Navigating the End: The Process of Legally Dissolving a Company in Ecuador

The decision to close a business, whether a nascent startup or a well-established enterprise, is often fraught with emotion. For expats in Ecuador, this process can feel particularly daunting, amplified by the intricacies of local bureaucracy and unfamiliar legal frameworks. As an Ecuadorian lawyer with extensive experience guiding foreign investors in Cuenca, I aim to demystify the legal dissolution of a company, providing a clear, step-by-step guide grounded in specific Ecuadorian legislation and anticipating the common pitfalls that can derail even the most well-intentioned closures.

Understanding the Legal Framework: Why Formal Dissolution is Non-Negotiable

Simply ceasing operations, locking the doors, and walking away is not a legal option in Ecuador. An improperly dissolved company remains a "phantom" legal entity, accruing ongoing tax obligations, administrative fees, and potential fines. This can lead to severe consequences, including the legal representative being held personally liable—a concept known as responsabilidad solidaria—for corporate debts.

The process is primarily governed by the Ley de Compañías (Companies Law), with oversight from two key state bodies: the Superintendency of Companies, Securities, and Insurance (Superintendencia de Compañías, Valores y Seguros - SUPERCIAS) and the Internal Revenue Service (Servicio de Rentas Internas - SRI).

Grounds for Dissolution

The first step is to identify the legal cause for dissolution. As per Artículo 361 of the Ley de Compañías, these include:

Voluntary Agreement: A decision made by the shareholders or partners in a general meeting. This is the most common path for a planned closure.
Expiration of the Term: The company's duration, as stated in its bylaws, has ended.
Completion of the Corporate Purpose: The objective for which the company was formed has been achieved.
Losses Exceeding 50% of Capital: When accumulated losses reduce the company's net worth to less than half of its share capital.
Merger or Division (Fusión o Escisión): When the company is absorbed by another or split into new entities.

The Step-by-Step Dissolution, Liquidation, and Cancellation Process

The process is a sequential three-part journey: Dissolution, Liquidation, and Cancellation. While SUPERCIAS has introduced a simplified online process through resolutions like Resolución No. SCVS-INC-DNCDN-2023-0013, the fundamental legal requirements remain.

Step 1: The General Shareholders' Meeting (Junta General de Accionistas)

The process begins internally. A General Shareholders' Meeting must be convened to formally approve the company's voluntary dissolution, state the cause, and—critically—appoint a Liquidator (Liquidador).

Key Document: The minutes of the Extraordinary General Shareholders' Meeting (Acta de Junta General Extraordinaria de Accionistas). This document is the legal cornerstone of the entire process and must be meticulously drafted.

Step 2: Notarization and Registration

The Acta is then taken to a notary to be formalized into a public deed (escritura pública de disolución, liquidación y nombramiento de liquidador). This deed is then registered at the Mercantile Registry (Registro Mercantil) of the company's domicile.

Hyper-Specific Detail: A common mistake is underestimating the costs at this stage. Expect to pay approximately $150 - $250 for notarization and registration fees at the Registro Mercantil. This fee varies by canton and the complexity of the deed.

Step 3: Notification and Liquidation Commencement

Once the dissolution is registered, the liquidator assumes legal representation of the company. Their primary duty is to "wind up" the company's affairs. This includes:

Public Notice: The liquidator must publish a notice of the company's liquidation for three consecutive days in a major newspaper circulated in the company's primary domicile, as mandated by Artículo 393 de la Ley de Compañías. This calls on all creditors to present their claims.
Asset Inventory and Sale: All company assets are inventoried, valued, and sold.
Debt Settlement: The proceeds are used to pay all liabilities in a legally prescribed order: employees first, then government agencies (SRI, IESS), and finally other creditors.

Hyper-Specific Detail: A critical, often-missed step is obtaining clearance certificates from all relevant government bodies. You absolutely must secure the Certificado de no tener obligaciones patronales pendientes from the IESS (Ecuadorian Institute of Social Security) and a similar clearance from the municipal government (GAD Municipal) for local patent fees. Failure to obtain these will halt the process indefinitely.

Step 4: Final Tax Declarations with the SRI

The liquidator must file all outstanding tax returns, including income tax and VAT. Once all taxes are paid and obligations are met, the SRI is notified of the company's liquidation status. This is a precursor to the final cancellation of the tax ID.

Step 5: The Final Liquidation Balance and Distribution

After selling all assets and settling all debts, the liquidator prepares the Final Liquidation Balance Sheet (Balance Final de Liquidación). This document shows the result of the liquidation. If there is a surplus (remanente), it is distributed to the shareholders according to their holdings. This final balance must be approved by the shareholders in a new General Meeting.

Step 6: Final Cancellation with SUPERCIAS

With all the previous steps completed, the liquidator submits a final cancellation request to SUPERCIAS. The file must include:

The public deed of dissolution.
Proof of the newspaper publications.
The shareholder-approved Final Liquidation Balance Sheet.
A formal request for cancellation of the company's registration.

Upon review and approval, SUPERCIAS issues a resolution officially cancelling the company's legal existence.

Step 7: Cancellation of the RUC

The final act is to take the SUPERCIAS cancellation resolution to the SRI and formally request the cancellation of the company's Taxpayer ID Number (Registro Único de Contribuyentes - RUC). This definitively severs any future tax liability.

Legal Checklist for Cuenca Expats

Comprehensive Power of Attorney: If you are abroad, your legal representative needs a Poder Especial (Special Power of Attorney). Do not use a general power. This document must explicitly grant the authority to vote in shareholder meetings on dissolution, appoint a liquidator, sign public deeds, and represent the company before SUPERCIAS, SRI, and IESS. It must be apostilled in your home country or notarized at an Ecuadorian consulate.
Employee Severance: Be prepared to pay all legally mandated severance to employees, known as liquidación or finiquito. This includes the desahucio and other benefits outlined in the Código del Trabajo. Miscalculating this is the fastest way to a labor lawsuit.
Meticulous Records: Missing accounting records or shareholder meeting minutes can stall the process for months. Ensure your accountant and legal counsel have a complete historical file.
Hyper-Specific Detail: The SUPERCIAS office in Cuenca is known for its strict adherence to formal requirements. Ensure every document submitted, especially the Actas and the liquidator's appointment, is perfectly drafted and signed. Any minor error, like a misspelled name or incorrect ID number, will result in the rejection of your entire submission, forcing you to start the specific step over.

⚠️ Legal Alert: When to Stop and Immediately Consult an Attorney

Shareholder Disagreements: If any partner or shareholder objects to the dissolution or the terms of liquidation.
Significant Debts or Insolvency: If company debts exceed its assets, you may need to enter a formal bankruptcy proceeding (concurso de acreedores), which is a separate and more complex judicial process.
SRI or IESS Audits: If a government audit is initiated during the liquidation process.
Missing Legal Representative: If the company's legal representative has left the country or is unreachable.
Litigation Pending: If the company is currently a plaintiff or defendant in any lawsuit.

Conclusion

Legally dissolving a company in Ecuador is a structured, zero-tolerance process where every step must be flawlessly executed. By understanding the legal mandates of the Ley de Compañías, anticipating bureaucratic requirements, and ensuring meticulous documentation, you can navigate this final business chapter with clarity and legal certainty. As your dedicated legal advisor in Cuenca, I am here to manage these complexities, safeguarding your interests and ensuring a compliant and definitive closure.

Ready to close your business with confidence and compliance? Don't let the complexities of Ecuadorian law create a lasting liability.

Schedule your initial consultation today. Let's discuss your company's specific situation and chart the clearest path to a successful dissolution.