Liquidation of a company represents a way of terminating a company. Liquidation is carried out when the company has sufficient funds to settle its obligations, which distinguishes it from bankruptcy proceedings, as another form of company termination.

Voluntary Liquidation

The basic form of liquidation is voluntary liquidation, which is initiated depending on the form of company organization:

1. By unanimous decision of all partners or general partners, unless otherwise stipulated by the incorporation agreement
2. By decision of the company’s assembly of members
3. By decision of the shareholders’ assembly

Compulsory Liquidation

The other type of liquidation is compulsory liquidation, which does not depend on the decision of management bodies and is initiated if:

1. A final measure has been imposed on the company: (a) prohibition of performing activities, and the company does not commence liquidation within 30 days of the finality of that act; (b) prohibition of performing registered activities, and the company does not register the deletion or change of that activity or does not commence liquidation within 30 days; (c) revocation of a permit, license or approval for performing registered activities, and the company does not register the deletion or change of that activity or does not commence liquidation within 30 days.
2. Within 30 days of the expiration of the company’s term, the company does not register an extension of its duration or does not commence liquidation.
3. A general partnership remains with one partner due to the death of a partner, and none of the deceased partner’s heirs are registered as a company member within three months of the final conclusion of the probate proceedings, or the company remains with one partner for other reasons, and the missing member does not join, or the company does not change its legal form, or does not commence liquidation within three months.
4. A limited partnership remains without a general partner due to the death of a general partner, and none of the deceased general partner’s heirs are registered as a company member within three months, or the company remains without a general partner or limited partner for other reasons, and the missing member does not join, or the company does not change its legal form, or does not commence liquidation within three months.
5. A final court judgment has established the nullity of the company’s registration or the nullity of the company’s founding act.
6. A final court judgment has ordered the termination of the company, and the company does not commence liquidation within 30 days of the finality of the judgment.
7. The company remains without a legal or temporary representative and does not register a new one within three months.
8. A company in liquidation remains without a liquidation manager and does not register a new one within three months.
9. The adopted initial liquidation report is not submitted to the Business Registers Agency.
10. The company does not submit annual financial reports to the relevant register for two consecutive business years.
11. The company does not submit the initial liquidation balance sheet to the relevant register.
12. In other cases provided by law.

Registration and Publication of Liquidation Proceedings

Liquidation of a company formally and legally begins on the day of registration of the liquidation decision and the publication of the announcement on the initiation of liquidation proceedings. This means that the date of legal effect towards third parties, i.e., the date of the start of liquidation, is considered to be the date of registration of the decision and the publication of the announcement, not the date of the decision itself. Registration produces legal effect towards third parties on the day following publication.

Legal Consequences of Initiating Liquidation

Initiating liquidation does not prevent the ordering and execution of enforcement against the company in liquidation, nor the conduct of other proceedings conducted against or in favor of the company in liquidation.

A consequence affecting members of the company in liquidation is that during liquidation, no profit share or dividends are paid, nor is company property distributed to members before all creditors’ claims are settled. Creditors have priority in payment, and they submit their claims in the liquidation procedure based on the announcement of the initiation of liquidation, which is published on the website of the Business Registers Agency for 90 days and contains:

• An invitation to creditors to submit their claims
• The address of the company’s registered office, i.e., the mailing address to which creditors submit claims
• A warning that claims will be barred if not submitted no later than 30 days from the expiration of the announcement period

 

Liquidation Manager

In the decision to initiate liquidation, the company appoints a liquidation manager. Upon appointment of the liquidation manager, all company representatives lose their representation rights. If the company does not appoint a liquidation manager, all legal representatives of the company become liquidation managers. The company may have multiple liquidation managers. If there are multiple liquidation managers, they represent the company jointly, unless otherwise specified in the appointment decision.

The liquidation manager may be dismissed by decision, and the same decision must appoint a new liquidation manager. The appointment, dismissal and resignation of the liquidation manager are registered in accordance with the law.