LIQUIDATION OF A LIMITED LIABILITY COMPANY IN POLAND
The liquidation of a limited liability company is intended to end its operations and bring about the termination of its legal existence.
The liquidation procedure can be divided into three stages:
- Opening the liquidation of a limited liability company
- Activities of the entity during liquidation
- Completion of the liquidation of a limited liability company
From the following entry you will learn how the liquidation procedure proceeds step by step.
OPENING THE LIQUIDATION OF A COMPANY
EXISTENCE OF A REASON FOR DISSOLUTION OF A LIMITED LIABILITY COMPANY
The first stage is to open the liquidation of a limited liability company. However, it requires the existence of a reason for dissolving a limited liability company limited liability company. The Commercial Companies Code states that the reasons for dissolving a limited liability company are:
1) provided for in the Articles of Association – shareholders may themselves indicate in the Articles of Association reasons for dissolving the limited liability company, the existence of which will lead to the dissolution of the limited liability company (e.g. implementation of a specific investment for the purposes of which it was established, expiry of the period for which it was established). In principle, they have freedom in creating reasons for dissolving the company, as long as they are legal;
2) resolution of partners on dissolution of the company or on transfer of the company’s registered office abroad, confirmed by a protocol drawn up by a notary, unless the transfer of the registered office is to take place in another Member State of the European Union or a country party to the agreement on the European Economic Area, and the law of that country permits it;
2(1) in the case of a company whose the Articles of Association was concluded using a template of the Articles of Association (via online s24 system), then in such a case also the shareholders’ resolution on dissolution of the company, which must be provided by all shareholders with a qualified electronic signature or a trusted signature;
3) declaration of bankruptcy of the company – in such a case, the company is dissolved after the bankruptcy proceedings are completed and the company is removed from the register;
4) other reasons provided for by law – these primarily concern cases where, due to non-compliance with the requirements of the regulations, the registry court is obliged to issue an order on the company’s dissolution ex officio. These include, for example, a conflict between the subject of the limited liability company’s activity specified in the Article of Association or in the statute and the provisions of law, or lack of legal capacity of the persons signed under the Articles of Association or statute at the time of signing.
5) In addition to the cases referred to above, the court may issue a judgment ordering the dissolution of the company:
- a) at the request of a partner or member of the body, if achieving the company’s purpose has become impossible or if there are other important reasons caused by the company’s relations;
- b) at the request of a state body specified in a separate act, if the activity of the LLC violating the law threatens the public interest.
COMPANY IN LIQUIDATION – “CHANGE OF NAME” OF A LIMITED LIABILITY COMPANY
As indicated above, the occurrence of a reason for dissolution of a company leads to the commencement of the liquidation of this entity. From that moment on, it should be traded as a company in liquidation.
For example, if the company name is „ABC spółka z ograniczoną odpowiedzialnością”, it will be
„ABC spółka z ograniczoną odpowiedzialnością w likwidacji”. In this case, you have to remember to add the words “w likwidacji” (in liquidation) to the existing company name.
LIQUIDATORS – WHO CAN BE A LIQUIDATOR OF A COMPANY?
On the day of opening the liquidation, the management board ceases to be a body of the limited liability company and the mandates of the members of the management board of the limited liability company expire, while the liquidators take over the competences to represent the company and manage its affairs. Therefore, during the liquidation, there is no management board of the limited liability company in liquidation, and the appointment of liquidators of the limited liability company does not mean that they join the management board. Liquidators of a limited liability company do not constitute a body of the limited liability company – they are its representatives. Additionally, it should be noted that at the moment of commencement of the liquidation, the commercial proxy (called in Poland „prokura”) expires (a commercial proxy is a special power of attorney granted by an entrepreneur entered in the register of entrepreneurs or CEiDG).
As a general rule, the current members of the management board of the limited liability company become liquidators. Exceptions to this rule may be provided for in the Articles of Association or a resolution of shareholders. Appointment of liquidators of a limited liability company is done by way of a resolution of shareholders. However, it is worth noting that when a court rules on dissolution, it may simultaneously appoint liquidators, in which case this court will be exclusively entitled to dismiss such a liquidator.
In other cases, unless the company agreement provides otherwise, the liquidator may be dismissed by way of a resolution of shareholders. Interestingly, at the request of persons with a legal interest, the court may, for important reasons, dismiss the liquidators and appoint others. This applies primarily to applications by the company’s creditors or its minority shareholders, who have reservations about the correctness of the actions taken by a given liquidator as part of the liquidation proceedings.
Liquidators of a limited liability company have the right to manage the entity’s affairs and represent it within the scope of competences specified by the liquidation proceedings (liquidators should terminate the company’s current business, collect receivables, fulfil obligations and liquidate its assets. They may initiate new business only when it is necessary to complete ongoing matters. Real estate may be sold by public auction, and by private sale – only by virtue of a resolution of shareholders and at a price not lower than that approved by them).
SUBMISSION OF AN APPLICATION FOR THE OPENING OF LIQUIDATION OF A COMPANY TO THE REGISTER COURT
Due to the changes described above, the opening of liquidation in a limited liability company requires notification to the National Court Register. The notification of opening should include an application to delete information about persons included in the management board, delete information about commercial proxy (if appointed), as well as an application to enter the data of the liquidators (name, surname, address) and the manner of representing the company by the liquidators. The application is subject to a court fee of PLN 350.00 and is currently submitted through the system available on the website of the Ministry of Justice at: https://prs.ms.gov.pl/.
ANNOUNCEMENT OF THE OPENING OF LIQUIDATION IN THE COURT AND COMMERCIAL MONITOR
In addition to submitting an application to the National Court Register, the company must publish an announcement of the liquidation of the limited liability company in the Court and so-called Court and Commercial Monitor. This announcement must include a call for the creditors of the limited liability company to report their claims within 3 months from the date of publication of the announcement in the Court and Commercial Monitor.
An application for the publication of the announcement in the Court and Commercial Monitor is also subject to a fee. The announcement is subject to a fee, which depends on the number of characters. On average, this will amount to approx. PLN 400.00.
ENTRY OF THE OPENING OF LIQUIDATION IN THE KRS – What next? HOW DOES THE LIQUIDATION OF A LIMITED LIABILITY COMPANY PROCEED STEP BY STEP?
DRAWING UP A BALANCE SHEET FOR THE OPENING OF LIQUIDATION
The next step in the liquidation of a limited liability company is to draw up a balance sheet as of the day the liquidation is opened and submit this balance sheet for approval by the Shareholders’ Meeting. The liquidation balance sheet of a limited liability company is not identical to the financial statements prepared at the end of the financial year. The financial statements for a given financial year consist of a balance sheet, profit and loss account and additional information. For the purposes of opening the liquidation, a balance sheet must be drawn up, indicating the state of assets and liabilities as of the day the liquidation is opened.
ACTIVITIES OF A LIMITED LIABILITY COMPANY DURING LIQUIDATION
UNDERTAKING LIQUIDATION ACTIVITIES OF A LIMITED LIABILITY COMPANY
The effect of initiating the liquidation process is a change in the purpose of the existence of the limited liability company in liquidation, which is no longer aimed at achieving a common economic goal by its partners, but at ending the company’s operations.
The liquidation activities primarily include:
– repayment of liabilities,
– collection of receivables,
– liquidation of the limited liability company’s assets and division of the limited liability company’s assets among the partners.
It is worth adding that liquidators are authorized to initiate new business when it is necessary to conclude matters that are already underway. The purpose of this process is therefore to organize and conclude the matters of the limited liability company.
DIVISION OF LIMITED LIABILITY COMPANY ASSETS
If, after the liquidation proceedings, there are any assets left in the limited liability company, it is necessary to divide them among the partners. The division of assets cannot take place before 6 months have passed since the date of the announcement of the opening of liquidation and the call for creditors to report their claims. The division takes place either proportionally to the shares held by them or in another manner provided for in the company agreement.
LIQUIDATION OF A COMPANY AND FINANCIAL REPORTS
It is worth noting that the commencement of liquidation in a limited liability company does not modify the period covering the financial year. If the financial year ends during the liquidation procedure, a full financial report of the limited liability company will have to be prepared for that year, which will have to be approved by the shareholders’ meeting of the limited liability company and filed with the register of entrepreneurs.
COMPLETION OF LIQUIDATION OF A LIMITED LIABILITY COMPANY
LIQUIDATION STATEMENTS
The performance of liquidation activities and the division of assets (if any remain) allows the company to be closed. To this end, steps must also be taken to complete the liquidation procedure.
At this stage, it is necessary to prepare a liquidation statements on the day preceding the division of assets remaining after the creditors of the limited liability company have been satisfied or secured among the shareholders. If there is no property left in the company that would be subject to division, the liquidation statements of the limited liability company is prepared on the day preceding the day on which the division of property would be possible at the earliest. The liquidation statements of the limited liability company is subject to approval by the meeting of shareholders of the limited liability company.
The liquidation statements of the limited liability company should be announced at the company’s registered office before the application for deletion of the limited liability company from the register of entrepreneurs is filed.
OBLIGATIONS RELATED TO THE DOCUMENTATION OF A LIQUIDATION COMPANY
The provisions of applicable law impose certain obligations related to the documentation of the liquidated company, including the appointment of a custodian of the company documentation. Thus, the books and documents of a dissolved company should be handed over for safekeeping to a person indicated in the company agreement or in a resolution of the partners. The resolution may specify the custodian only if the agreement does not indicate one. In the absence of such an indication, the custodian is appointed by the registry court.
It is important that if the company employed employees during its business activity, it is obliged to transfer the employees’ personal and payroll documents for safekeeping to one of the entities authorized to do so. The principles for keeping employee documentation in the event of the employer’s liquidation are specified in the regulations. The entity conducting business in the field of document storage is authorized to store employee documentation after the liquidation of the employer, to which it will be transferred for further storage, providing financial resources for this purpose for the time remaining until the end of the period of storage of documentation established on the basis of separate regulations.
Business activity in the field of storing personal and payroll documentation of employers with a temporary storage period is a regulated activity that may be performed only by entities entered in the register of custodians of personal and payroll files. These entities store the documentation for a fee for the required period based on the agreement concluded with the company. The agreement regarding the storage of payroll and personal documentation of the liquidated company should be concluded before the company is removed from the register, and funds for this purpose should be secured before the end of the liquidation proceedings.
REPORTING TO THE COURT THE DISSOLUTION OF A COMPANY
The termination of the activity of a limited liability company takes place by reporting to the register of entrepreneurs the completion of the liquidation by submitting to this register an application for deletion of the company from the National Court Register. This is done by completing anapplication by an electronic proceeding. The dissolution of a limited liability company takes place at the moment of deletion of the company from the National Court Register.
The application for deletion is also subject to a fee in the total amount of PLN 400.00.
DURATION OF THE COMPANY LIQUIDATION PROCESS
There is no specified duration of the liquidation process of a limited liability company. The liquidation procedure of a limited liability company lasts until all activities constituting the liquidation procedure have been completed.
In most cases, the process of liquidating a limited liability company lasts approx. 7-8 months
(min. 6 months from the date of publication of the announcement in Court and Commercial Monitor) and ultimately the course of the liquidation of a limited liability company and its duration depends on the current status of the company and any liabilities.
r.pr. dr Alicja Olszar-Lucca
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