{"id":2781,"date":"2021-04-07T16:30:08","date_gmt":"2021-04-07T14:30:08","guid":{"rendered":"https:\/\/carlotagonzalez.com\/?p=2781"},"modified":"2021-05-04T16:39:05","modified_gmt":"2021-05-04T14:39:05","slug":"company-liquidation-one-creditor","status":"publish","type":"post","link":"https:\/\/carlotagonzalez.com\/en\/company-liquidation-one-creditor\/","title":{"rendered":"Is it possible to register a company’s liquidation when there is only one creditor involved?"},"content":{"rendered":"\t\t
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Every year more than 90,000 companies are incorporated in Spain and about 20,000 are dissolved, according to the<\/strong> Company Statistics<\/strong>\u00a0<\/a>provided by the\u00a0 Spanish Institute of Statistics (INE). One in four liquidations are voluntary, but the rest are the result of insolvency proceedings that attempt, as far as possible, to respect the rights of creditors.\u00a0 A common question asked is whether it is possible to liquidate a company when there is only one creditor involved and there are not enough assets to pay the outstanding debts. What can be done in these cases?<\/strong><\/p>\n<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Corporate liquidation is the process by which a company is wound up by a liquidator. This involves, firstly, conducting an inventory and a balance sheet review to assess the company’s assets and liabilities; secondly, paying debts and collecting receivables; and, lastly, preparing a final liquidation balance sheet, which will include any surplus cash to be distributed to each shareholder.<\/p>\n

A basic principle of Spanish corporate law, and therefore a requirement for the liquidation of a company, is that all creditors must be paid in full before any equity holders<\/strong> receive anything and. In other words: no distributions can be made to shareholders unless all existing debts have been paid.<\/p>\n

The prerequisite involving paying creditors in full (or consigning or securing their claims) assumes that either there is sufficient equity or there are assets available to satisfy any outstanding debts. The question is, what happens in those cases in which there are no assets to pay the debts? Is the company forced to remain in business indefinitely?<\/p>\n

The doctrine of corporate liquidation when only one creditor is involved<\/strong><\/h2>\n

If there are insufficient assets available to pay the debts and there are multiple creditors, the procedure to liquidate a company is to commence \u00a0insolvency proceedings <\/a>. However, if there are no assets available to pay outstanding debts and there is only one creditor involved, engaging in insolvency proceedings may not be the right option<\/strong>, since having several creditors is a requirement to initiate and conduct insolvency proceedings.<\/p>\n

There may be companies that have only one creditor and insufficient assets to pay their outstanding debts, but cannot commence insolvency proceedings because they do not meet the requirement indicated above. In these cases, the liquidation may not be accepted and entered in Companies House on the basis that it is necessary to have satisfied all the creditors claims for a company to be regarded as having been liquidated.<\/p>\n

In these cases, the General Directorate of the Registry and Notaries (DGRN) has established the doctrine of allowing the liquidation to be officially registered and, therefore, cancelling such company’s register entries. The DGRN has held that shareholders cannot be ‘forced’ to keep a dissolved company registered with Companies House once the liquidation procedure has been carried out (even if insolvency prevents the company from satisfying the debts owed to its only creditor).<\/p>\n

This doctrine is based on the following:<\/p>\n