It is important to know that company liquidation and bankruptcy are procedures that only the owners of the company can carry out. As a company that offers consulting services, we recommend that you come to us for consultations before making a decision on liquidating your company.
What is liquidation?
Liquidation of a company is a procedure carried out when a company does not have sufficient financial resources to cover all of its obligations. More precisely, liquidation is a procedure through which a company ceases to exist and its assets and funds are distributed to other natural and legal persons on the basis of law. Liquidation is usually divided into compulsory liquidation — ordered by a court or other state authority in order to settle outstanding claims — and voluntary liquidation, which results from a decision by the owner or management of the company that has concluded that it is no longer able to carry out its regular business activity.
Voluntary liquidation
When a company decides on voluntary liquidation, it can be carried out in two ways:
- Simplified liquidation procedure
- Regular liquidation procedure
The simplified procedure is the easiest way to liquidate a company. It is carried out so that the owner signs a Statement declaring that there are no debts and that he will be personally liable, with his property, for any potential debts for a period of three years. This procedure can be initiated if the company had no turnover on its bank account, which means the owner can easily liquidate a company that was never actually operating. It should be noted in this case that salary contributions are not considered a debt. This simplified procedure of voluntary liquidation can also be initiated for a company that did operate if the owners know there are no outstanding liabilities. The risk is that someone may file a claim within three years, which can be collected from the personal property of the founder.
The regular procedure of liquidation is carried out when the company had turnover through its bank account but has no outstanding liabilities. In that case, it is necessary to obtain a certificate from the Tax Administration confirming that there are no outstanding obligations, and then a request for the deletion of the company is submitted to the Central Registry.
It is important that the accounting is brought to zero on the same date on which the founder signs the Statement before a notary.
Company bankruptcy
The bankruptcy of a company is a procedure defined by law, and it is initiated against the debtor's property. If a company had turnover through its account and no longer has the funds to pay its debts to creditors, it may initiate bankruptcy proceedings. Bankruptcy can be initiated by creditors or by the owner(s) of the company. The founder(s) or a creditor initiates bankruptcy by submitting a request to the Commercial Court, together with a list of creditors, a list of debtors, a list of assets, a balance sheet and an income statement, and other required documentation. The court appoints a bankruptcy trustee and notifies the debtors and the Tax Administration. When the court determines that the debts exceed the claims, it concludes the bankruptcy procedure and the business entity is liquidated.
If the founder submits a Reorganisation Plan and it is adopted by the creditors and the court, the business entity continues its operations. This means that bankruptcy proceedings do not necessarily lead to the deletion of the company from the Central Registry.
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