1. When does a company initiate voluntary liquidation, and in which cases is compulsory liquidation required?
Voluntary liquidation of a company is initiated when the members of the company want to shut the company down because there is no longer an interest of its members to continue to operate, or at least to continue to operate through that company. To conduct the voluntary liquidation procedure in general, it is necessary for the company to have sufficient funds to meet all its obligations. In that case, the members of the company themselves make the decision to initiate the liquidation of the company.
Unlike voluntary liquidation, compulsory liquidation is initiated in precisely determined cases prescribed by the law and is launched ex officio by the Business Registers Agency of the Republic of Serbia.
Some of the cases in which compulsory liquidation of a company is required are:
- If the company is left without a legal representative and does not register a new one within 3 months from the day of registration of the deletion of the representative;
- If the company has been banned from performing activities, and the company does not start liquidation within 30 days from the entry into force of the act by which the ban was imposed;
- If the final judgment determines the nullity of the registration of the establishment of the company or the nullity of the founding act;
- If the company is established for a certain period of time, and after the expiration of that period it does not register its extension, etc.
2. What does the process of voluntary liquidation look like?
Voluntary liquidation, as we have already stated, begins with the decision to conduct liquidation by the members of the company. The decision to initiate the liquidation procedure must be registered with the Business Registers Agency. This decision appoints the liquidation manager of the company who becomes the legal representative, i.e. the appointment of the liquidation manager terminates the authorizations of all previous representatives of the company. Usually, the former director of the company is appointed as the liquidation manager, but it can be any other person. The liquidation manager undertakes all actions and tasks that are necessary for the implementation of the liquidation procedure.
Simultaneously with the decision to initiate the liquidation procedure, an announcement on the initiation of the liquidation procedure is published, with an invitation to all creditors of the company to report their claim. On the other hand, the liquidation manager is obliged to send a written notice to the known creditors who report their claims, informing them that the liquidation procedure has been initiated. The company is obliged to record all received claims in the list of reported claims and to compile a list of reported and disputed claims. If it disputes a creditor’s claim, the company is obliged to inform the creditor with an explanation why the claim has been disputed. If the creditor does not initiate proceedings before the court regarding the disputed claim within 15 days of receiving the notice of dispute and does not inform the company about it, the claim will be considered precluded, i.e. the creditor loses the right to it. An exception to the rule are the claims determined by the so-called enforcement document (final decision of a court or other body, a contract made in the form of a notarized document with the effect of an enforcement document, court settlement, etc.). Namely, the company cannot dispute the claims of creditors whose claims are determined by an enforcement document.
After the payments to the creditors and the settlement of all obligations, the company passes a decision on the termination of the liquidation procedure, which together with other legally prescribed documents is submitted to the Business Registers Agency. The company is then deleted from the register, and the assets that remain after the settlement of obligations, the so-called liquidation balance, are distributed to the members of the company.
3. Is it possible to stop the process of both voluntary and forced liquidation at some point, and what is necessary to do in that case?
The compulsory liquidation cannot be stopped. This is because the Register of Business Entities of the Business Registers Agency, if it finds that there are reasons for initiating the compulsory liquidation procedure, initially leaves a deadline for the company in which the mentioned reasons can be eliminated. If the company misses this deadline and does not act according to the instructions of the Business Registers Agency, the procedure is subsequently irreversible. In other words, once the process of compulsory liquidation begins and the deadlines are missed, it is not possible to suspend it, i.e. the procedure necessarily leads to the deletion of the company from the register.
Unlike compulsory, voluntary liquidation of a company may be interrupted at any time by the decision of the members to suspend the liquidation procedure, in accordance with the Company Law. Liquidation may be suspended provided that all creditors of the company are settled regardless of whether their claims are recognized or disputed, and provided that the company has not terminated the employment contract of any employee on the basis of liquidation, nor has it started disbursing members of the company.
The decision to suspend the liquidation procedure must be registered with the Business Registers Agency and it contains, among other things, a provision on the appointment of a new legal representative of the company.
What essentially distinguishes the consequences of the completion of compulsory and voluntary liquidation is the fact that after the completion of the compulsory liquidation the controlling member of the LLC and the controlling shareholder of the shareholding company are jointly and severally liable for the company’s obligations even after deleting the company from the register for a period of three years after the company has been deleted from the register. In the case of voluntary liquidation, the members of LLC and SC are liable for the obligations of the company only up to the amount received from the liquidation balance, also for a period of three years from the date of deletion of the company from the register.