Liquidation relates to the sale of all assets of a company or organization with the goal of converting into cash. The fundamental aim of liquidation is the dissolution of the company.
The remaining assetsand net liquidation costs are referred to as liquidation proceeds. This is paid out regularly after completion of the liquidation to the shareholders of the liquidated company. The person who is entrusted with the liquidation of an association or a partnership is called the liquidator.
The liquidation of a company takes place when the majority of owners have decided to dissolve the company. The objective is to provide the satisfaction of all creditors and settlement of all current business debt obligations.
In addition, liquidation is often carried out due to excessive indebtedness or insolvency (bankruptcy reasons), an insolvency procedure or when the insolvency proceedings are refused for lack of funds. Resolution means that the company ceases to exist.
The liquidator’s role involves selling the property to recover debts and pay debts, convene the shareholders to inform them of the situation and to establish the liquidation accounts. In some cases controllers are appointed for extra liquidation tasks, and the closing of the liquidation is followed by the sharing between the partners.
The liquidation accounts are filed at the Registry of Commerce so that the company is struck off the register of companies, thus losing its legal personality.
The notice of termination of the liquidation shall be published in a newspaper’s legal notices, in order to make it public. And may require a court decision which acknowledges the fact of insolvency, that is, when liabilities are greater than the available assets of the company, compounded by the impossibility of its recovery.
The court then appoints an attorney to the office of liquidator. The appointment of a liquidator by the court involves the divestiture of the former leader and this decision is entered on the K-bis of the entity, if it is registered with the registry of a court.
The liquidator is then responsible for conducting all assets (recover, sell, etc). And with these assets goes on to effect necessary repayments according to the priorities set by the Commercial Code.
Frequently, the amount of assets is insufficient to pay the entire liability; the legal liquidation procedure is then stopped completely at the company with the publication of the closure for lack of assets. The decision of closing for lack of assets without penalty secures a ban for creditors to resume the proceedings.