Company dissolution

A company can be dissolved for many reasons. These reasons can be on the part of the shareholders or based on a court decision (then it is a forced dissolution of the company). The company may also be dissolved for other reasons, such as the expiration of the validity period, if it was established for a definite period, the achievement of the purpose for which the company was established, or the death of any of the company's shareholders. Of course, there are other reasons that lead to the dissolution of a company and that are established by law. These reasons may be, for example, the inability of the company to perform its activities and fulfil its purpose for more than one year, or the inability to resolve disputes between the shareholders.

FORCED DISSOLUTION

The forced dissolution of a company is usually decided during court proceedings and the court is obliged to give the owners of the company a reasonable period to rectify the company before issuing a judgment. The reasons for which a court may decide on the dissolution of a company are set forth in the new Civil Code, the Business Corporations Act and others.

A proposal for the dissolution of a company can be made by any person who has a legal interest in the situation, or by the public prosecutor's office if it finds a serious public interest in the company's situation.

TERMINATION AND DISSOLUTION

Company termination, just like dissolution, is governed by the new Civil Code and the Business Corporations Act. According to these laws, the dissolution of a company always takes place first, followed by its termination. The company ceases to exist on the day of the deletion of the company's record from the Commercial Register.

The dissolution of the company that precedes termination can take place in two ways: with or without liquidation.

DISSOLUTION WITH LIQUIDATION

A company dissolves with liquidation if it has no economic, material or legal continuation, i.e. the undertaking terminates all its business activities. The dissolution of a company with liquidation is usually a more complex process than the dissolution of a company without liquidation, as the dissolution of the company must first be voted on at the general meeting if the memorandum of association so provides and then determine if the company has any debts (if the company is overindebted the dissolution with liquidation must be abandoned and insolvency proceedings are initiated) and whether it has settled all orders and receivables. Subsequently, all the company's assets are monetized, the amount obtained is subject to withholding tax and the liquidation balance is distributed among the company's shareholders. After the dissolution of the company with liquidation, the company may be deleted from the Commercial Register, which leads to the complete termination of the company.

DISSOLUTION WITHOUT LIQUIDATION

The dissolution of a company without liquidation occurs when the company is transferred to a new legal successor – a new or existing company, or if the company merges with another, larger unit. Dissolution of a company without liquidation includes processes such as a merger of the company, transfer of assets to a shareholder, division, or change of the legal form of the company.

Upon dissolution of the company without liquidation, the assets and liabilities are transferred to the legal representative of the new company.

The only thing to consider when dissolving a company without liquidation is the filing of a tax return, which must be filed no later than the end of the month following the decision to transform the company. If the transformation of the company has not been entered in the Commercial Register, it is assumed that the transformation of the company did not take place at all and the companies that should have ceased to exist are obliged to submit tax returns by the date of the regular tax period.

Do you have any questions about company dissolution or need help dissolving a company with liquidation? Contact us! We will be happy to help you.