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Liquidation or dissolution is a term which is used when a company decides to dissolve and materialize all its assets. This usually occurs when the company is deemed insolvent, i.e. cannot pay its debts when they are due. As a result, it collects and materialises its assets to settle its obligations and eventually comes to an end.
The liquidation of a company can be either voluntary or compulsory. The Board of Directors must select the most suitable mechanism for the dissolution of a company, depending on the circumstances.
company, depending on the circumstances.
Voluntary liquidation can be made either by the members of the company or by its creditors. Different requirements apply for each case.
One or more members of a company may decide to dissolve it voluntarily. This may be a suitable path for members of a company who are seeking for a tax efficient wait to distribute assets, for the restructuring of a company’s business or when seeking for the dissolution of an inactive company.
In order to proceed with the voluntary liquidation, a liquidator must be appointed by the company and confirm that the company is solvent. In turn, the directors are required to prepare a statutory declaration stating that the company is able to pay its debts, accompanied by a statement of the company’s Assets and Liabilities up to the date of the declaration.
The liquidators shall arrange for the liquidation of the company’s affairs, and then pay its creditors. Any surplus is returned to the shareholders. All the debts of the company must be settled within 12 months from the commencement of the liquidation of the company.
Finally, the liquidators submit the Final Liquidation Account which will lead to the dissolution of the company by the registrar.
This is a process initiated by the creditors of a company in the event that the company is unable to repay its debts
Acceding to Creditors’ Voluntary Liquidation may be a suitable path for the directors’ and shareholders in order to deal voluntarily with their company’s insolvency.
The principle aim of the process is to distribute the company’s assets amongst its creditors and then dissolving the company.
Initially the directors of the company are required to provide a statement on the position and affairs of the company along with a list of the company’s creditors and to convene respective meetings of shareholders and creditors in order to resolve to place the company into liquidation.
The liquidators shall arrange for the liquidation of the company’s affairs, and then convene a general meeting in the presence of the company’s presence.
Finally, the liquidators submit the Final Liquidation Account which will lead to the dissolution of the company by the registrar.
Compulsory Liquidation is a process whereby the Court issues an order for the winding up of a company.
A creditor, a contributor or any other interested party can file an application to the court requesting for a company’s winding up. Subsequently, the court will issue an order to that effect and the Official Receiver becomes the liquidator of the company and has to protect the assets of the company for the benefit of its creditors.
In turn it is compulsory for the company’s directors to attend an interview with the examiners of the official receiver and provide information regarding the company’s fand provide a Statement as to the Company’s Affairs.
The Court appoints a Liquidator, who must act in accordance with a Statement of Affairs, prepared and submitted by the company’s directors. The document includes the company’s affairs, such as details of its assets and liabilities, creditors’ details, securities and other information. Failure on the part of the directors of the company to cooperate with the official receiver may lead court proceedings against the said directors.
Strike-Off the Companies’ Registry is a simplified way of dissolving a company which is suitable for companies which are dormant and do not intend to carry on business in the future
The company must file financial statements for the periods until the date it ceased its activities with the relevant tax authorities in order to obtain a tax clearance certificate.
All the directors of the company must sign a declaration of solvency (affidavit). This statement must be sworn before Court.
The affidavit is a confirmation that the company has no assets or liabilities whatsoever, is no longer carrying on business, and does not intend to carry on business in the future. be prepared until the date the company ceased activities. The financial statements must be filed with the relevant income tax return to the Cyprus tax office and after the tax office examines and agrees these and any tax liability settled a tax clearance certificate will be issued.
The directors of the company must prepare a statement of affairs confirming that the company has sufficient funds to discharge its debts including the fees for the strike-off. In turn the company must fulfil all its statutory obligations and settle its affairs:
The strike-off is an administrative procedure which takes effect when the Registrar of Companies is satisfied that the company in question is no longer active and has no assets.
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