The closing of a subsidiary in Spain for economic reasons raises numerous questions for partners as to the appropriate procedure to follow. This article discusses the two central mechanisms offered by Spanish law, emphasizing the advantages and disadvantages of each of them.AdvantagesThe main advantages of closing a subsidiary without bankruptcy proceedings are:Legal certainty as to the course of liquidationGreater control and flexibility in settlement transactionsThe liquidation procedure’s shorter durationGreater freedom to act without the supervision of bankruptcy administrators.Closing a subsidiary with bankruptcy proceedingsAccording to the law in Spain, a company is considered insolvent when it cannot regularly comply with its obligations; that is, when it cannot meet the payment obligations to which it has committed. The situation of insolvency may be current or imminent.Once the company’s managers have established the existence of a situation of insolvency, they must undertake voluntary bankruptcy proceedings within two months from the date on which they discovered (or should have discovered) said situation, notwithstanding the provisions of Article 5 bis of the Spanish Bankruptcy Law.In general terms, bankruptcy proceedings in Spain are characterised by two phases: the common phase and the agreement or liquidation phase. All bankruptcy proceedings are carried out under the supervision of a commercial judge, who will be responsible for appointing the panel of bankruptcy trustees.Disadvantages of a subsidiary’s closure with bankruptcy proceedingsThe main disadvantages of closing a subsidiary through bankruptcy proceedings are:The proceedings’ length of timeGreater legal uncertainty regarding the course of the proceedings and the unpredictability of the judge and/or bankruptcy trusteesCareful preparation of all documents when applying for the opening of the bankruptcy proceedingsCareful and diligent collaboration between company’s managers and the judge and bankruptcy trusteesPossible rescission of legal dealings by bankruptcy trusteesPossible declaration of liability against company managers and, if applicable, against Group partners or companies.Advantages of a subsidiary’s closure with bankruptcy proceedingsThe main advantages are:The cost for partners in terms of paying the subsidiary’s creditors is reduced to the assets existing at the time of the bankruptcy declarationDuring the liquidation phase, the appointed bankruptcy trustee assumes the role of liquidator (converting the existing assets to cash and paying creditors from the available assets).Closing down a subsidiary in Spain, whether with or without bankruptcy proceedings, has its advantages and disadvantages. The circumstances of each individual case will determine the best option.For further information regarding the closing of a subsidiary in Spain,