Spanish companies are obliged to wind-up under certain circumstances, which are covered by article 363 of the Spanish Capital Companies Act. Said circumstances are as follows:
A company must be wound up:
a) In the event of ceasing to engage in the activity or activities which constitute the corporate purpose. In particular, the cease of activities shall be deemed to have taken place after a period of inactivity of more than one year.
b) Upon the conclusion of the business which constitutes its corporate purpose.
c) Due to the manifest impossibility of achieving the corporate purpose.
d) Due to the paralysis of the company organs in such a way that it is impossible for them to function.
e) In the event of losses which reduce net worth to an amount of less than half of the company’s capital, unless it is sufficiently increased or reduced, and provided that it is not necessary to file for bankruptcy.
f) In the event of a reduction of capital to an amount below the legal minimum, other than as a result of complying with the law.
g) If the nominal value of the participations or shares without vote exceeds half of the paid-up share capital and the proportion is not re-established within the period of two years.
h) On any other grounds provided for in the company articles of association.
The general meeting may adopt an agreement for winding-up, if the resolution or resolutions necessary for the removal of the grounds are included on the meeting agenda. One of the most common grounds for winding-up a companies is that set forth in section e) above. For solutions to these grounds, one may opt for one of the proposals suggested by our colleague Carla Villavicencio in this article.
Otherwise, the directors must call a general meeting within two months in order to adopt a resolution for winding-up or, if the company is insolvent, it must file for bankruptcy. However, any shareholder may request a meeting summons from the shareholders if in their opinion grounds for winding-up exist or the company is insolvent.
Should the directors not comply with the obligation to call a general meeting within two months, they may have to jointly and severally respond to company obligations which arise following the occurrence of the legal grounds for winding-up.
The concrete facts of each case must be taken into account given that the responsibility of the directors may be moderated by the courts as explained here.
Hugo Ester
Vilá Abogados
For more information, please contact:
28th of September 2018
