Liquidation? Trust an expert

The purpose of liquidation is to satisfy creditors in the manner prescribed by law.
Liquidation proceedings may be initiated at the request of the debtor, a creditor, the liquidator, the company court, or a court acting in a criminal matter.

If a creditor requests the commencement of liquidation proceedings, the application must specify the legal basis of the debtor’s debt, its due date, and the reasons why the creditor considers the debtor to be insolvent. The debtor is obliged to submit a statement to the court within 8 days indicating whether it acknowledges the claims set out in the application and whether it requests a grace period for settling the debt.

The court may grant a maximum payment deadline of 45 days for the settlement of the debt. The court establishes insolvency if the debtor fails to settle the debt within 20 days following the expiry of the due date, or if the debtor neither disputes nor settles the debt despite a creditor’s payment demand, or if the debtor fails to settle the debt beyond the performance deadline established in a final court decision, enforcement has proven unsuccessful, and the debtor has failed to satisfy creditor claims despite a bankruptcy settlement.

The detailed rules of liquidation are set out in Act XLIX of 1991 on Bankruptcy Proceedings and Liquidation Proceedings (the “Liquidation Act”). The duration of liquidation proceedings may not exceed two years.

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Process of Company Liquidation

Following the finalisation of the court order establishing insolvency, the court immediately appoints the liquidator of the debtor and publishes a notice in the Company Gazette regarding the commencement of liquidation proceedings against the debtor.

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Within 30 days from the start date of liquidation, the debtor must contact the liquidator and hand over the following documents:

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• the closing balance sheet, closing inventory, and general ledger extract;

• detailed lists of the company’s assets (real estate, vehicles, inventories, equipment, other assets, receivables, securities, business shares, cash and cash equivalents), as well as a statement specifying the physical location of such assets;

• final tax returns;

• an environmental protection declaration;

• a statement on whether the company employs any employees (active or inactive);

• a statement on whether any litigation is pending against the company or initiated by the company;

• a register of the company’s active contracts and copies of such contracts.

 

Creditors must report their claims against the debtor to the liquidator within 40 days following the publication of the court order initiating liquidation. The liquidator registers and classifies these claims. The liquidator assesses the debtor’s financial position and the claims asserted against it, enforces the debtor’s receivables, and liquidates its assets.

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After the expiry of 40 days from the publication of the initiating court order and until the submission of the liquidation closing balance sheet, the debtor and the creditors may enter into a settlement agreement at any time, which must be submitted to the court for approval.

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If, during the proceedings, the debtor settles all registered, acknowledged, or undisputed debts and provides security for disputed claims as well as for the liquidator’s fee, the court shall terminate the liquidation proceedings.

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If no settlement is reached between the debtor and the creditors during the proceedings and the creditors’ claims have not been satisfied in accordance with Section 45/A of the Bankruptcy and Liquidation Act, the court—upon the liquidator’s request and based on the liquidation closing balance sheet and asset distribution proposal submitted by the liquidator—issues an order on the completion of the liquidation proceedings, the termination of the debtor, the allocation of costs, the liquidator’s remuneration, and the (partial) satisfaction of creditor claims.

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The liquidator may initiate legal proceedings to establish the managing director’s secondary (personal) liability, in which case the managing director may be held liable for creditor claims with their private assets. If the liquidator detects a suspicion of a criminal offence, a criminal complaint may also be filed.

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