Legal personality of dissolved and liquidated companies

The controversial dispute regarding the legal personality of dissolved and liquidated companies to be sued for pending debts has been finally addressed by the latest ruling of the Supreme Court in its judgment no. 324/2017, of May 24, 2017 (RJ\2017\2217), which resolves the discrepancy of earlier rulings on the matter. The referred judgement settles the dichotomy of criteria that has been present until the moment, by which it rules that companies continue to have legal personality (ex article 6.1.3ª Ley 1/2000, de 7 de enero,  de Enjuiciamiento Civil –LEC-) following dissolution and liquidation, and after cancelation of registry entries exceptionally when there are outstanding debts which have not been included in the settlement operations.

The contradicting two doctrinal positions are outlined as follows:

On the one hand, judgments no. 979/2011, of December 27, 2011, and no. 220/2013, of March 20, 2013, recognize in line with the General Directorate for Registers and Notaries, that companies which have been dissolved and liquidated, even after cancellation of their registry entries, maintain their legal personality until all their legal relations have been exhausted, including, non-extinguished existing obligations and obligations which have appeared after the liquidation process.

On the other hand, judgment 503/2012, of July 25, 2012, rules that the cancelation of the company’s registry entries, determines the extinction of the legal personality of the company, making it necessary, in case there are pending existing debts, to claim the annulment of the cancellation, together with the reopening of the liquidation operations. In this sense, the judgement emphasizes that the extinction of the company shall be effective at the time the cancellation responds to a real situation, this is, with a correct liquidation of the company’s assets, with no unpaid creditors and shareholders.

In conclusion, after analyzing the latest controversial doctrinal positions, the Supreme Court has resolved this divergence with the referred judgement no. 324/2017, which is in line with the first thesis, amongst others, by stating that, even if the cancellation of registration entries entails the extinction of the company, the company “shall still hold legal personality for the claims resulting from existing debts, which should have been included in the settlement operations”. Therefore, for reasons of procedural economy, creditors with unpaid debts shall have the right to sue against the company, without it being necessary to claim for the annulment of the cancellation and reopening of the liquidation operations in order to recover a pending debt against a dissolved and liquidated company, which overall enables a rapid and un-bureaucratic recovery of the credit.

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