LIQUIDATION AND DISSOLUTION OF A COMPANY IN BOLIVIA

DIFFERENCE BETWEEN DISSOLUTION AND LIQUIDATION OF A COMPANY

Before initiating this procedure, it is essential to understand the distinction between the two main stages of business closure.

WHAT IS DISSOLUTION?

Dissolution is the first step toward the legal termination of a company. It involves the formal decision by the partners or shareholders to cease business activities, which results in the termination of the partnership agreement and the beginning of the closure process. This decision must be formalized by public deed and registered with the Registry of Commerce.

From that point forward, the company retains its legal personality exclusively for liquidation purposes.

WHAT DOES LIQUIDATION ENTAIL?

The purpose of liquidation is to settle outstanding obligations, distribute remaining assets among partners, and formally close the company. During this process:

• The company name must include the phrase “in liquidation”.
• One or more liquidators are appointed to replace the administrators and take full control of the company for liquidation purposes only.
• An inventory, balance sheets, and a draft plan for asset distribution are prepared.
• Debts are paid, and assets are distributed among partners if applicable.

LEGAL GROUNDS FOR COMPANY DISSOLUTION

Commercial law provides various grounds under which a company may be dissolved. The most relevant include:

• Agreement by the partners or shareholders.
• Expiration of the company’s term without renewal.
• Supervening impossibility to fulfill the company’s purpose.
• Fulfillment of the corporate purpose or loss of economic interest in it.
• Loss of the legally required minimum capital.
• Declaration of bankruptcy without preventive or resolution agreements.
• Merger with another company.
• Reduction in the number of partners below the legal minimum without timely replacement.

Specific causes may also be outlined in the founding contract.

STEP-BY-STEP COMPANY LIQUIDATION PROCESS

1. PUBLIC DEED OF DISSOLUTION

The partners’ assembly or shareholders’ meeting must formally approve the dissolution and appoint the liquidators. This decision must be formalized in a public deed and registered with the Registry of Commerce.

2. REGISTRATION OF DISSOLUTION WITH SEPREC

Form No. 0090, the request to cease operations, must be submitted. This form is a sworn statement signed by the legal representative and is only valid if the company’s Commercial Registration is active.

3. APPOINTMENT OF LIQUIDATORS

Liquidators are appointed by a simple majority of the shareholders’ meeting and assume duties similar to those of administrators, including:

• Preparing the initial inventory.
• Presenting the opening liquidation balance.
• Executing pending collection and payment operations.

The initial inventory must be submitted within 30 days, extendable for justified reasons.

4. FINAL BALANCE AND ASSET DISTRIBUTION PLAN

Once the company’s liabilities are settled, liquidators must prepare:

• The final liquidation balance sheet.
• The asset distribution plan detailing the contributed capital and the amounts due to each partner.

This plan must be approved by the shareholders’ meeting and registered with the Registry of Commerce. No partner may receive their share until all debts are paid.

5. PUBLIC DEED OF FINAL CLOSURE

The Registry of Commerce must receive the public deed containing:

• The act of dissolution and appointment of liquidators.
• Approval of the final balance and asset distribution plan.

6. MANDATORY PUBLICATIONS

The notarized dissolution and liquidation deed must be published in the Electronic Gazette of the Registry of Commerce. If a distribution agreement exists, it must also be published in accordance with applicable regulations.

7. CANCELLATION OF THE COMMERCIAL REGISTRATION

After completing the previous steps, the Commercial Registration is officially canceled, thus terminating the company’s legal personality.

ENTITIES THAT MUST BE NOTIFIED OF THE PROCESS

In addition to the Registry of Commerce, the company undergoing liquidation must formally notify the following entities of its closure:

• Municipal Government
• National Tax Service (SIN)
• Ministry of Labor, Employment and Social Welfare
• National Health Fund (CNS)
• Pension Fund Administrators (AFPs)

Failure to notify these institutions may result in future liabilities for the partners or liquidators.

RISKS OF POORLY MANAGED LIQUIDATION

Improper handling of business liquidation can lead to significant legal problems:

• Labor issues: Workers may claim social benefits or request transformation of the company into a worker-managed entity.
• Civil matters: Creditors could initiate lawsuits and seize company assets if not properly informed.
• Tax matters: The deactivation of the company’s tax ID (NIT) does not exempt it from tax obligations; previous noncompliance may still be audited and sanctioned.

In conclusion, conducting a company liquidation under the appropriate legal framework protects partners, employees, and creditors, and ensures full compliance with all legal, tax, and labor obligations. Carrying out this process in an orderly manner avoids future disputes and provides legal certainty regarding the definitive closure of business operations.