Do you know that failure to comply with the obligation to file for insolvency proceedings may result in the liability of the Administrators?
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When are the administrators liable?
There are companies which, despite being in a situation of dissolution, or having reached a situation of insolvency, either continue to operate in the market with the risk that this entails for creditors, or simply cease their activity without proceeding to their orderly liquidation or, in the event of insolvency, without proceeding to file for the corresponding insolvency proceedings.
In order to avoid the risks to third parties and to the shareholders themselves that may arise from the survival of companies subject to certain grounds for dissolution, their directors are obliged to take appropriate measures to:
- Eliminate or remove such cause or
- Failing that, to promote the orderly dissolution and liquidation of the company in any of the ways provided for by law.
In the event of non-compliance with their obligations, the directors are jointly and severally liable for debts arising after the cause of dissolution.
What are the causes for dissolution of a company?
The causes of dissolution - legal or statutory - whose concurrence constitutes a factual presupposition for the compulsory intervention of the administrators are the following:
a) Cessation in the exercise of the activity or activities that constitute the corporate purpose. In particular, cessation is understood to occur after a period of inactivity of more than one year.
b) Termination of the business which constitutes its corporate purpose.
c) Manifest impossibility of achieving the corporate purpose.
d) Paralysis of the corporate bodies in such a way as to make it impossible for them to function.
e) Losses that reduce the net assets to less than half of the share capital (known as "aggravated losses"), unless the latter is increased or reduced to a sufficient extent, and provided that it is not appropriate to apply for a declaration of bankruptcy in accordance with the provisions of the LCon - this is the "capitalise or dissolve rule".
f) Reduction of the share capital below the legal minimum, provided that:
- it is not a consequence of compliance with a legal provision; or
- if it is a consequence of compliance with a legal provision, one year has elapsed since the adoption of the reduction resolution and the transformation or dissolution of the company, or the increase in share capital, has not been registered in the register of companies.
g) When the nominal value of the non-voting shares exceeds half of the share capital and the proportion is not restored within two years.
h) Any other cause provided for in the company's articles of association.
What should I do?
The Capital Companies Act imposes the obligation to take the appropriate measures within two months of the company's dissolution. For this reason, the appropriate measures must be initiated, otherwise there is a risk of incurring liability for the company's debts.
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