If you’re considering exiting the market, you’ll need to find appropriate legal support to understand the laws and processes to liquidate your company in Uruguay. Not every business venture works out as planned, despite the popularity of incorporating a business in Uruguay. Commercial Companies Law (Law No. 16.60) establishes that prior to the liquidation of a company, it must be dissolved. We outline both the dissolution and liquidation process for a company in Uruguay below.
Key Takeaways:
| Steps to liquidate a company in Uruguay | 1. Social agreement or judicial resolution 2. Temporary conservation of the legal entity 3. Appointing Liquidators 4. Form of Action: Duties and Obligations 5. Cancellation of the Company’s Activity |
| Time generally needed | It should take approximately six months to a year. |
| Reasons to liquidate a company in Uruguay | Companies can dissolve for the following reasons: Decision of the partners to dissolve and liquidate. Expiration of fixed-term shelf life of the company. Failure of compliance regulations. Realizing the corporate purpose as unachievable. Judicial decision. Losses that reduce equity to less than a quarter. By merger or division. An irreparable reduction in the number of partners. Illegal activity. |
| Involuntary liquidation | This can be triggered by not complying with legal responsibilities under the law. |
Liquidating your company in Uruguay: dissolution stage
Dissolution is the first step to liquidate your company in Uruguay. During this step, the company may only carry out activities aimed at its liquidation. The expression “in liquidation” is added to the company’s name.
Initiate the dissolution of your company
Companies can dissolve for the following reasons:
- Decision of the partners to dissolve and liquidate (in accordance with their legal entity type)
- Expiration of fixed-term shelf life of the company.
- Failure to comply with legal and company compliance regulations.
- Realizing the corporate purpose as unachievable.
- Judicial decision to liquidate.
- Losses that reduce equity to less than a quarter of the total integrated social capital.
- By merger or division, in accordance with Uruguayan law.
- An irreparable reduction in the number of partners (e.g. Limited Liability Companies)
- The company has or is conducting an illegal or prohibited activity, distorting corporate purpose.
Companies in Uruguay must identify a cause for dissolution, a social agreement or a judicial resolution in order to liquidate.
Stages of the Liquidation process
Liquidating a company in Uruguay means that it will cease to exist and cannot conduct commercial activities. During this process, the company can only perform activities specific to liquidation proceedings. The liquidation will be governed by the provisions of the company’s social contract or, failing that, by the norms established in the Law of Commercial Companies (Nº 16.60).
The stages are broken down into the following steps:
- 1. Social agreement or judicial resolution
- 2. Temporary conservation of the legal entity
- 3. Appointing Liquidators
- 4. Form of Action: Duties and Obligations
- 5. Cancellation of the Company’s Activity
1. Social agreement or judicial resolution
To start liquidation proceedings, a shareholder agreement or judicial decision must be made to liquidate the company.
2. Temporary conservation of the legal entity
The dissolved company will retain its legal status for the purposes of its liquidation and will be governed by the rules corresponding to its entity type as is necessary.
The term “in liquidation” must be added to the company name. Administrators and liquidators are jointly and severally liable to partners and third parties for any damages that occur as a result of its omission.
3. Appointing Liquidators
Next, the company must establish a liquidator who will take charge of liquidation proceedings, except for special cases or contrary stipulation.
The liquidator(s) will be appointed by the corresponding majority vote of shareholders, within 30 days of entering the company into liquidation status. If the liquidators have not been formally appointed within 30 days, any interested party may request a judgment from Uruguayan court on the omitted appointment or request a new election.
The appointment of liquidators, as well as their termination or revocation, must be registered in the National Registry of Commerce (Registro Nacional de Comercio).
The liquidators will prepare, within thirty days of their appointment, an inventory and balance of the social assets. This period may be extended up to 120 days by resolution of the majority at the shareholders’ meeting, as appropriate.
In addition, they will report quarterly on the status of the liquidation settlements. For prolonged liquidation procedures, the Liquidators must prepare annual balances.
4. Form of Action: Duties and Obligations
While liquidating a company in Uruguay, Liquidators:
- must conclude all social operations pending at the time of dissolution.
- will not be able to start new businesses unless they are necessary for the best settlement.
- will be empowered to take necessary action to sell assets and eliminate or reduce the company’s liabilities.
- will be subject to the instructions of the partners, given according to the type of company.
When the social assets are insufficient to eliminate the company’s debts, the liquidators will request the necessary contributions due from partners, according to the social contract and the entity type.
If the company’s obligations are sufficiently covered by the asset sales, Liquidators can then divide any remaining assets among the partners as is appropriate. To do this, they will prepare the final balance and present the project for distributing remaining assets.
The liquidator will determine the amount that corresponds to each partner by reimbursement of their share in the capital.
The final balance and the distribution project, signed by the liquidators, will be communicated to the partners. These documents will be considered approved if not contested within 30 days from the date of their receipt.
5. Cancellation of the company’s activity before public entities
Once the operations described above have been completed, the Liquidator will declare the closing activities of the company before the General Tax Directorate (Dirección General Impositiva) and the Social Security Bank (Banco de Previsión Social). In this declaration, they will outline the extinction of all social liabilities and allotment of the remaining assets to partners by way of capital reimbursement.
The Public Registry of Commerce (Registro Público de Comercio) will then register the said document.
Shareholders have the right to be kept informed throughout the liquidation process, being able to oppose in certain cases the resolutions adopted by the liquidators. They also have the right to be awarded remaining assets, as is appropriate.
FAQs for liquidating an entity in Uruguay
Based on our extensive experience these are the common questions we receive from clients about liquidating an entity in Uruguay.
1. What is the process of liquidation in Uruguay?
After dissolution, the stages are broken down into the following steps:
- 1. Social agreement or judicial resolution
- 2. Temporary conservation of the legal entity
- 3. Appointing Liquidators
- 4. Form of Action: Duties and Obligations
- 5. Cancellation of the Company’s Activity
2. How long does it take to liquidate a company in Uruguay?
The liquidation process will normally take between six and 12 months, assuming the entity is in good standing and no rectification work is required.
3. What are the reasons to liquidate a company in Uruguay?
Companies can dissolve for the following reasons:
The company has or is conducting an illegal or prohibited activity, distorting corporate purpose.
Decision of the partners to dissolve and liquidate (in accordance with their legal entity type)
Expiration of fixed-term shelf life of the company.
Failure to comply with legal and company compliance regulations.
Realizing the corporate purpose as unachievable.
Judicial decision to liquidate.
Losses that reduce equity to less than a quarter of the total integrated social capital.
By merger or division, in accordance with Uruguayan law.
An irreparable reduction in the number of partners (e.g. Limited Liability Companies)
4. Can you be forced to liquidate a company in Uruguay?
Yes, under certain circumstances, when a judicial order is given. This is usually for non payment of debts or failure to comply with the country’s laws and regulations.
Liquidate your company in Uruguay with support from Biz Latin Hub
Liquidating your company in Uruguay requires a due process and a legal representative to ensure that you are in good hands.
At Biz Latin Hub, we create trust in our clients by connecting them with our team of local and expatriate professionals. We provide services enter and exit the market, including liquidation services for companies. We operate with the highest quality and integrity to ensure that the companies fulfill their corporate obligations and can leave the market without delay or penalty.
Contact our specialists in Uruguay today and receive personalized assistance on your exit strategy.
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