The liquidation procedure is settled with provisions of the Commerce Act and some special laws and is one of the legal methods established by law for discontinuation the activity of a trader. It describes the means of converting the assets of as commercial company into cash, satisfying debts to creditors and distribution of remaining property according to existing liquidation shares, winding up legal subjects and this deletion from the Commercial Register. Liquidation is out-of-court procedure. It is always a result of the discontinuation of the activity of the trader.
The law prescribes the voluntary liquidation that has three stages:
Stage 1 – Announcement for winding up, registering the liquidator
1. Decision for liquidation
The decision is taken by the general meeting of the Joint stock company and agrees the term for completing the liquidation procedure and the appointment of liquidator of the company. Normally the executive manager is appointed as a liquidator of the company. The decision of the general meeting regarding the liquidation of the company takes immediate action. The respective entrance made in the Commercial register in essence serves as a declaration of these circumstances and as a proof. After the decision is entered the name of the company shall be followed by the words “in liquidation”.
The National Revenue Agency shall be informed for the decision for liquidation of the company and a certificate shall be obtained. The certificate is issued in two months term.
2. Appointment of a liquidator
The appointment of liquidator shall be entered into the Commercial Register. Once the decision for liquidation is taken the management bodies are deprived from their rights to manage their property and their rights and obligations are transferred to over to the appointed liquidator. The representative power of the liquidator is limited with regards to concluding new transactions on behalf and for the account of the company. The remuneration of the liquidator is being determined by the General meeting of the company.
Stage 2 – Findings on the Size of the property, converting into cash and satisfying creditors. Distribution of the remaining property.
During this stage the liquidator pulls together the property of the company, concludes the current transactions, executes the activities on collecting the receivables and converting the existing property into cash, composition the initial balance and the explanatory report after an inventory check-up, attach an evaluation of different property items and presentation to the general meeting. In the same time the creditors are informed that they should claim their receivables. After the six-month period for making claims has expired the remaining property is distributed before the owners of the company, according to their shares.
2. Invitation to creditors
Upon declaring the dissolution of the company, the liquidator must invite its creditors to make their claims. The notice shall be forwarded in writing to known creditors and shall be posted in the Commercial register. The company’s assets shall not be distributed before six months have passed form the date of the notice to the creditors posted in the Commercial register.
3. Filing claims on receivables
Filing of claims shall be done with a written request, addressed to the liquidator with enclosed evidence for the existence and size of the claimed receivables.
4. Transition from liquidation to insolvency
One of the main characteristics of the liquidation procedure is that the amount of the assets is enough for covering its debts. In the opposite case the liquidator is obliged to file a request with the respective court for initiation of insolvency procedure. This obligation shall be fulfilled in 30 days and the liquidator bares civil and criminal liability if he fails to fulfill it.
Stage 3 – Deletion by the Commercial register
After satisfying the claims of creditors the remaining property is being distributed among the shareholders, according to their share installments. After the final distribution of property the liquidator prepares a report and presents to the General meeting, which takes a decision to delete the company from the Commercial Register.
The resolution to terminate the company and its declaration of liquidation shall be subject to recordation in the Commercial Register. The termination and liquidation of the company shall take effect as of the moment of recordation of the resolution.
Expected period for completion of the procedure: From 9 to 12 months;