Registry Closure of Companies for Failure to Comply with Legal Obligations: Which Acts May Still Be Registered?

Registry Closure of Companies for Failure to Comply with Legal Obligations: Which Acts May Still Be Registered?

As a general rule, the registry closure of a company prevents certain acts from being registered on its record at the Commercial Registry for as long as the breach that gave rise to the closure remains outstanding.

However, not all registry closures have the same cause or produce the same effects. This distinction is particularly relevant in practice, as certain acts may still be registered despite the company’s registry record being closed, whereas other types of closure have an almost absolute effect.

One of the most common situations arises from failure to comply with the obligation to file the annual accounts.

Article 282 of the Spanish Companies Act provides that, where the management body fails to comply with its obligation to file the annual accounts, no document relating to the company may be registered with the Commercial Registry for as long as such failure persists.

This provision is further developed by Article 378 of the Commercial Registry Regulations, pursuant to which the registry is closed once one year has elapsed from the end of the financial year without the duly approved annual accounts having been filed.

However, this closure is not absolute. The applicable regulations allow certain acts to continue to be registered with the Commercial Registry.

In particular, the following may still be registered:

• the removal or resignation of directors, managers, general managers or liquidators;
• the revocation or relinquishment of powers of attorney;
• the dissolution of the company;
• the appointment of liquidators; and
• entries ordered by a judicial or administrative authority.

 

The distinction between the removal and the appointment of directors is particularly important. A company whose registry record has been closed due to failure to file its annual accounts may register the removal or resignation of a director, but not the appointment of the person who is to replace them.

The Spanish Directorate-General for Legal Certainty and Public Faith has reiterated this interpretation, including in recent resolutions. Accordingly, the removal of a director constitutes an independent act that may be registered, whereas a new appointment remains subject to the registry closure until the company regularises its position.

Likewise, the closure will generally prevent the registration of other corporate resolutions, such as amendments to the articles of association, capital increases or reductions, or changes to the structure of the management body involving new appointments.

A distinction must also be drawn between failure to file annual accounts that have already been approved and cases where the annual accounts have not even been approved by the general shareholders’ meeting.

Article 378.5 of the Commercial Registry Regulations allows registry closure to be avoided where it is demonstrated that the annual accounts could not be filed precisely because they had not been approved. For this purpose, a certificate issued by the management body, with notarised signatures and stating the reason for the lack of approval, must be submitted, or alternatively an authorised copy of the notarial minutes of the general meeting recording such circumstance.

In addition, for as long as this situation continues, its continued existence must be evidenced every six months. The Directorate-General has recently reiterated that, where the annual accounts have not been approved, the obligation to file them has not yet arisen and, therefore, registry closure may be avoided by complying with these formal requirements.

The position is different where the closure of the company’s registry record arises for tax-related reasons. A particularly relevant example is the company’s provisional removal from the Spanish Tax Agency’s Index of Entities. Article 119.2 of the Spanish Corporate Income Tax Act provides that, once such removal has been recorded, no registration affecting the company may be made until the corresponding certificate confirming its reinstatement has been submitted.

In this case, the exceptions are considerably more limited. Article 96 of the Commercial Registry Regulations only permits entries ordered by a judicial authority, those that are a necessary prerequisite for reopening the company’s registry record, and those relating to the filing of annual accounts.

Therefore, unlike a closure resulting from failure to file annual accounts, the removal or resignation of a director cannot be registered while the company remains provisionally removed from the Index of Entities.

Even more restrictive is a registry closure resulting from the revocation of the company’s Spanish Tax Identification Number (NIF). The Sixth Additional Provision of the Spanish General Tax Act prohibits the registration in any public registry of acts affecting an entity whose NIF has been revoked until it is reinstated. Registry doctrine has consistently held that, while this marginal note remains in force, no entry may be made on the company’s registry record, including the removal of a director.

Accordingly, when dealing with a company whose registry record is closed, it is not sufficient simply to establish that a closure exists: it is essential to identify the specific breach that gave rise to it.

Where the closure results from failure to file annual accounts, there are significant exceptions allowing certain acts to be registered. Conversely, where the closure is tax-related, particularly in cases involving provisional removal from the Index of Entities or revocation of the company’s NIF, its effects are considerably broader.

Before formalising any corporate transaction, it is therefore advisable to verify the company’s registry and tax status in advance. This makes it possible to identify any existing registry closure and, where necessary, regularise the company’s position before executing documents or adopting corporate resolutions whose registration could subsequently be blocked.