Liquidation
The purpose of the liquidation procedure is to ascertain the financial position of the company, to convert the required amount of assets into cash, to repay the company’s debts, and to return the surplus to the shareholders or other parties as determined in the Articles of Association. After the liquidation has ended, the dissolution of the company is notified for registration and the company is deregistered from the Trade Register.
Often the decision to place a company into liquidation is taken when the company’s financial situation has weakened. However, the general meeting of shareholders may at any time resolve to commence liquidation proceedings, subject to a qualified majority resolution of two-thirds of the votes given and the shares represented at the general meeting.
Instead of placing the company into liquidation, the company shall be deregistered [Deregistration], if its assets are not sufficient for covering the liquidation costs or if it is not possible to establish the value of the company’s assets, unless a shareholder, creditor or a third party agrees to bear the liquidation costs.
In certain situations, the Board of Patents and Registration is under an obligation to issue an order for liquidation of a company. This is the case if:
the company does not have a registered and competent Board of Directors;
the company has no registered representative, as required by Section 6 of the Freedom of Enterprise Act;
notwithstanding a request by the registration authority, the company has not notified its financial statements for registration within one year from the end of the financial period; or
the company has been declared bankrupt but the bankruptcy has expired due to lack of funds.
Liquidation or deregistration proceedings may be filed with the Board of Patents and Registration by the Board of Directors of the company, a member of the Board of Directors, the managing director, an auditor, a shareholder, a creditor or other third party whose rights may be dependent upon appropriate registration of the company or placement of the company into liquidation. The registration authority may also initiate proceedings on its own initiative.
As a rule, liquidation commences with the decision to initiate liquidation. Simultaneously, one or several liquidators are appointed, to manage the company during the liquidation. A decision regarding placement of the company into liquidation, as well as the liquidators, shall be submitted for registration without delay.
The liquidators shall apply for a public summons to the creditors from the Board of Patents and Registration, in which the creditors are requested to notify their receivables by the due date under the threat of expiration of all unknown debts. The summons must be applied for even if the company has no known creditors.
Following determination of the company’s assets and liabilities, the assets of the company are converted to cash to the extent necessary, and thereafter the company’s debts are paid and the remaining assets distributed to the shareholders. Finally, the liquidators shall present a final settlement to a general meeting of shareholders, and submit a notification regarding dissolution of the company for registration. The dissolution will enter into force when the final settlement is presented to the general meeting.
During the liquidation proceedings, a general meeting of shareholders is generally subject to the provisions of the Companies Act regarding general meetings. Liquidation is not considered to create an obstacle for, e.g., distribution of profits during the liquidation process. Where the liquidation proceedings have been initiated with a resolution of the general meeting, it is possible for a qualified majority of the general meeting to resolve upon termination of the liquidation, and continuation of the company’s operations. However, liquidation proceedings cannot be terminated if any part of the company’s assets has already been distributed to a shareholder or a third party. Following such decision on termination of the liquidation proceedings, a new management shall be appointed for the company in accordance with the Companies Act and the Articles of Association. A notification regarding the decision on termination of the liquidation proceedings and the appointment of management shall be submitted for registration without delay.