THE LIQUIDATION (WINDING UP) OF A COMPANY (LLC/LLT/FIRM) – LAW OFFICE BELGRADEIvan
If your business went to the crisis and you don’t realize expected profit, as one of the realistic option is to winding up it. The winding up of business realizes in the procedure of liquidation which is regulated by Law on companies. The liquidation of company is more complex than procedure of registration company. In the following lines we will describe you the procedure of liquidation company, with special emphasis on liquidation of Limited liability company (LLC).
THE TERM OF LIQUIDATION AND WAY TO START IT
The liquidation is process of winding up company which has enough money and assets to pay all his debts. In other words, if your company is insolvent you can’t initiate a liquidation and only legal possibility is to initiate bankruptcy. In that case, as first step, we advice you to go at the Law office Belgrade for liquidation of a company.
Liquidation can be voluntary or forced. The voluntary liquidation initiates by decision of company members. At general partnership and limited partnership it initiates by a unanimous decision of all partners, on other hand, at Joint-stock company shall be initiated by decision of shareholders’ General Meeting by a simple majority of the voting power present shareholders. On other hand, at LLC company the decision which initiates a liquidation should be made by General Meeting by a two-third majority of the total voting power, but constitutional act of LLC can provides different majority, not less than simple majority.
Forced liquidation should be initiated officially by Serbian Business Registration Agency (SBRA) in the case that company doesn’t has all legal conditions which are need for existence in the world of company law. Law on companies provides several cases when forced liquidation shall be initiated.
Among them the most important are: 1) if an injunction is imposed on a company by a valid and enforceable document barring it from carrying on a business activity, and such company fails to register a change of predominant business activity or to initiate liquidation within 30 days of the date when such document became final and enforceable 2) if within 30 days of expiration of its duration a company does not register an extension of duration or fails to initiate a liquidation procedure in the same period 3) if a general partnership is left with a single partner or a limited partnership is left without a general partner or a limited partner and a missing member does not accede the company within three months or the company does not change its legal form within the same period.
PROCESS OF THE LIQUIDATION – DOCUMENTS AND DEADLINES
As first step, we have to make a decision of initiating liquidation. By this decision company shall appoint a liquidator, as person who will governing a liquidation and represents company. Liquidator is very often director of company or engaged accountant because company shall submit several financial report during the liquidation which is domen of accountant. This decision is very formally and must includes many elements which provides by law, than we advice you to engage Law office Belgrade for liquidation of a company for writing it. The decision to liquidate shall be registered by Serbian Business Registration Agency (SBRA) and in the same time on the web page of SBRA a notice of liquidation shall be posted.
A notice of liquidation shall be posted for 90 days on the web page of the SBRA and his purpose is to make the process of liquidation more transparent, also to give a chance creditors of company to register their claims (if company has creditors). Creditors has a right to register their claims no later than 30 days of expiration of the notice display period, after that their claims will be precluded. On other words, creditors of company has total 120 days, starting from the day of initiating liquidation to register their claims. Creditors should send their registration of claims to address of the company’s registered office and liquidator decides on their merits.
On other hand, a liquidator shall also send written notice of initiation of liquidation within 15 days of the date of initiation of liquidation to known creditors and invite them to register their claims with a warning that creditors’ claims will be precluded if not registered it on time.
A company may challenge a creditor’s claim within 30 days of receipt of a filing of claim, in which case it shall notify the creditor thereof in the same period and provide rationale for such challenging of claims. In that case, a creditor of company has a right to submit a lawsuit to the court within 30 days of receipt of notification, in order to determine about final merits of his claim. If a creditor didn’t do it, his claim will be precluded and company won’t have any obligations on the occasion of this claim.
OPENING LIQUIDATION BALANCE SHEET AND INITIATION LIQUIDATION REPORT
A liquidator shall, within 30 days of initiation of liquidation, draw up an opening liquidation balance sheet and submit it to the members of company for adoption. A opening liquidator Balance Sheet is extraordinary financial report which should be written in accordance to regulations governing accounting and auditing.
A liquidator shall also draw up an opening liquidation report, not earlier than 90 and not later than 120 days of initiation of the liquidation procedure. This report shall be submited to the members of company for adoption within the same period, after that shall be registered at Serbian Business Registration Agency.
An opening liquidation report shall includes: 1) a list of registered claims; 2) a list of recognised claims; 3) a substantiated list of challenged claims; 4) an indication whether the company’s assets are sufficient to settle all of its liabilities; 5) actions necessary for the conduct of liquidation; 6) time envisaged for the completion of the liquidation procedure. Only from the moment when an opening liquidation report be registred at SBRA, company can start with payments for the purpose of settling creditors’ claims.
WHAT IS THE NEXT AFTER PAYMENT OF CREDITORS?
After making payments to creditors, a liquidator shall draw up next acts and reports: 1) a closing liquidation balance sheet; 2) a report on completed liquidation procedure; 3) a declaration in writing to the effect that he has sent a notice to all known creditors and that all liabilities of the company arising from registered claims are fully settled; 4) a draft decision on distribution of the company’s residual assets. When the shareholders adopt those documents, General Meeting by a two-third majority of the total voting power shall make a decision to terminate the liquidation procedure. After this decision be registered at Serbian Business Registration Agency LLC shall be delated from register of SBRA and LLC stop to exist.
WHAT IS RESIDUAL ASSETS?
A residual assets is the assets of a company in liquidation that remain after the settlement of all liabilities. It will be shared among all members of company in accordance to decision on distribution of the company’s residual assets. At LLC, if constitutional act don’t provide different solution, residual assets will be shared among shareholders according to the value of their equity interests in the company.
As you can see the liquidation procedure is very complex, long-term and involves preparing many documents and respect deadlines. Because of that we advice you to engage Law office Belgrade for liquidation of a company.