Liquidation of the companies as of 1st October 2020
21. August 2020
Act No. 390/2019 Coll., which amends and supplements Act No. 513/1991 Coll. Commercial Code, as amended and which amends and supplements certain acts, in addition to measures to improve the functioning of the Commercial Register, brings extensive changes in the conditions for the liquidation of companies pursuant to § 70 et seq. of the Commercial Code. The liquidation of the limited liability company will thus change.
Changes: liquidation of the limited liability company
The aim of the adopted new legislation is, in accordance with the Explanatory Memorandum to Act No. 390/2019 Coll., to respond to long-term problems of application practice, which are mainly connected with inadequate motivation resulting from the current legislation for the persons involved to successfully initiate, lead and effectively end the liquidation process. The aim of the amendment is to create conditions for combating unfair practices in the liquidation of companies, as well as to introduce and streamline the functional link of public registers relating to the business sector in order to increase transparency of the business environment and to provide not only the entrepreneurs with relevant information on entities registered in the Commercial Register which enter into contractual and other legal relationship.
Pursuant to the amendment, the winding-up of the company will still underway with liquidation or without liquidation, however according to the new wording, the company will be wound up without liquidation, if after its winding-up by a court no advance payment was made to pay the liquidator’s remuneration and expenses (liquidation advance) in the amount stipulated by a special regulation. This means that after the winding-up of a company (regardless of whether the winding-up of a company has been decided by the shareholders or by a court) the liquidation will be underway only if an advance payment for liquidation is made. The advance payment for liquidation will have to be deposited into a notarial custody and its deposit will be proved by a notarial deed of custody. Such a procedure is justified by the legislator by the need to ensure coverage of at least the basic costs of liquidation or coverage of the initial process of saving the company’s assets. The advance payment for liquidation is not subject to execution nor to similar enforcement proceedings and can only be used to cover the remuneration and expenses of the liquidator appointed by the company or by the company’s competent authority.
Disposal of the assets, liquidator and legal acts
In this context, we would also like to point out that the amendment to § 68c of the Commercial Code sets out the conditions for disposing of the company’s assets after its winding-up, so that from the company´s winding-up until its entry into liquidation, the company’s disposal assets exceeding 10% of the company’s share capital will be subject to determination by an expert opinion and approval by the highest body of the company. The related legal act will not be able to take effect before it is deposited together with the expert opinion in the Collection of Documents.
Based on the amendment, the company will enter into liquidation on the day when the liquidator is registered in the Commercial Register (not on the day of its winding-up), which means that the first liquidator’s entry will have constitutive effects.
The amendment strengthens the conditions in relation to the liquidator. The liquidator may be appointed by a court or by the shareholders (the amendment omits the distinction between the terms “designation” and “appointment” of the liquidator), while the legislator prefers the appointment of a liquidator by the shareholders. However, if the shareholders do not appoint a liquidator within 60 days of the decision on winding up the company, the court will appoint a liquidator (but only on condition that an advance payment has been made to cover the liquidator’s remuneration and expenses). The liquidator shall be only the bankruptcy trustee (it means a person who is registered in the list of trustees maintained under a special act) or a person who is registered in the register of natural persons, agrees with the appointment as a liquidator and could otherwise be appointed as a member of the company´s statutory body.
When the company is entering into liquidation, the unilateral legal acts of the company, in particular its orders, authorizations, powers of attorney and procuration, besides the powers of attorney granted in order to represent the company in the court proceedings, cease to exist. The role of the liquidator (on who the powers of the statutory body passes, when the company is entering into liquidation) is to execute, in the name of the company, only legal acts which relate to the company´s liquidation (i. e. fulfilment of the company’s obligations, lodging claims etc.). The liquidator, who is appointed by a court, has the same powers in ascertaining the company’s property as the bankruptcy trustee in ascertaining the bankrupt’s property under a special regulation.
Following the company’s entry into liquidation, the liquidator shall immediately notify all known creditors of the fact that the company is entering into liquidation and shall publish the fact that the company has entered into liquidation, as well as an invitation for the company’s creditors and other persons and authorities concerned to submit their claims for receivables and other rights. The court may order the liquidator to repeat an invitation under the first sentence, in particular when changing the liquidator.
The process of submitting claims for receivables is similar to the bankruptcy proceedings, as creditors have the right to submit their claims for receivables and other rights via an application form (regardless of their maturity) and the liquidator continuously enters the registered claims on the list of claims. However, a failure to register a claim or other right does not affect its duration. The basic list of the registered claims for receivables shall be prepared by the liquidator according to the situation by the date of expiry of 45 days after the publication of the fact that the company entered into liquidation, while within the same period the liquidator is obliged to prepare a basic list of the company’s assets and deposit it in the Collection of Documents.
In order to fairly arrange the relationships, the rules for prioritizing the satisfaction of creditors’ claims have been clarified, which have absolute priority over the claims of shareholders. In order to prevent the acceleration of the liquidation process, the amendment stipulates a minimum period of six months from the notification of the company’s entry into liquidation, within which the liquidation cannot end.
In relation to the liquidator’s remuneration, if he is appointed by the shareholders or by a competent body of the company, he is entitled to the agreed remuneration. Otherwise, if the liquidator is appointed by a court, he is entitled to remuneration and compensation of expenses according to a special regulation, while these are paid from the advance payment for liquidation and from the liquidation´s estate. § 75a (2) of the Commercial Code, after the effective date of the amendment, establishes the decisive moment for determining the maturity of the remuneration and compensation of the liquidator’s expenses.
The amendment to the act will also introduce a more precise regulation of additional liquidation. Likewise, in the case of additional liquidation, the obligation to submit an advance payment for liquidation applies (the person who proposes the additional liquidation is obliged to do so), otherwise the court will terminate the proceedings. Any receivables, or other rights towards a company, which existed at the time of the company’s dissolution and were not satisfied, shall be renewed upon the court´s decision on additional liquidation and on appointment of the liquidator. During the period for which the company has been deleted from the Commercial Register, the limitation period does not expire. Following additional liquidation and the renewal of the company’s entry in the Commercial Register, the limitation period shall not be less than one year from the additional liquidation. Please note that if the proposal for additional liquidation has not been submitted within four years after the company’s deletion from the Commercial Register, the company’s assets will become the state ownership at the end of this period.
Provisions of § 70 to 75k of the amended Commercial Code on liquidation shall also apply to the liquidation of a bank, branch of a foreign bank, securities dealer, insurance company, reinsurance company, asset management company, pension management company, supplementary pension company or other financial institution, unless special laws in the field of financial market governing these financial institutions do not provide otherwise. Act No. 390/2019 Coll. takes effect on 1st October 2020, however, the transitional provisions stipulated in § 768s of the amended Commercial Code set out more detailed conditions for the application of the amended wording of the Act. Liquidations in which the liquidator entered into the Commercial Register before 30 September 2020 should be completed in accordance with the law in force until 30 September 2020.
Commercial law and company law within our legal chttps://www.prosman-pavlovic.sk/enounselling – we provide information on the status and responsibilities of an executive director in a limited liability company.
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