Liquidation and Law on Business Companies

Voluntary liquidation of the company – legal aspect

According to provisions of Article 468 of Law on Business Companies, business company shall be dissolved by deletion from the register of economic operators in case of:

  • Liquidation or forced liquidation in accordance with this Law
  • Bankruptcy proceedings in accordance with the law governing bankruptcy and
  • A status change resulting in the dissolution of a company.

Liquidation of the company is the process of dissolution of the solvent company and can be: voluntary and forced.

Voluntary liquidation of the company is run by the decision of the owner of the company, as opposed to the forced liquidation, which starts in the cases provided by law.

The registrar in charge of the register of companies shall ex officio change a company’s status to “in forced liquidation” and shall at the same time post a notice of forced liquidation on the web page of the register of economic operators and keep it posted for an uninterrupted period of six months.

Liquidation of the company is regulated by Articles 524.-548. of Law on Business Companies.

Initiation and commencement of the voluntary liquidation of the company

The liquidation of the company shall be initiated:

  • By a unanimous decision of all partners or general partners, unless provided otherwise by the Memorandum of Association
  • By a decision of the General Meeting of limited liability company members, in accordance with Article 211 of the Law on Business Companies
  • By a decision of shareholders’ General Meeting, in accordance with Article 358 of the Law on Business Companies.

According to the provisions of the Article 526 of the Law on Business Companies liquidation of the company shall commence on the date of registration of a decision to liquidate and publication of a notice of liquidation, in accordance with the Law on Registration Procedure in Serbian Business Registers Agency.

A notice of liquidation of the company shall be posted continuously for 90 days on the web page of the register of economic operators.

In addition to this public notice of liquidation to the creditors, a liquidator shall also send written notice of initiation of liquidation within 15 days of the date of initiation of liquidation to known creditors who register their claims under this Law on Business Companies.

Creditors whose claims are secured by an enforceable document and creditors whose claims become the matter of a lawsuit before the initiation of liquidation shall not be required to register those claims and their claims shall be considered registered in accordance with the Law on Business Companies.

After initiation of liquidation of the company and registration of the decision on the liquidation of the company in Business Registers Agency, perform the following legal consequences:

  • The initiation of liquidation shall not prejudice the imposition or enforcement of orders on a company in liquidation or the conduct of any pending proceedings against or in favour of a company in liquidation.
  • The initiation of liquidation shall be without prejudice to any petition for initiation of bankruptcy made in accordance with the law governing bankruptcy and the creditors of a company in liquidation may file petitions for initiation of bankruptcy during the period of liquidation for reasons laid down by the law governing bankruptcy.
  • During the liquidation of a company, participation in profit and dividends shall not be paid and the company’s assets shall not be distributed to its members before the settlement of all creditors’ claims.
  • Company’s business name is changed so that it is marked ’’in liquidation’’.
  • Activities and operations of the company shall be managed by the liquidator. The appointment, removal and resignation of a liquidator shall be registered in accordance with the law on registration.
  • During the duration of the liquidation of the company a liquidator may carry out the following activities:
    – Take actions necessary to finalise transactions initiated before the initiation of liquidation
    – Take actions necessary to conduct the liquidation, including the sale of assets, settlement with creditors and collection of receivables
    Other activities necessary for the conduct of liquidation.
  • a company in liquidation can not change its legal form, or participate in a status change, unless the liquidation or status changes are implemented as a reorganization measure in accordance with the law governing bankruptcy.

Voluntary liquidation of the company - legal aspect

Registration of Claims

A company shall record all received filings of claims and all claims which shall be considered registered in accordance with the provisions of Article 534 paragraph 4 of Law on Business Companies in a list of registered claims and draw up a list of recognised and challenged claims.

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.

A company may not challenge the claims of creditors whose claims are backed by an enforceable document.

Liquidation Balance Sheets and Reports, Termination of Liquidation and Initiation of Bankruptcy Proceedings

Before the settlement with creditors liquidator shall draw up following balance sheets and reports, which shall be registred in accordance with the law on registration:

  • Opening liquidation balance sheet, as an extraordinary financial report within 30 days of initiation of liquidation and shall submit it to the partners or the general partners or the General Meeting for adoption within the same period.
  • Initiation Liquidation Report not earlier than 90 and not later than 120 days of initiation of the liquidation procedure and shall submit it to the partners or the general partners or the General Meeting for adoption within the same period.
  • Annual Liquidation Reports on his/her activities, with an explanation of reasons why the liquidation procedure is continuing and not completed, and shall submit it to the partners or the general partners or the General Meeting for adoption within three months of the end of every accounting year.

Suspension of Liquidation Procedure
In the course of a liquidation procedure, a company may suspend the liquidation procedure and resume its operations pursuant to a decision passed by its partners or general partners or General Meeting. A decision to suspend a liquidation procedure shall be registered in accordance with the law on registration.

Initiation of Bankruptcy Proceedings due to Insolvency
If it is found on the basis of an opening liquidation balance sheet or opening liquidation report that a company’s assets are not sufficient to settle all claims filed by its creditors (insolvency), a liquidator shall file a petition for initiation of bankruptcy proceedings with the competent court within 15 days of preparation of the opening liquidation balance sheet or opening liquidation report, as the case may be. In this case a liquidator may not settle creditors’ claims, other than those that arose from the company’s current operations until the date of initiation of bankruptcy proceedings.

Documents drawn up after Settlement with Creditors

After settlement with creditors, a liquidator shall draw up:

  • A closing liquidation balance sheet
  • A report on completed liquidation procedure
  • A declaration in writing to the effect that he/she has sent a notice to all known creditors in accordance with Article 534 of the Law on Business Companies and that all liabilities of the company arising from registered claims and claims considered to be registered for the purposes of Article 534 paragraph 4 of the Law on Business Companies are fully settled and that there are no other pending proceedings against the company
  • A draft decision on distribution of the company’s residual assets.

A company’s partners or general partners or General Meeting shall adopt the documents and shall pass a decision to terminate the liquidation procedure in the manner provided by Article 525 of the Law on Business Companies.

Liquidation of the company – termination and liability for damage

The assets of a company in liquidation that remain after the settlement of all liabilities (residual assets) shall be distributed to company members in accordance a decision on distribution of residual assets.

Liquidation shall be terminated by the passing of a decision to terminate liquidation. Upon the termination of a liquidation procedure, a company shall be deleted from the register of economic operators in accordance with the law on registration.

Upon termination of a liquidation procedure and deletion of a company from the register a liquidator shall be liable for any damage caused in the exercise of his/her duties to company members and creditors of the company in liquidation and company members shall be liable for the obligations of a company in liquidation to creditors of the company.

Listed claims to the liquidator and members of the company in liquidation shall become time-barred three years of the date of deletion of a company from the register.

Read more:
Liquidator »
The Legal Framework for the Company Foundation »
Status changes according to the Law on Business companies – concept and types »

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