Dissolving Company in Serbia

Voluntary liquidation of a company

Concept and initiation of procedure

Liquidation of a company is a form of termination of the company’s existence and can be carried out when the company is solvent, ie. when it has sufficient assets to fulfil all its obligations. The Law on Companies (“Official Gazette of the RS”, No. 36/2011, 99/2011, 83/2014 – other law, 5/2015, 44/2018, 95/2018 and 91/2019) and the Law on the Registration Procedure in the Business Registers Agency (“Official Gazette of RS”, No. 99/2011, 83/2014 and 31/2019) shall apply to the liquidation procedure. We distinguish between voluntary and compulsory liquidation.

Voluntary liquidation of a company is initiated by a unanimous decision of all partners, i.e., general partners, by a decision of the general assembly of members of a limited liability company or by a decision of the general assembly of shareholders. The liquidation of the company begins on the day of registration of the decision on liquidation and the publication of the announcement on initiating liquidation. The announcement on initiating liquidation is published for 90 days on the website of the register of business entities and contains in particular an invitation to creditors to report their claims, the address of the company’s headquarters, i.e., the address for receiving mail to which creditors submit claims, a warning that creditors’ claims will be precluded if the creditors do not report them no later than within 30 days from the day of announcement expiration. If the company changes the address of the registered office or the address for receiving mail during the period of the announcement on initiating liquidation, the period of 90 days starts running again from the day of registration of that change, and all received claims are considered duly submitted. The question arises: “Are the creditors of the liquidation debtor precluded in the right to collect their claim, if they did not report it within the legal deadline, if the announcement inviting the creditors did not contain a warning about the preclusion?”

“Liquidation of a company begins on the day of registration of the decision on liquidation and publication of the announcement on initiating liquidation, in accordance with the Law on Registration, according to Article 526 of the Law on Companies. The announcement on initiating liquidation referred to in this Article shall be published for 90 days on the website of the Register of Business Entities and shall contain in particular an invitation to creditors to report their claims and a warning that creditors’ claims will be precluded if creditors do not report them within 30 days. on the day of expiration of the advertisement period, in accordance with Article 533, paragraph 1 of this Law.

Therefore, if the announcement on initiating liquidation did not contain a warning on preclusion, which is prescribed by Law, the creditors of the liquidation debtor will not be precluded in the right to collect their claim, even if they did not report it within the legally prescribed period. ”

(Answers to the questions given by commercial courts, determined at the session of the Department for Commercial Disputes of the Commercial Court of Appeal, held on 26 November 2014 and 27 November 2014)

Important consequences of initiating liquidation procedure

• The goal of the company is no longer to perform activities for profit, but the liquidation of the company’s assets and the distribution of the remaining capital;
• The mark “in liquidation” is added to the business name of the company;
• On the day the decision on initiating the liquidation procedure is made, the representation rights of all representatives of the company cease and those rights pass to the appointed liquidator;
• During the liquidation of the company, no share in the profit or dividend is paid, nor are the company’s assets distributed to the members of the company before the payment of creditors’ claims;
• The liquidation procedure does not affect the possibility of determining and conducting enforcement against the company in liquidation or conducting other proceedings against or in favor of the company in liquidation, nor the possibility of initiating bankruptcy procedure;
• Claims that creditors do not report within the legally prescribed period will be precluded, unless they are claims determined by an enforcement document, when there is no obligation to report claims, but they are considered reported.

Liquidator

The liquidator represents the company in liquidation and is responsible for the legality of the company’s operations. The liquidator may undertake the following activities:

• perform actions on completion of operations started before the beginning of liquidation;
• take actions necessary for the implementation of liquidation, such as the sale of assets, payment of creditors and collection of claims;
• perform other tasks necessary for the implementation of the liquidation of the company.

In the decision to initiate liquidation, the company appoints a liquidator, which terminates the rights of all representatives to represent the company. If the company does not appoint a liquidator in this way, all legal representatives of the company become liquidators. The company may have several liquidators. If the company has several liquidators, they represent the company together, unless otherwise determined by the decision appointing them. The appointment, dismissal and resignation of the liquidator shall be registered in accordance with the law. The liquidator has the right to be reimbursed for the costs he incurred in conducting the liquidation, as well as for the payment of compensation for work. Compensation for work and the amount of liquidation costs are determined by partners, limited partners, or the general assembly, and in case of dispute or when the company does not determine, the liquidator may request that the competent court determine the amount of compensation and reimbursement of costs.

Notifying creditors and reporting claims

In addition to publishing the announcement on initiating the liquidation procedure, the liquidator is obliged to send a written notice on initiating the liquidation of the company to known creditors, no later than within 15 days from the beginning of the liquidation of the company. The notice shall contain in particular:

• information on the day of publication and the duration of the announcement on initiating liquidation;
• the address of the company headquarters, i.e., the address for receiving mail to which the creditor submits the claim report;
• a warning that the creditor’s claim will be precluded if the creditor does not report it no later than within 30 days from the day of the expiration of the period for the announcement of the initiation of liquidation.

The Company is obliged to record all received claims in the list of reported claims and to compile a list of recognized and disputed claims. Within 30 days from the day of receipt of the claim report, the company has the right to dispute the creditor’s claim and to inform him about it within the same period with an explanation. If the creditor whose claim is disputed does not initiate proceeding before the competent court within 15 days from the day of receipt of the notice on disputing the claim and within the same period notifies the company in writing, that claim is considered precluded. If by the time of receipt of the notice on disputing the claim, the creditor has already initiated proceeding on that claim before the competent court, the creditor is not obliged to initiate a new proceeding upon receipt of the notice on disputing the claim. Claims arising after the initiation of liquidation are not reported and must be settled until the end of liquidation, while creditors whose claim is determined by an enforcement document and creditors in connection to whose claim began a litigation against the company before the liquidation, have no obligation to report claims, and their claims are considered reported.

Documents in the liquidation procedure

Phase I – Before settling creditors:

Initial liquidation balance sheet – the liquidator is obliged to compile an extraordinary financial report within 30 days from the day of liquidation in accordance with the regulations governing accounting and auditing, and to submit it for approval to partners, general partners or the general assembly of the limited liability company and joint stock company. The decision on the adoption of the initial liquidation balance sheet must be made no later than 30 days from its submission. The adopted initial liquidation balance sheet is registered in accordance with the regulations on registration. The initial liquidation balance sheet is compiled with the aim of showing the assets position of the company in liquidation. It also allows creditors to consider the possibility of settling their claim from the company’s assets, and to show them that the liquidation is certain and that their rights are not endangered;

Initial liquidation report – which contains: list of reported claims, list of recognized claims, list of disputed claims with explanation of dispute, information that the company’s assets are sufficient to settle all creditors, necessary actions to conduct liquidation proceeding, time for completion of liquidation and other facts of importance for the implementation of the liquidation procedure. The liquidator is obliged to compile the initial liquidation report no earlier than 90 and no later than 150 days from the beginning of the liquidation and to submit it for approval to the partners, general partners or the general assembly of the limited liability company and the joint stock company within 30 days from the day it was submitted to them for approval. The adopted initial liquidation report is registered in accordance with the regulations on registration. Failure to submit the adopted initial liquidation balance sheet or initial liquidation report for registration prevents further implementation of the voluntary liquidation procedure and is the basis for initiating compulsory liquidation ex officio by the Serbian Business Registers Agency;

Annual liquidation report – the annual liquidation report of the company is the financial report submitted by the liquidator if the liquidation procedure is not completed by the end of the business year. The liquidator states his performed actions, stating the reasons for which the liquidation continues and is not completed.

Initiation of bankruptcy proceedings due to over-indebtedness

If it is determined from the initial liquidation balance sheet or the initial liquidation report that the company’s assets are not sufficient to settle all creditors’ claims (insolvency), the liquidator is obliged to submit a proposal to the competent court to initiate bankruptcy within 15 days of the initial liquidation balance sheet, or initial liquidation report. In that case, the liquidator may not settle the claims of the creditors, except for the claims arising from the current business of the company until the day of initiating the bankruptcy procedure.

Phase II – After settling the creditors:

Final liquidation balance sheet – the liquidator compiles and registers the final liquidation balance sheet in accordance with the regulations governing accounting and auditing;

Report on the conducted liquidation – the liquidator compiles a report on the conducted liquidation after the conducted liquidation procedure;

Written statement – the liquidator trustee confirms in a written statement that he has sent a notice to known creditors, that all creditors have been fully settled, and that no other proceedings are being conducted against the company;

Proposal of decision on distribution of the remaining capital – the liquidator compiles the proposal of this decision after settling all obligations of the company.

The company adopts the listed documents by the decision on termination of liquidation unanimously by all partners, i.e., general partners, in a limited liability company by the general assembly – by a two-thirds majority of the total number of votes of all members, and in a joint stock company – by the general assembly, by a simple majority of shareholders.

Decision on suspension of liquidation – Since this is a voluntary liquidation, during its implementation the company can make a decision on suspension of liquidation and continue with business, and it is also possible to suspend liquidation due to initiating bankruptcy proceeding due to insolvency. The decision to suspend liquidation can be made only if the company has fully settled all creditors, regardless of whether the claims of these creditors are disputed or recognized, provided that it has not terminated the employment contract of any employee on the basis of liquidation nor started payments to members of the company. An integral part of the decision on suspension of liquidation is the appointment of the legal representative of the company and the statement of the liquidator that all creditors have been settled in full and that the company has not started making payments to members of the company. The decision on suspension of liquidation is registered in accordance with the law on registration. In case of suspension of liquidation, the claims of creditors who did not report their claims and creditors whose claims were disputed, but did not initiate proceedings before the competent court within the deadline, will not be considered precluded.

Distribution of the remaining capital

The assets of the company in liquidation that remain after the settlement of all obligations of the company (remaining capital) are distributed to the members of the company in accordance with the decision on the distribution of the liquidation balance of the company.

Unless otherwise determined by the founding act, i.e., the statute or the unanimous decision of the partners, general partners, or the general assembly, the distribution is done as follows:

• partners, general partners and limited partners and members of a limited liability company in proportion to their shares in the company;
• shareholders with preferred shares who have the right of priority in relation to the remaining capital, and after their payment to shareholders with ordinary shares in proportion to the share of their shares in the total number of ordinary shares in the company.

Limited partners, members of a limited liability company and shareholders who conscientiously received payments in liquidation are obliged to return the received if it is necessary to settle the company’s creditors. In the event of a dispute between the members of the company regarding the distribution of the remaining capital, the liquidator postpones that distribution until the final conclusion of the dispute. If the remaining capital is above the value of the invested capital, which is determined in accordance with the law governing the taxation of corporate profits, there is a tax obligation to pay capital gains tax. The capital gains tax rate is 15%.

Completion of liquidation

Liquidation ends with the decision to end the liquidation. Upon completion of the liquidation, the company is deleted from the register of business entities in accordance with the law on registration, and in the case of a joint stock company, the deletion is performed after submitting a request to the Central Register for withdrawal of financial instruments from the register.

If the partners, general partners, or the general assembly do not make a decision on the adoption of phase II documents within 60 days from the date of submission of these documents for adoption by the liquidator, this decision may be replaced by a written statement of the liquidator on non-approval of these documents.

Business books and documents of the company that were deleted due to the end of liquidation are kept so that they are available in the territory of the Republic of Serbia in accordance with the regulations governing archives, and the name and address of the person who must have a residence or headquarters in the Republic of Serbia, to whom the business books and documents are entrusted to safekeeping are registered in accordance with the law.

Liability for damage

The liquidator is liable for the damage he causes in the performance of his duties to the members of the company and the creditors of the company. The claim becomes statute-barred within three years from the day the company is deleted from the register. Partners and general partners are jointly and severally liable for the obligations of the company in liquidation and after deleting the company from the register of business entities. Limited partners, members of a limited liability company and shareholders joint stock company are jointly and severally liable for the obligations of the company in liquidation and after deleting the company from the register of business entities, up to the amount received from the remaining capital. Creditors’ claims become statute-barred within three years from the day the company is deleted from the register.