Understanding a jurisdiction’s company closure process is vital for tracking a company’s history and determining its official status. Ecuador, similarly to Mexico and Panama, has a lengthy, time-consuming company closure process that may take years to complete.
The company closure process in Ecuador comprises three stages: dissolution, liquidation, and cancellation. These three stages are further broken down into six steps.
- The process begins when a company meets the criteria of any one of the 13 reasons for dissolution outlined in Art. 361 of the Companies Law (Ley de Compañías)
- Once the company has finalized dissolution and entered liquidation, it then appoints a liquidator – an individual tasked with ensuring a fair distribution of the company’s assets – in place of its directors. The government will appoint liquidators in cases when the government itself orders the company’s liquidation or the company is unable or unwilling to name them.
- The company terminates its business activities, thereby formally entering the liquidation.
- Liquidators sell or distribute the remaining assets to shareholders.
- The company must submit to the government its approved final balance, a declaration that it has no unpaid debts to the state or others, and its updated accounts.
- Liquidators must request the cancellation of the company in the public registry once liquidation is complete.
- The company is cancelled from the public registry and officially closes.
The company may be reinstated at any point during this process until it is cancelled in the public registry.
Company statuses associated with company closure in Ecuador
The Ecuador public registry may list one of several statuses for the company to denote where it is in the closure process. Its status may say “Disolución Liquidación,” “Disoluc. Liquidac.,” “Cancelación de la inscripción,” or “Canc. de inscripción,” for example. The first two statuses signify that the company is in the process of closing, somewhere between steps one and five, while the last two state that the company is cancelled and officially closed.
Some companies may be listed as inactive (Inactiva). This does not mean that they are closed, but rather that they have not operated in the last two years. This is defined as having failed to provide the following in two consecutive years:
- authorized copies of the annual balance sheet, losses and profits, as well as minutes and reports from the administrators and auditors;
- the salary of administrators, legal representatives, and shareholders;
- other information deemed necessary by Ecuador’s Superintendency of Companies and Securities (Superintendencia de Compañías y Seguridades).