Liquidating a Limited liability company in Serbia
When it comes to the dissolution of a company in Serbia, there are multiple options. A company dissolves by striking off from the register of business entities based on a performed procedure of liquidation or compulsory liquidation, a performed bankruptcy procedure, or status changes resulting in the dissolution of the company. But in this article, we want to focus on the procedure of liquidation (also called voluntary liquidation) of a limited liability company, given that limited liability companies represent the predominant legal form of business entity in Serbia.
The liquidation of a company may be conducted when the company has sufficient assets to settle all of its liabilities. If there are not enough assets to settle all of its liabilities,bankruptcy or reorganization are available options.
A resolution of the general meeting of the limited liability company initiates the liquidation procedure. Here, it's important to note that this kind of resolution needs to be adopted by a two-thirds majority of the total number of votes in the company. The liquidation of a company commences as of the day of registration of the decision on liquidation and by publication of a notice regarding the initiation of liquidation in accordance with the Registration Act. This notice has the goal of informing potential creditors about the liquidation so that they can assert their interests.
Initiation of liquidation neither prevents imposing or implementing enforcement against a company in liquidation nor conducting other proceedings against or for the benefit of the company in liquidation. Initiation of liquidation does not bear effect on the submitted motion to initiate bankruptcy filed in accordance with the law governing bankruptcy, whilst the creditors of the company being liquidated may file a motion to initiate bankruptcy even during liquidation for reasons prescribed by the law governing bankruptcy.
During the course of the liquidation, neither is a share in profit paid out nor are the assets of the company distributed to the members of the company before all creditors' claims have been settled.
In the aforementioned decision on initiating liquidation, the company needs to appoint a liquidator, or several of them, if needed. The information about the liquidator is also registered in accordance with the Registration Act. The role of the liquidator is to represent the company in liquidation and to be responsible for the legality of the company’s operations. The liquidator may take actions aimed at completing the transactions begun prior to the commencement of the liquidation, take actions required for conducting the liquidation, such as the sale of property, payments to the creditors, and collection of claims, and also perform other tasks necessary for the completion of the liquidation procedure.
The notice regarding the initiation of liquidation needs to be published for a period of 90 days on the internet page of the business entities register and, among other include an invitation to creditors to file their claims, the address of the company’s seat to which the creditors can send their claims and a warning that the creditors’ claims shall be precluded if the creditors fail to file them at the latest within a term of 30 days from the day of expiry of the period of duration of the published notice. In addition to the publication of the notice, the liquidator shall also send a written notice about the initiation of liquidation to known creditors.
The company shall enter all received filings of claims into the list of filed claims and compile a list of recognized and disputed claims. The company can, within a term of 30 days from the day of receipt of the filed claim, contest the creditor's claim, in which case it shall notify the creditor thereof, within the same term, with an explanation of the reasons for contesting the claim, but its important to mention that claims established by an enforceable document cant be contested.
If a creditor whose claim is challenged fails to initiate a proceeding before the competent court within a term of 15 days from the day of receipt of the notice that the claim is contested, that claim is deemed precluded. Also, by the same deadline, the creditor needs to notify the company in writing about the initiation of the appropriate procedure. Naturally, if the creditor has already initiated a proceeding against the company regarding that claim before a competent court, the creditor is under no obligation to initiate a new proceeding upon receipt of the notice that the claim is contested. Claims incurred after initiation of liquidation are not filed and must be settled before the completion of liquidation.
The liquidator compiles an initial liquidation balance sheet as an extraordinary financial statement in accordance with the regulations governing accounting and audit within a term of 30 days from the day of commencement of liquidation and, within the same deadline, submits it to the general meeting for adoption.
The general meeting shall render a decision on the adoption of the initial liquidation balance sheet at the latest within 30 days from the day it was submitted to them for adoption.
The liquidator also prepares an initial liquidation report, which includes a list of filed claims, a list of recognized claims, a list of challenged claims with an explanation of reasons for challenging, and information about whether the assets of the company are sufficient for settling all liabilities of the company (including the challenged claims), information on necessary actions for the conduct of the liquidation, time envisaged for the completion of liquidation and other facts of relevance for the conduct of the liquidation.
The liquidator compiles the initial liquidation report not earlier than 90 days, and not later than 150 days from the day of commencement of the liquidation and submits it within the same deadline to the general meeting for adoption.
In the course of liquidation, the liquidator submits annual liquidation reports on his actions, with an explanation of reasons why the liquidation proceeds without completion, to the general meeting of the company for adoption, at the latest within six months upon expiry of each business year. The annual liquidation reports are also registered within 15 days from the day of adoption.
In the course of liquidation, a company may terminate the liquidation and resume its operations by a decision of the general meeting.
Suppose, on the basis of the initial liquidation balance sheet or the initial liquidation report, it is established that the assets of the company are insufficient for settling all claims of creditors (insolvency). In that case, the liquidator shall file a motion with the competent court to initiate bankruptcy within a term of 15 days of the day of compilation of the initial liquidation balance sheet, i.e., the initial liquidation report.
After the satisfaction of creditors, the liquidator compiles the closing liquidation balance sheet, the report on completed liquidation, a written statement that he had sent notifications to all known creditors, as well as a written statement that states that all liabilities of the company originating from filed claims and claims established by an enforceable document or claims in regards to which a civil action was initiated (prior to the commencement of the liquidation) are fully settled and that no other proceedings are ongoing against the company, and a draft decision on the distribution of the company's liquidation surplus.
The assets of the company in liquidation, which remain after the settlement of all liabilities of the company (liquidation surplus), are distributed to the company's members in accordance with a decision on the distribution of the company's liquidation surplus.
Unless otherwise prescribed by the memorandum of association or by a unanimous decision of the general meeting, the distribution of the company's liquidation surplus is allocated to the members of a limited liability company pro rata to their shares in the company. This means that the surplus is distributed among the company's members in proportion to their respective ownership stakes in the company.
In the event of a dispute among the members of the company on the distribution of liquidation surplus, the liquidator postpones the distribution until the final completion of the dispute.
The liquidation is completed by the adoption of the decision on completion of liquidation. Once the liquidation is completed, the company is deleted from the business entities register in accordance with the registration act.
For some of these documents, it is prescribed that if the general meeting of the company fails to render the decision on the adoption of them within a term of 60 days from the day of submission of those documents by the liquidator for adoption, such decision may be superseded by the liquidators' statement on the failure to adopt these documents.
The ledgers and documents of the company which has been deleted as a result of the completed liquidation, are kept in a manner so that they are available on the territory of the Republic of Serbia in accordance with the regulations governing archives. Also, the name and address of a person (who must have a domicile, i.e., seat in the territory of the Republic of Serbia) to whom the ledgers and documents are entrusted for safekeeping are registered. Interested parties are entitled to inspect, at their own cost, the ledgers and documents of the deleted company.
Overall, the procedure can be complex and time-consuming, and many documents need to be prepared and registered. However, by adopting a methodical approach and by promptly and accurately identifying the company's assets, creditors, and potential risks from the outset, one can navigate the process successfully and bring it to a secure and favorable conclusion.
Author: Kristijan Karan, attorney at law
February 19, 2024
