Liquidation is a procedure which includes the settling and distribution of the assets of a company which ceased to exist. The name of a company undergoing liquidation proceedings has to contain the additional indication “in liquidation”.
The reasons for the cessation of a company may be as follows:
Liquidation will not be carried out if the members agree on a different method of calculation and division or if bankruptcy has been instituted over the company.
A creditor or a bankruptcy manager may come to an agreement for liquidation not to be carried out in the event where it should be carried out by the force of law because a creditor of one of the members has stated his/her cancellation or because bankruptcy proceedings have been instituted over one of the company members.
Implementation of liquidation
Liquidation is carried out by all company members as liquidators, unless a decision of the members or articles of incorporation stipulate that certain company members or other persons should do it.
At the proposal of one of those persons, liquidators may, for relevant reasons, be appointed by the court in whose territory is the company’s head office.
In addition to members of the company, a creditor who due to its claims against one of the members has cancelled the articles of incorporation is also deemed a participant in the appointment of liquidators.
If bankruptcy proceedings are pending against any of the company members, the position of such a member will be taken by bankruptcy manager.
The application for registration of liquidators in a register of companies is submitted to the court together with the application for the registration of reasons for the termination of the company.
Liquidators have to complete ongoing operations, collect receivables of the company, encash the remaining assets and pay off creditors. To complete any pending operations, they may also enter into new business transactions. Within the boundaries of their business activity, liquidators represent the company.
Actions concerning the liquidation have to be performed by liquidators collectively, unless a decision registered in the register of companies (at the competent court) determines that these may be taken individually.
Regardless of the above, liquidators may authorise someone among them to carry out certain operations or types of operations. Regardless of who appointed them, liquidators have to act in accordance with the decision relating to the conduct of the company’s operations unanimously made by the company members, a creditor who has cancelled the articles of association due to its claims against one of the company members or the bankruptcy manager of one of the company members.
Course of liquidation
Liquidators have to compile financial statements at the beginning and at the end of the liquidation.
Members should be returned the things they gave the company to use.
After settling the debts of the company, liquidators have to allocate the remaining assets to the members in proportion to their shares in the capital of the company, which is determined on the basis of the final financial statements.
During the liquidation, money can be temporarily divided if it is not required to settle the creditors. The amounts required to cover the outstanding or disputed liabilities should be maintained, and to ensure the amounts belonging to the members for the final distribution.
If the assets of the company are not sufficient to cover liabilities of the company and to pay off the shares in the capital, members of the company have to compensate for the shortfall in the proportion in which they are obliged to cover company’s loss.
Upon completion of the liquidation, liquidators have to submit to the court an application for the deletion of the company from the register. The company ceases to exist by its deletion from the register. Business records and company documents will be deposited by liquidators to the court on the territory where the company has its head office.
Costs of liquidation
Costs of liquidation have been reduced by abandoning the obligation of its publication in the Official Gazette of the Republic of Croatia (Narodne novine) and replacing it with a notice on the register of companies’ website.
There are notarial costs and commercial court costs, i.e.
Cessation of a company without liquidation
A company may cease to exist with a summary proceedings without liquidation.
Competent authority and regulations
Ulica grada Vukovara 49
10 000 Zagreb
(OG 111/93, 34/99, 121/99 – authentic interpretation, 52/00 – Decision of the Constitutional Court of the Republic of Croatia (USRH), 118/03, 107/07, 146/08, 137/09, 152/11 – final draft, 111/12, 68/13, 110/15 and 40/19)
Court Register Act
Ordinance on entering a company into the register of companies (OG 121/19)
Updated on 30 November 2020