Although in recent years some reforms have been made to the Companies Law with the objective of streamlining the inflow of foreign capital into the country, less attention has been paid to the closing of ventures through the liquidation and cancellation of companies. Although it is understandable that the main objective is to encourage investment and facilitate access to the Ecuadorian market, it is also essential to prevent that the liquidation and cancellation process of a company becomes a waste of time and resources for entrepreneurs.
For this reason, the most recent amendment to the Companies Law, published in the Supplement to the Official Gazette 269 of March 15, 2023, introduced: (i) the simplified liquidation of companies; and, (ii) the expedited cancellation of companies.
This process arises as an alternative to the ordinary liquidation procedure. In this case, the company must prepare a liquidation plan that requires the approval of the general shareholders’ meeting, with the unanimous consent of the entire capital stock.
The liquidation plan shall contain at least the following: (a) The suggestion of the liquidator; (b) The manner in which the sale of the assets will be carried out (whether through public auction, direct sale or other means); (c) The times and manner foreseen for the liquidation of the assets; (d) The appraisal of all the company’s assets; (e) The list of priority of the company’s credits; and, (f) The detail of the opportunity and the method of distribution of the proceeds from the sale of the assets.
The liquidation plan will be submitted to the Superintendency of Companies, Securities and Insurance (hereinafter “SCVS”), which will be responsible for notifying all creditors through publications on its website.
Creditors will have the right to oppose such plan. In the event that the SCVS finds that the opposition is well-founded, it will request the company to modify the plan. Once the plan has been approved, the SCVS, by means of a resolution that must be registered in the corresponding registry, will order the start of the simplified liquidation process and will appoint the liquidator.
Unlike the ordinary liquidation process, where the liquidator must prepare an initial and a final liquidation balance sheet, in this process the actions of the liquidator will be focused on the liquidation plan and the balance sheet for the qualification of debts.
Once all the company’s obligations have been covered and the remainder has been distributed among the partners or shareholders -if any- the cancellation of the company will be ordered by means of a resolution to be registered in the corresponding registry.
It is important to note that in the event that the available assets of the debtor company are insufficient to cover its obligations, or once assets have been liquidated and liabilities have been paid off, and there is no remainder to be distributed among the partners or shareholders, a certificate of lack of equity will be issued, which may be subject to appeal.
The legal representative of a company that has no outstanding obligations with the SCVS and whose liabilities have been fully settled, with the authorization of the general shareholders’ meeting (with the unanimous consent of the entire capital stock), may request the Superintendent, by means of a resolution, to declare the company dissolved, to order the adjudication of the corporate assets, and to order the cancellation of the registration in the corresponding registry in a single act.
The advantage that this corporate act introduces is that the presentation of corporate books or accounting records will not be required. Instead, the minutes of the general meeting will contain a declaration, under oath, of the partners or shareholders, of the veracity and authenticity of the information provided and of the supporting documentation presented during the expedited cancellation process.
This article contains information of general interest and does not constitute legal advice about specific matters. Any particular analysis will require the Firm’s legal advice.
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By Paz y Miño Andrés in NATURAL RESOURCES, ENERGY AND INFRASTRUCTURE