Your company not invoicing anything does not mean you can forget about it. Plenty of Spanish limited companies have sat idle for years, filing no accounts and no tax returns, on the assumption that “if it does nothing, nothing can happen”. A dormant SL (a sociedad limitada, the Spanish private limited company) is still a company in the eyes of the law, the Spanish Tax Agency and the Registro Mercantil (the Companies Registry). At Tecem Abogados we explain which obligations are still alive and what you can do about it.
A dormant SL still has legal personality
Stopping selling, hiring or issuing invoices does not dissolve the company. Until its dissolution is agreed and the winding-up is complete, the company exists: it has its open entry at the Registro Mercantil, its registration in the Tax Agency’s census and directors who are answerable for its compliance.
That is why owning a dormant SL is not a neutral state. It is a limbo where obligations pile up year after year, even when the accounts show zero, and the problem grows precisely because nobody is watching it.
The accounts of a dormant SL are prepared and filed just the same
The Ley de Sociedades de Capital (the Spanish Companies Act) makes no distinction between active and inactive companies. Directors must prepare the annual accounts within 3 months of the financial year end, the ordinary general meeting must approve them within the first 6 months and, in the month after that approval, they must be submitted for filing at the Registro Mercantil of the registered office. We cover it in detail in our guide to filing annual accounts.
If a dormant SL fails to file its accounts on time, article 282 of that Act orders the closure of its registry sheet (cierre registral): no document of the company can be registered while the breach continues. In practice, the company is blocked for almost everything that goes through the Registry:
- Appointing a new director or amending the articles of association.
- Changing the registered office or the corporate purpose.
- Registering a capital increase or other corporate transactions.
Exempt from the block are, among others, the removal or resignation of directors, the revocation or waiver of powers of attorney, and dissolution together with the appointment of liquidators.
The fine for not filing does not depend on the company’s turnover
The registry closure is not the only consequence. Article 283 also provides for a fine on the company, imposed by the Instituto de Contabilidad y Auditoría de Cuentas (ICAC, the Spanish accounting and audit regulator) after formal proceedings, of 1,200 to 60,000 euros, which can rise to 300,000 euros for each year of delay when annual turnover exceeds 6 million. The amount is graded according to assets and sales, but being idle does not exempt a dormant SL from that penalty.
The Tax Agency still expects the Corporate Income Tax return
The Spanish Corporate Income Tax Act requires every taxpayer to file a return, except for the fully exempt entities the law itself lists. A dormant SL is not on that list, so it must file its annual return even with no income at all. On top of that come any other returns that apply depending on how it is registered in the census.
Not filing it has an effect few people know about: if your dormant SL does not file Corporate Income Tax for 3 consecutive periods, the Tax Agency orders its provisional removal from the Index of Entities. The Registry records that removal on the company’s sheet and, from then on, accepts no registration without a certificate of reinstatement. And the removal does not release it from any outstanding tax obligation.
More than a year idle is a legal ground for dissolution
There is one risk that hits whoever runs the company directly. The law states that a company must be dissolved when it ceases the activity that makes up its corporate purpose, and presumes that cessation after a period of inactivity of more than one year. A dormant SL for over 12 months is therefore subject to a ground for dissolution.
When that ground applies, directors must call a general meeting within 2 months to agree the dissolution or remove the cause. If they do not, they become jointly and severally liable, with their own personal assets, for the company’s subsequent debts. This is the point where a forgotten company becomes a personal problem.
Reactivate, wind up or bring your dormant SL up to date: it depends on each case
There is no single answer for a dormant SL. The first step is to check what situation it is really in and, from there, choose the way forward:
- Reactivate it, if you are going to restart the business or want to use it for a new project.
- Wind it up properly, with dissolution, liquidation and removal from the register all recorded, to close the chapter with no loose ends.
- Bring it up to date, filing the outstanding accounts and regularising the tax returns, if you would rather keep it inactive but compliant.
September, with everyone back from the holidays, is a good time to carry out that review before the problem builds up for another financial year.
The work you do not see behind every file
Bringing a dormant SL up to date is not a matter of filling in a form. Behind every file there are hours of review, follow-up and detail that never show on the client’s screen: you only see the result. Unfiled financial years, pending tax returns, general meetings that were never held, directors who no longer hold the post.
That is how we have worked at Tecem for more than 30 years, in an orderly way and never leaving anything half done, so that you only have to worry about your business. If you have a dormant SL in Málaga, we will tell you which option suits you before a single document is moved.
Frequently asked questions
Is the registry closure lifted once the accounts are finally filed?
Yes. The law ties the closure to the breach continuing, so once the outstanding accounts of the dormant SL have been filed, the company’s sheet accepts registrations again as normal.
Is the ICAC fine reduced if I catch up early?
If the accounts are filed before the penalty proceedings begin, the sanction is imposed at its minimum level and reduced by 50%. These infringements become time-barred after 3 years.
Can I stop being a director of a dormant SL even if its registry sheet is closed?
Yes. The removal or resignation of directors is one of the exceptions to the registry closure, as is the revocation or waiver of powers of attorney. It is worth doing it properly and in writing, because as long as you hold the post you remain bound by its duties.
Does a company in liquidation still exist?
Yes. A dissolved company keeps its legal personality while it is being wound up and must add the words “en liquidación” (in liquidation) to its name. It ceases to exist when that process ends and its final removal from the register is recorded.