Liquidation of an s.r.o.: how to close a company properly

Liquidation of a limited liability company (s.r.o.) is the process by which a company is wound up properly and voluntarily when it no longer serves its purpose but remains solvent. It is a formalised procedure with several successive steps that should definitely not be underestimated. In this article, we explain when liquidation is appropriate and how the whole process works in practice.

When to proceed with liquidation

Liquidation is the route taken when the shareholders decide to end the business for good and the company is not insolvent. If, however, it were over-indebted and unable to pay its debts, the solution would instead be bankruptcy. Liquidation of an s.r.o. is therefore a suitable route for companies that can settle their liabilities without difficulty.

The company entering liquidation

The decision to dissolve the company with liquidation is taken by the shareholders, and the company then enters liquidation. From that moment, the company operates under its name with an addition indicating that it is in liquidation, and its aim is no longer to continue doing business but to settle its assets and pay off its liabilities.

• The shareholders’ decision on dissolution and liquidation.
• Appointment of a liquidator.
• Entry of the start of liquidation in the Commercial Register (ORSR).
• Notification of creditors and an invitation to lodge their claims.

The liquidator’s role

The liquidator manages the whole process – realises the assets, pays the liabilities and recovers receivables from the company’s debtors. The liquidator acts with due professional care and, during the liquidation, represents the company externally in place of the original statutory representative. The liquidator’s main task is to settle the company’s financial affairs so that it can be deleted from the Commercial Register without obstacles. If, during the liquidation, the liquidator finds that the company’s assets are not sufficient to pay its liabilities, they must respond appropriately to this situation and proceed in accordance with the law.

The course of liquidation step by step

The process takes place in self-contained stages that follow on from one another.

1. Preparing the accounting records as at the day of entering liquidation.
2. Realising the assets and satisfying the creditors.
3. Preparing the financial statements and the final report.
4. Filing an application to delete the company from the Commercial Register.

Accounting and tax obligations

During liquidation, the company continues to meet its accounting and tax obligations, including preparing extraordinary financial statements. This is a fairly demanding area of administration, where even small mistakes can prolong the whole process unnecessarily. Check the current fees and deadlines, as they may change from time to time.

How long liquidation takes

Liquidation is not a matter of a few days – it involves a period during which the creditors must lodge their claims, the assets must be realised and all liabilities must be settled. The law sets certain protective time limits that cannot be circumvented. The exact duration depends on how complex the company’s financial affairs are, so it is always worth checking the current deadlines in advance and planning the whole process with a sufficient time buffer.

• The duration depends on the complexity of the assets and liabilities.
• Creditors have time to lodge their claims.
• Some time limits are set by law.
• Plan the process with a sufficient buffer.

Why choose professional help

A proper liquidation of an s.r.o. requires the procedure and the deadlines to be followed precisely. Bilvao’s accountants will help you prepare the necessary financial statements, handle the tax administration and prepare the documents for deletion from the register. As a result, you will close your company correctly and without unnecessary complications or delays.

Related articles: Bankruptcy and restructuring: a basic overview, Mergers and amalgamations of companies: the procedure, Transferring an ownership interest in an s.r.o..

Frequently asked questions

What is the difference between liquidation and bankruptcy?

Liquidation is the voluntary winding-up of a company that is solvent and able to settle its liabilities. Bankruptcy is the route when a company is insolvent and unable to pay its debts. These are therefore two different processes, depending on the company’s financial situation.

Who manages the process of liquidating a company?

The process is managed by a liquidator appointed by the shareholders. The liquidator realises the assets, pays the liabilities, recovers receivables and represents the company during the liquidation. The liquidator acts with due professional care and aims to settle the company’s assets so that it can be deleted from the register.