Under the Commercial Companies Law, the liquidation of a company can be triggered by a number of cases stipulated in article 40 of the law. This blog post will highlight the steps required under the Commercial Companies Law to commence and complete the liquidation of a company.
Step 1—Liquidation Trigger
The liquidation of a company can be triggered by any of the cases stipulated in article 40 of the Commercial Companies Law. This must be formalised by a resolution by the shareholders of the company commencing the liquidation or a court judgment made pursuant to a request by a related party, the Ministry of Commerce, Industry, and Investment Promotion, or the Financial Services Authority.
Step 2—Legal Dissolution
Upon the issuance of the liquidation shareholder resolution or court judgment, the company is legally deemed dissolved and enters the “phase of liquidation”.
Step 3—Appointment of the Liquidator
The same shareholder resolution or judgment formalising the liquidation must also include the appointment of a liquidator to carry out the tasks required for the liquidation process.
Step 4—Carrying out the Liquidation
The liquidator is required to carry out the liquidation on the basis of the instructions provided to him in the shareholder resolution or judgment. These instruction can determine the procedures and timelimits associated with the liquidation. In the shareholder resolution or judgment do not include specific instructions, the liquidator must abide by the provisions found in article 46 of the Commercial Companies Law, which require communicating with all creditors, publishing an announcement regarding the liquidation, and specifying a time limit of 180 days for credits to submit their claims.
Step 5—Settlement of Creditor Claims
Upon receiving the claims of the creditors, the liquidator is required to settle all valid claims against the company on the basis of the legal rank of each claim, after deducting the expenses of the liquidation and the fees of the liquidator.
Step 6—Distribution of Remaining Assets
If there are any remaining assets after the settlement of the claims, the liquidator is required to distribute these assets among the shareholders in accordance with the constitutive contract of the company.
Step 7—Submission of Final Report
Upon the completion of the liquidation process, the liquidator is required to a final report to the shareholders of the company as well as the creditors within 30 days of the completion of the liquidation process. Once the shareholders approve this report, the liquidator is required to submit a copy of the report to the Ministry of Commerce, Industry, and Investment Promotion and also publish an announcement of the completion of the liquidation process.
Step 8—Removal of Registration
Upon receipt of the approval report, the Ministry of Commerce, Industry, and Investment Promotion will delete the registration of the company from the Commercial Register.
Conclusion
If you are interested in learning more about the process of liquidation, I highly advise you to familiarise yourself with the provisions under the Commercial Companies Law. You can also view the latest liquidation announcements on Decree Risk:
