CAUSES FOR DISSOLUTION OF A COMMERCIAL COMPANY

Commercial companies play a vital role in the economy, but their existence is not indefinite. The law establishes different circumstances under which a company must be dissolved, whether by the decision of its partners or due to external factors beyond their control. Understanding these grounds is essential for both business owners and investors, as dissolution marks the beginning of the liquidation process and the end of the company’s legal personality.

MAIN GROUNDS FOR DISSOLUTION

PARTNERS’ AGREEMENT

Dissolution can occur voluntarily if the partners decide so jointly, following the formalities outlined in the bylaws and current regulations.

EXPIRATION OF THE COMPANY’S DURATION

When a company is incorporated for a fixed term, it is dissolved upon the expiration of that term unless the partners agree to extend it. This agreement must be reached before the expiration date and, generally, requires unanimity.

FULFILLMENT OR IMPOSSIBILITY OF THE CORPORATE PURPOSE

A company is also dissolved when it achieves the purpose for which it was created or when fulfilling it becomes impossible. A practical example is a company engaged in the exploitation of a depleted natural resource.

ECONOMIC AND LEGAL GROUNDS

LOSS OF CAPITAL

If a company loses its capital, dissolution is required unless the partners agree to restore or increase it. In the case of corporations, specific rules reinforce this principle.

DECLARATION OF BANKRUPTCY

Bankruptcy leads to dissolution, unless a preventive or restructuring agreement is reached that allows the company to continue operating under a new financial framework.

MERGER WITH ANOTHER COMPANY

When two or more companies merge, the absorbed or integrated ones are dissolved and their assets, rights, and obligations are transferred to the surviving or newly created entity.

STRUCTURAL AND CONTRACTUAL GROUNDS

REDUCTION IN THE NUMBER OF PARTNERS

If a general partnership, limited liability company, or limited partnership is left with only one partner, or if a corporation has fewer than three shareholders, the company must be dissolved unless new partners join within three months. During that period, the remaining partners assume joint and several liability for the company’s obligations.

GROUNDS ESTABLISHED IN THE INCORPORATION AGREEMENT

The incorporation agreement may include additional grounds for dissolution, as long as they do not contradict applicable laws or violate mandatory legal rules.

EFFECTS OF DISSOLUTION

Dissolution does not imply immediate termination but opens the liquidation phase. From that point on, the company cannot incur new obligations and is limited to concluding pending operations, liquidating assets, and settling debts.

Administrators are obligated to act solely for liquidation purposes. If they perform actions outside this scope, they will be jointly and severally liable to third parties and partners.

Dissolution only takes legal effect against third parties once it is registered with the Commercial Registry and, in the case of corporations, after it is published in the corresponding Electronic Gazette. Furthermore, if there is any doubt about the existence of a cause for dissolution, the interpretation favors the continuation of the company.

In conclusion, the dissolution of commercial companies can be caused by various factors, ranging from voluntary partner agreements to economic, legal, or structural situations. Once dissolution occurs, the company retains its legal personality solely to liquidate its assets and fulfill its obligations, always under strict control by its administrators and with full protection for third parties.

If your company is undergoing a dissolution or liquidation process, contact our law firm for specialized legal advice.

Frequently Asked Questions (FAQs)

Does the dissolution of a commercial company always require the partners’ agreement?

No, it can also be triggered by legal causes such as bankruptcy, loss of capital, or a reduction in the number of partners.

What happens if a company continues operating after being dissolved?

Administrators will be jointly and severally liable to third parties for any actions unrelated to the liquidation process.

Is registration of the company’s dissolution in the Commercial Registry mandatory?

Yes. Without this formality, the dissolution has no legal effect on third parties.

What happens if the partners replenish the lost capital in a company?

In that case, the cause for dissolution is resolved and the company may continue operating normally.

When does a judicial dissolution take effect?

It takes retroactive effect from the date the verified cause occurred that led to the court’s ruling.

The content of this article does not reflect the technical opinion of Rigoberto Paredes & Associates and should not be considered a substitute for legal advice. The information presented herein corresponds to the date of publication and may be outdated at the time of reading. Rigoberto Paredes & Associates assumes no responsibility for keeping the information in this article up to date, as legal regulations may change over time.