Dissolution and Liquidation of Companies: Causes, Effects, and Processes
Dissolution: Causes and Effects
The partnership agreement may be dissolved by the will of the partners or on grounds provided by law or in the contract of society. The dissolution of the partnership does not automatically mean its extinction, but to reach it, usually starts the process of liquidation of the company. There exists within our system dissolution proceedings common to all corporations.
1.1 Causes of Dissolution
a) Grounds for dissolution common to all societies:
- Compliance with the term established in the statutes.
- Conclusion of the company that constitutes the corporate purpose or the inability to carry out or cessation of corporate bodies.
- For small stop losses, heritage to an amount less than half the capital, unless it is reinstated or reduced (capitalist societies) or whole for the loss of capital (in other societies).
- By fusion or total excision of society (these causes are not matched by opening the process of liquidation).
b) Causes of specific dissolution of partnerships and limited partnerships:
- The death of one of the general partners in writing if no express agreement includes the continuation of society by the heirs of a partner, or the latter survive the survivors.
- Termination of contract concluded for an indefinite period, if requested by any of the partners. The other partners cannot object unless there were bad faith of the one who has proposed the solution. It is understood that it is in bad faith if it is proved that the cause of dissolution is on the partner individually to make money.
- Getting the number of members reduced to one.
- Disqualification from managing partner to manage their property or the opening of the liquidation phase of the competition partner.
c) Cause specific dissolution of limited liability companies:
- Reduction of share capital below the minimum required.
- The declaration of bankruptcy is not by itself a cause of dissolution. The company shall be automatically dissolved only if the bankruptcy proceeding is produced to open the liquidation phase.
- The SL also be dissolved by the non-exercise of the activity or activities which constitute the object for 3 consecutive years.
The Liquidation of Companies: Operations and Bodies
The company retains its legal personality dissolved during the liquidation period, but at this stage, its activity is not the exercise of its objects but just cleared them. Therefore, traffic must turn in their business name by adding the tagline “in liquidation” (Lesson 16. Dissolution, liquidation, and termination of companies 3 is mandatory in capitalist societies and volunteering in the personality).
2.1 Bodies of Liquidation
a) The liquidators
From the moment the solution produces its effects, managers cease their power and positions are held by the liquidators that constitute the management body and represent the company during its liquidation. The duties of the liquidators are to manage and represent the company to perform all operations necessary to liquidate the company. The liquidators are required to report periodically to the shareholders and creditors of the progress of the liquidation.
The appointment of the liquidators is achieved as has been agreed upon in the bylaws (may be managers themselves).
The liquidators will respond before the partners and creditors for any damage they had caused by fraud or gross negligence in the performance of their duties.
b) The Annual General Meeting
The general meeting remains during the liquidation period, but its powers are limited to matters concerning the liquidation. Among its functions at this stage is the possibility of dismissal of liquidators and the approval of the final liquidation balance sheet.
c) The auditors
Intervenors arise in the regime of SA to replace the auditors and monitoring body activity, especially censorship liquidating the bottom line.
Operations of Liquidation
a) The liquidation itself
The liquidators are to draw together an inventory of managers and stock of the company stating their financial situation when you start winding. Subsequently must perform all operations that are pending and new to the assessment (to collect overdue loans, dispose of property social when necessary or prudent social pay creditors, etc). Completed all these operations compose a bottom through which the liquidators expose the result of liquidation. The resulting asset is shared between the partners as provided in the statute.
b) Breakdown of community assets
The social sharing have assumed that all operations have been completed earlier and the bottom is firm. Payment will normally be made in cash while the LSL supports the possibility that has been agreed upon, either in the statutes or by unanimous agreement of the partners, share settlement is paid by delivery of goods of society.
3. The Extinction of Companies
Extinction occurs when the process is complete liquidation and distribution of community assets, cancel commercial registry entries relating to society. The liquidators must request cancellation of the entries relating to society once extinct has approved the bottom line. The extinction involves the cessation of the personality of the entries in the registry does not determine the end of the company. Thus, they have not completed all the process of liquidation may be requested reopening of the settlement and proceed against the company.
The LSL provides for the possibility that, after the cancellation, may appear:
- Social liabilities: former partners jointly liable to the extent they would have received from the settlement fee, subject to the accountability of liquidators by fraud or negligence.
- Social good: the liquidators awarded to the former shareholders additional fee corresponding to them.