How to liquidate your company in Uruguay

If you’re considering exiting the market in Uruguay, 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. You may have decided to pivot your business strategy in Latin America, which could mean undertaking liquidation proceedings for one of your incorporated companies.

In Uruguay, the Commercial Companies Law (Law No. 16.60) establishes that prior to the liquidation of a company, it must be dissolved. We outline the dissolution and liquidation process for a company in Uruguay.

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:

1. Decision of the partners to dissolve and liquidate (in accordance with their legal entity type)
2. Expiration of fixed-term shelf life of the company.
3. Failure to comply with legal and company compliance regulations.
4. Realizing the corporate purpose as unachievable.
5. Judicial decision to liquidate.
6. Losses that reduce equity to less than a quarter of the total integrated social capital.
7. By merger or division, in accordance with Uruguayan law.
8. An irreparable reduction in the number of partners (e.g. Limited Liability Companies)
9. 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).

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.

How is a Liquidator appointed in Uruguay?

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).

4. Form of Action: Duties and Obligations

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.

Liquidators represent the company

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.

Shareholder rights

Firstly, 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.

Common FAQs for Liquidating an entity in Uruguay

Based on our extensive experience these are the common questions and doubts of our clients when liquidating a local entity

Liquidate your company in Uruguay with support from local legal experts

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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