When Creditors’ Voluntary Liquidation is Appropriate

A company may enter into the procedure of the voluntary liquidation by its creditors when it cannot pay its debts. This procedure’s objectives are the distribution of the insolvent company’s assets between its creditors and the company’s dissolution.

The directors of the insolvent company shall prepare a statement of their position on the company’s affairs, a list of all the company’s creditors and an estimated amount of their claims.

After that, the directors of the company shall, at the same time, send notices to the shareholders and the creditors of the company in order to call meetings for both. The notices of the meeting of the creditors shall be advertised in the Official Gazette and two local newspapers.

At the shareholders meeting, the shareholders of the company shall propose the voluntary liquidation of the company by its creditors and nominate a person to be appointed as liquidator.

The same day, or the day following the day of the meeting of the shareholders, the meeting of the creditors shall be held in order for a special resolution to be passed for the approval of the creditor’s voluntary liquidation proposed by the shareholders and the appointment of a liquidator. The creditors have the right, if they think fit, to also appoint an inspection committee.

If at the shareholders and creditors respective meetings mentioned above, a different person is nominated to be liquidator, the creditor’s decision shall prevail, and if no person is nominated by the creditors, the person, if any, nominated by the shareholders shall be appointed liquidator.

The liquidator to be appointed must be a licensed insolvency practitioner and his/her main responsibilities are to deal with the claims of the creditors of the company, realise the assets of the company and in general liquidate the company.

Upon the appointment of the liquidator, the powers of the directors of the company cease unless the creditors approve the continuation of such powers and within fourteen (14) days after the appointment, the liquidator shall publish in the Official Gazette and deliver to the registrar of companies a notice of his appointment.

In case that the creditor’s voluntary liquidation proceedings continue for more than one year, the liquidator is obliged to call a general meeting of the company every respective year from the commencement of the liquidation and lay before each meeting an account of his/her acts and dealings for each year.

As soon as the affairs of the company have been wound up fully, the liquidator shall send notices for the convention of a general meeting of the company and a meeting of the creditors for the purpose to submit the final accounts accompanied by a report stating the way in which the affairs of the company have been liquidated. Such meetings are called final. The liquidator at the final meeting, if asked, is obliged to give any explanations thereof. Each such meeting shall be called by advertisement in the Official Gazette specifying the time, place and object thereof and published one month at least before the meeting.

Within one week after the date of the final meetings, or, if the final meetings were not held on the same date, after the date of the later final meeting, the liquidator shall send to the registrar of companies a copy of the final accounts.

The registrar of companies on receiving the final accounts shall forthwith register them, and on the expiration of three months from the registration thereof the company shall be deemed dissolved.

All costs, charges and expenses properly incurred in the creditor’s voluntary liquidation procedure, including the remuneration of the liquidator, shall be payable out of the assets of the company in priority to all other claims.