Slovakia: Liquidation and the hidden potential of supplementary liquidation
If a company has fulfilled its purpose, its further existence is unprofitable, or if there are other justifying reasons, it is usually best to dissolve such a company and have it deregistered from the commercial register. Where the company has no legal successors to which its assets could be transferred, it must, however, first go into liquidation.
What provisions on liquidation should a company’s articles of association contain?
It is advantageous for a company to include in its articles of association provisions on distribution of liquidation proceeds, selection of liquidator, the liquidator’s remuneration and reimbursement of expenses, as these may diverge from the statutory regulation. However, care should be taken that the protection of creditors is guaranteed and that the law is not abused.
What is the step plan of liquidation?
There are usually seven stages of liquidation: (1) dissolution of company and appointment of liquidator; (2) transitional phase with specific restrictions; (3) entry into liquidation; (4) notification and registration of creditors’ claims; (5) satisfaction of claims; (6) completion including final distribution of liquidation proceeds; and (7) deregistration. Furthermore, specific provisions apply in the event of overlapping of liquidation and insolvency. Where over-indebtedness is identified, the liquidator is obliged to immediately file for insolvency proceedings, for the duration of which the liquidation process is interrupted.
What are the consequences of entering into liquidation?
From the moment of the entry of the liquidator in the commercial register, the liquidator assumes the competences of the company’s statutory body. The only exception is the right to convene a meeting of the company’s supreme body. In addition, unilateral legal acts of the company, such as granted powers of attorney (save for representation in court proceedings) and proxy representation, are no longer valid. The liquidator takes only such measures on behalf of the company that are aimed at the company’s liquidation.
What is the average duration of liquidation?
Liquidation cannot be completed before the lapse of six months since the notification of its beginning. If, under the financial statements and the final report, the liquidator finds out that the company has tax debts or that tax inspection is in progress, the liquidation is extended for another six months. Experience shows that liquidation, including preparatory steps and deletion of the company from the commercial register, take approximately 30 months.
What factors can stall a liquidation process?
Several factual elements weigh in when it comes to the actual duration of liquidation. Firstly, internal circumstances, such as duration of decision-making, volume and composition of assets, and number of creditors and claims, play a major part. Secondly, there are external factors, such as the exceptional adoption of an injunction, which may result in the deregistration of the company to be suspended, or the necessity to obtain a confirmation on the non-existence of tax arrears or an ongoing tax inspection.
What liquidation-related costs are to be expected?
In most cases, liquidation can be very costly. When calculating the costs, one should include at least costs of proceedings, notarial expenses, asset liquidation costs, and signature verification fees which altogether exceed EUR 100. Another item on the list of liquidation expenses is the statutory liquidation advance payment amounting to EUR 1,500. It is also important to include the costs of legal and economic services, the amount of which varies from case to case. The liquidator is entitled to the statutory remuneration and reimbursement of expenses, unless contractually stipulated.
What responsibilities does a liquidator have?
The liquidator is obliged to act with professional diligence and observe fiduciary duties. Furthermore, the liquidator is subject to the same accountability rules as are the members of the company’s statutory body.
How to fully benefit from the hidden potential of supplementary liquidation?
If distributable assets are discovered only after a company has been deregistered, the supplementary liquidation comes into play. By means of supplementary liquidation, creditors can assert their unsatisfied claims and other rights which existed at the moment of the company’s deregistration. The hidden potential, however, lies in the group of persons who are eligible to submit an application for supplementary liquidation, i.e. any person that justifies its legal interest can file the application. Consequently, co-owners of a real estate can now initiate the liquidation of a deregistered co-owner. In any case, the statutory application deadline must be observed.
The information above provides only a brief overview of liquidation process and the amended legal concept of supplementary liquidation. The statutory regulation is much more complex and its application requires detailed examination of each case.
Any questions? Please contact: Mgr. Martin Ťupek, JUDr. Martin Štelcl
Practice group: Corporate