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]⁠. The General Meeting decides to liquidate the company. The decision of the General Meeting must be taken by a qualified majority. In certain circumstances, the Patent and Registration Office must order the company to be wound up or struck off the register. Instead of liquidation, the registration authority must remove the company from the register if the company's assets are insufficient to pay the liquidation expenses or if the amount of the assets is not known and the shareholder, creditor or other person does not declare that he will bear the expenses of the liquidation proceedings. This must be done if:

1. the company does not have a board of directors entered in the register who are entitled to act;

2. the company does not have a registered representative within the meaning of the Trade and Commerce Act who can accept summons and other service of process on behalf of the trader;

3. the company has not, despite being requested to do so, filed its financial statements for registration within one year of the end of the financial year; or

4. the company has been declared bankrupt, which has lapsed for lack of assets.

The order must be issued unless it is shown, before the case is settled, that there are no longer grounds for it. 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. 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.