Liquidation of a Company: Definition

Simply put, liquidation is a legally prescribed procedure for the voluntary closure and deletion of a company from the trade register. Once liquidation is fully executed, the legal identity of the company ceases to exist.

What are the Grounds for Termination of a Limited Liability Company (LLC) under the Law on Trade Companies?

According to the Law on Trade Companies, the grounds for the termination of an LLC include:

1. Expiration of the term specified in the founding agreement.
2. Decision of the shareholders.
3. Merger, acquisition, or division (status changes).
4. Bankruptcy of the company.
5. Court decision.

Founders can also specify additional grounds for termination in the founding agreement.

In cases where an LLC is terminated due to the expiration of its term, a shareholders’ decision, or a court decision, liquidation proceedings must be initiated. If an LLC is founded by a single individual (Sole Proprietor LLC), it ceases with the owner’s death unless heirs request its continuation. If owned by a legal entity, the company ceases upon the dissolution of its owner unless another entity acquires the share during bankruptcy proceedings.

What is a Decision to Terminate a Company, and How is it Made?

A decision to terminate a company reflects the voluntary will of the shareholders to dissolve and liquidate the firm. This decision must be adopted by at least a three-fourths majority of all votes in the shareholders’ meeting. Any provision in the founding agreement contradicting this majority requirement is deemed null and void.

Difference Between Voluntary and Compulsory Company Closure (Bankruptcy vs. Liquidation)

Voluntary Closure (Liquidation): Assumes that the company has settled all debts to the state and creditors.

Compulsory Closure (Bankruptcy): Initiated when the company is insolvent, over-indebted, or unable to service its obligations. This complex process is managed by the competent court and regulated by the Bankruptcy Law.

How Does the Liquidation Process Begin, Proceed, and End?

The process begins with a decision to terminate the company, recorded in the Central Register.

First Phase

Upon the adoption of the Decision to terminate the company, it is recorded in the Central Registry, initiating the first phase of the liquidation process.

The purpose of the first phase of liquidation is to record in the register that the company’s liquidation has commenced and to register the company’s liquidator.

After completing the first phase, the Central Register issues a Resolution for registering the liquidation, and the term “in liquidation” is added to the company’s name. This is done to indicate that the company is in liquidation and that, if the conditions for liquidation are met, it will be removed from the trade register.

Intermediate Phase

The intermediate phase aims to invite all creditors of the company to submit their claims through the website of the Central Registry of the Republic of Macedonia.

This phase is initiated by the company’s liquidator within a period not shorter than seven days and not longer than fifteen days from the registration in the trade register indicating that the company is in liquidation.

However, known creditors must be notified individually and in writing about the liquidation.

During this phase, if the liquidator determines, based on the submitted claims of the creditors, that the company’s assets in liquidation are insufficient to settle all obligations to the creditors in full, including interest, they are obligated to immediately halt the liquidation process and file a proposal to initiate bankruptcy proceedings.

How are the remaining assets distributed after settling the obligations?

The assets remaining after settling obligations to creditors are distributed among the shareholders.

The distribution of assets is done in proportion to the nominal amounts of the shares unless otherwise stipulated in the company’s founding agreement.

Within what timeframe are the remaining assets distributed after settling the obligations?

The company’s assets are distributed after the expiration of six months from the date of the creditors’ notice publication.

If one of the known creditors does not come forward, the amount owed to them is deposited into a court escrow account.

What happens if assets are discovered after the company is dissolved?

If assets of the company are found after its deletion from the trade register, the court, upon the request of any person with a legal interest, recalls the liquidators or appoints new ones, who then act in accordance with the provisions of the Law on Trade Companies regarding liquidation.

Second Phase (Final Phase)

The final phase of liquidation begins with the adoption of a Decision for the dissolution of the company by its members.

This phase is carried out if the company has settled all obligations and debts to the state, as well as to known creditors and creditors who have submitted their claims during the liquidation announcement.

With the issuance of a Decision for the deletion of the company by the Central Registry, the liquidation process is considered fully completed, and the company is officially dissolved and no longer exists in legal transactions.

Is the liquidation process conducted electronically or on paper?

The liquidation process of a company is carried out entirely electronically.

The electronic procedure assumes that all documentation and submissions are filed electronically with the Central Registry through registration agents.

This process also assumes that the Decisions issued by the Central Registry are in electronic form with electronic signatures, which are fully valid.

What documentation does the company need to provide for the liquidation process?

First Phase

In the first phase, the company needs to provide the following documents:

1. Certificate of tax, contributions, and other public revenues and liabilities – this document is obtained from the Public Revenue Office (PRO);
2. Certificate of solvency – this document is obtained from the banks where the company had open accounts;
3. Certificate of creditworthiness – this document is obtained from the banks where the company had open accounts.

Second Phase (Final Phase)

In the second phase, the previously mentioned documents must be provided again, with the addition of the final accounts for the last three years of the company’s existence.

In this phase, the following documents are required:

1. Certificate of tax, contributions, and other public revenues and liabilities – this document is obtained from the Public Revenue Office (PRO);
2. Certificate of solvency – this document is obtained from the banks where the company had open accounts;
3. Certificate of creditworthiness – this document is obtained from the banks where the company had open accounts;
4. Final accounts for the last three years – these documents must be provided by the company’s accounting office.

What are the rights and duties of the liquidators during the liquidation?

What is the responsibility of the liquidators during the liquidation of the company?

The liquidator is liable with all of their assets for any damage caused to the creditors during the liquidation process.

If multiple liquidators are appointed, they are jointly and severally liable for any damage caused.

A claim for compensation for damages against the person who was a liquidator can be filed in court within one year of the company’s deletion from the commercial register.

Legal actions taken during the liquidation procedure cannot be contested after the company is removed from the commercial register.

In which case can a company be granted the status of an inactive entity?

Commercial companies that have not carried out any business activity, or activities that, based on their nature and scope, can be considered commercial in the previous year, are required to submit a written notification to the Central Register stating that they were inactive and provide an annual statement on the prescribed forms no later than the last day of the statutory deadline for submitting annual accounts.

A procedure is then initiated to determine the status of the inactive entity.

The Central Register records in its registry that a procedure is underway to determine the status of an inactive entity and electronically informs the Public Revenue Office (PRO) about each entity determined to have not carried out any business activity in the previous year.

After the notification, the Public Revenue Office initiates a procedure to determine the status of an inactive entity.

In this process, the Public Revenue Office determines whether the entity:

• Conducted any transactions of any kind through a transaction account opened with a payment service provider, or
• Otherwise disposed of its assets and property, as identified by the Public Revenue Office during its inspections within its scope of jurisdiction.

The ПРОissues a decision to establish the status of an inactive entity if it determines that the previously mentioned conditions have not been met.

For the assignment of the status of an inactive entity, the Public Revenue Office immediately notifies the Central Register for its record-keeping.

What are the consequences of determining an inactive entity?

Commercial companies that have not submitted an annual account and a written notification stating that they were inactive for the previous business year by the last working day of the current year will be removed from the single commercial register.

The Central Register also removes entities from the single commercial register if it is determined that they have been inactive for three consecutive years.

What is the procedure for deleting inactive entities from the relevant register?

The Central Register (CR) must publish a statement on its website within 30 days of the conditions for deleting an inactive entity being met and initiate the procedure for its deletion.

The statement includes:

• The name of the commercial company;
• Its ID number (EMBS) and headquarters;
• The reason for deleting the entity;
• Notification of the legal consequences of the deletion;
• The deadline for responding to the notification.

At the same time, the founders of the entity, or the persons authorized for management, as well as the creditors, are invited to submit a proposal for bankruptcy or liquidation within one year from the date of the announcement and notify the CR in writing.

For the published announcement, the CR informs the public at least through one printed media outlet that covers the entire territory of the Republic of Macedonia and on the national public radio and television service.

What happens if the Central Registry does not receive a proposal for liquidation or bankruptcy from the authorized persons of the entity?

If, within the specified deadline, the CR does not receive a notification of a submitted proposal for liquidation or a proposal to open bankruptcy proceedings, it deletes the entity and publishes the deletion on its website. The partners of the deleted entity are called upon to distribute the company’s assets among themselves.

How long does it take to distribute the movable and immovable property of a deleted entity?

The movable property of deleted entities is distributed within one year from the date of the decision for deletion.

Monetary funds and immovable property are distributed within ten years from the date of the decision for deletion.

If, after these deadlines, the movable and immovable property of the entity is not distributed, it is transferred into the ownership of the Republic of Macedonia, with the obligation to keep the movable property for one year and the immovable property and monetary funds for ten years. During this period, the founders have the right to prove ownership of the property in court and request its return.

The Central Registry publishes a monthly overview of individual traders and companies that have been deleted from the commercial register during the previous month on its website.