Liquidation of the company

In this article we will describe the process of liquidation of the company. If you want to know the answer to questions such as what liquidation is, how a company can enter into liquidation, who is the liquidator, what documents for the liquidation of the company must be prepared, or what the amount of the advance payment for the liquidation of the company is, read our article.

What is liquidation of a company

Liquidation is a natural and most frequently used method of voluntary termination of a company's activity. Cancellation of Ltd. in the form of liquidation is possible only in the so-called healthy companies, i.e. companies that must not have more liabilities than assets.

The company can be dissolved by liquidation if the company is dissolved without a legal successor, or if the entire assets have not been transferred to the legal successor. In such a case, the company enters into liquidation, which is carried out by the liquidator. In accordance with §70 of the Commercial Code, the liquidation aims to satisfy the claims of creditors and other persons entitled to the liquidation balance.

The liquidation of a company is a complicated process lasting several months, which requires knowledge of both law and accounting and taxes.

Entry of the company into liquidation

Before the company goes into liquidation, it is necessary to determine the current property status of such a company. In order for a company to enter liquidation, the value of its assets must be greater than the value of its debts. It is therefore very important to find out the financial status of the company, and for this purpose it is necessary to ask an accountant to prepare an extraordinary financial statement. Subsequently, if the assets of the given company exceed the liabilities, the company may enter into liquidation.

Pursuant to §70 par. 3 of the Commercial Code, the company goes into liquidation by registering the liquidator in the commercial register. Subsequently, the company is obliged to use the trade name with the suffix "in liquidation" during the liquidation.

For a better understanding, we attach an example: The partners decided on May 10, 2024 to dissolve the company ABC, s.r.o. However, the liquidator will not be registered in the commercial register until June 1, 2024. Thus, the company will enter liquidation only on June 1, 2024.

The entry of the company into liquidation is thus the first phase of the termination of the company's business. This first phase of closing the business can thus be divided into two steps:

• Preparation of the necessary documents for starting the liquidation of the company. In order for the company to go into liquidation, it is necessary for the partners to decide on it. Therefore, for this purpose, it is necessary to convene an extraordinary general meeting of the company, made up of all the company's partners. The law requires at least 2/3 of the votes of all partners in order for the decision of the partners to enter the company into liquidation. Therefore, within the framework of the extraordinary general meeting, it is necessary to:
  • make a decision that the company is going into liquidation
  • appoint and determine the method of action of the liquidator on behalf of the company
  • decide to change the business name of the company

  Subsequently, it is necessary to draw up the minutes of the extraordinary general meeting. In the event that the company has only one partner, the situation is easier, since an extraordinary general meeting is not called, but only a written decision is required - a decision of the sole shareholder.

• Entry of the company into liquidation in the commercial register (ORSR). After the company entered into liquidation, the liquidator is obliged to ensure that this fact is recorded in ORSR on the basis of an electronic proposal. It is necessary to list facts such as:
  • the exact date when the company went into liquidation 
  • an amendment to the trade name "in liquidation“
  • who is appointed liquidator of the company
  • the date of creation of the position of liquidator and the method of his action

Who is the liquidator and how he is appointed

Liquidator in accordance with §72 par. 1 of the Commercial Act may be:

• A person who is registered in the list of administrators maintained according to a special law,
• Another person, if he is registered in the register of natural persons, agrees with the appointment as liquidator and could otherwise be appointed as a member of the company's statutory body.

When performing his duties, the liquidator is obliged to proceed with professional care and in accordance with the interests of the company. If the liquidator is appointed by the company's partners, the company is obliged to deposit 1 500 EUR in a notary's escrow as an advance payment for liquidation before its registration in the commercial register.

Liquidation process

The duty of the liquidator after the company enters liquidation is:

• notify all known creditors of the company's entry into liquidation
• publish a call for claims collection, call for creditors, or other persons affected by this, to register their claims, or other rights.

We emphasize that it is also necessary to announce the entry of the company into liquidation to:

• Health insurance company - due to the assumption that a company that is in liquidation may have insurance debts.
• To the tax office - since in accordance with § 67 par. 9 of the Tax Code there is an obligation according to which, if there are changes in the facts stated during the registration of the company, the tax subject is obliged to notify the tax administrator of this fact within 30 days from the day they occurred. Since liquidation involves a change of business name, it is necessary to notify the tax office of the company's entry into liquidation.
• Social Insurance Company - due to the assumption that a company that is in liquidation may have insurance debts.

Subsequently, the liquidator in accordance with § 75j of the Commercial Code will draw up a final report on the progress of the liquidation, financial statements and a proposal for the distribution of the liquidation balance as of the end of the liquidation, but no earlier than 6 months after the announcement of the company's entry into liquidation. The obligation of the liquidator is to immediately publish the final report on the progress of the liquidation, the financial statement and the proposal for the distribution of the liquidation balance in the Trade Gazette of the Slovak Republic. After the liquidation is completed, the liquidator will convene an extraordinary general meeting:

• discusses the course of liquidation of the company
• decides on the decisive date of completion of the liquidation
• the liquidator approves the final report and proposal for the distribution of the liquidation assets of the company

The liquidator will publish a notice in the commercial journal and will show the liquidation balance to those who are entitled to it immediately after the approval of the financial statements, the final report on the progress of the liquidation and the proposal for the distribution of the liquidation balance. The last and final step in the liquidation of the company is the submission of a proposal to delete the company from the commercial register. Pursuant to §75j par. 6 of the Commercial Code, the liquidator shall complete the deletion of the company from the commercial register:

• financial statement
• final report on the liquidation progress
• the liquidator's proposal for the distribution of the liquidation balance
• confirmation that there are no tax arrears and that the tax audit has not taken place.

The company does not have to pay any court fee for submitting a request for deletion of the company from the commercial register. Subsequently, after the company is deleted from the commercial register, the company's business is terminated.

For more information or if you decide to liquidate your inactive company, please contact us.