Dissolution of a Company in General

The dissolution of a limited liability company refers to the final termination of a company’s operations. A limited liability company may be dissolved through liquidation or bankruptcy proceedings or as a result of a merger or a demerger.

A company may be dissolved voluntarily through liquidation proceedings [Liquidation]⁠. According to the Companies Act, the general meeting of shareholders may resolve, or the registration authority (Board of Patents and Registration) in certain situations issue an order, to place the company into liquidation. During the liquidation, the operations of the company are terminated, debts are paid and assets distributed to the shareholders, following which the company is deregistered from the Trade Register. In certain situations a company may also be removed from the Trade Register without liquidation proceedings by an order of the registration authority.

Bankruptcy [Bankruptcy]⁠ may also result in dissolution of the company. A bankrupt company shall be deemed to be dissolved if, at the time of termination of the bankruptcy proceedings, there are no remaining assets, or a decision on the use of the remaining assets has been made during the bankruptcy proceedings.

The purpose of restructuring proceedings [Restructuring Proceedings in General]⁠ is to rehabilitate the viable business of a company in financial difficulties. Accordingly, instead of dissolution of a company, restructuring proceedings are related to avoidance of such proceedings. However, restructuring proceedings do not always proceed as planned, and may lapse resulting in, e.g., the company becoming declared bankrupt.

A company may also dissolve as a result of a merger or a demerger. In a merger [Merger]⁠, the merging company is dissolved, and in a full demerger [Demerger] ⁠the demerging company is dissolved.