Liquidation

Liquidation proceedings

In liquidation proceedings, we are in a favourable position if we initiate the liquidation of another business entity. If an invoice issued by our company is accepted by the recipient and remains unpaid without dispute, we may initiate liquidation proceedings against the recipient company. As a result – provided the company does not wish to run into insolvency deliberately – there is a high likelihood that the debt will be paid.

The real problem arises when liquidation proceedings are initiated against your company. At this point, it must be emphasised that the sale of the business entity or the appointment of a new managing director does not exempt the former owner or managing director from criminal liability.

During liquidation proceedings, the liquidator has a statutory obligation to satisfy the creditors of the company under liquidation to the greatest possible extent and to file criminal reports in order to remedy any violations of law that come to their attention.

If liquidation has already become unavoidable, please contact us for consultation, preferably before the company’s documents have been handed over to the liquidator.

In many companies, cash exists only on paper in the cash register, and tangible assets exist only in the records.

At the commencement of liquidation, the amount shown in the closing balance sheet as cash must be handed over to the liquidator; otherwise, the liquidator may file a criminal complaint on the grounds of embezzlement. The same issue applies to tangible assets; however, in most cases these have already been fully depreciated.

The liquidator has the right and obligation to examine how the company spent its funds prior to liquidation, what contracts were concluded, what claims the company has, and what claims exist against it. The liquidator may even challenge the concluded contracts.

At the beginning of liquidation proceedings, the most common thought is whether to destroy the documents or to hand them over to the liquidator. I do not recommend destroying documents under any circumstances. At the start of liquidation, please contact our office, and we will review the documents to be handed over to the liquidator. If any errors are identified, we will remedy the situation.

Many people choose, instead of liquidation, to transfer or “sell” the company to a foreign or untraceable private individual. As of this year, the tax authority no longer allows this solution. A “solution”? By selling the company in question, we effectively admit that something is not in order. The former owner remains liable for prior events in any case. From January 2012, the tax authority has indicated that it will conduct an audit prior to any change of members or ownership of a business entity.

If a business entity becomes subject to termination proceedings (voluntary liquidation or liquidation), the tax authority is required to conduct a mandatory tax audit, which may result in the establishment of a tax shortfall. The problem will not be the amount of the tax shortfall, but rather the reason for the establishment of the tax shortfall as stated in the justification. In such cases, it is also necessary to consult a professional and entrust representation during the audit, as a criminal report relating to the period prior to liquidation may be filed.

Following the final court order ordering liquidation, the owner may no longer dispose of the company; all actions are carried out by the liquidator. If the owner performs any activity in the name of the company, this constitutes a criminal offence.

From the ordering of liquidation proceedings, do not wait for the court decision on the matter. Contact us with confidence before that. After the final declaration of liquidation, you can no longer act on behalf of the company (for example, carry out self-revision). At the beginning of liquidation proceedings, a closing balance sheet must be prepared and the entire assets of the company must be handed over to the liquidator. Legal transactions preceding liquidation must be defended.

Failure to hand over documents to the liquidator may also result in criminal liability if it is established that the business entity concluded sham contracts or that we ourselves withdrew assets securing the company’s liabilities.

If liquidation proceedings are initiated against a company, it is not sufficient merely to settle the debt. Liquidation will still be ordered, and until it is terminated, only the liquidator may dispose of the company.