When you realize the fact that a certain investment is no longer profitable, and it may be reasonable to abandon it, there is a question on the termination of the company’s business activities. With this regard, the law prescribes the liquidation procedure of companies, during which a company may terminate its business activities and tie up loose ends.
The liquidation procedure is a time-consuming process that takes at least 7-8 months and consists of the following stages:
- The shareholders make the decision to liquidate the business and appoint liquidators. At least one of the liquidators should be an Estonian resident. Once the decision is made, only the actions necessary for liquidation can be taken.
- The member of the management board (with the right of signature) and the liquidator(s) sign and submit a notarised application to the Commercial Register to liquidate business and appoint liquidators.
- The liquidation notification is given in the publication Ametlikud Teadaanded and is mailed to any known creditors.
- Within 3 months after the decision, the opening liquidation balance sheet is prepared along with an explanatory report and an annual report that are approved by resolution of the competent authority and then submitted to the Commercial Register.
- 4 months after the issuance of the liquidation notification in the publication Ametlikud Teadaanded and when the claims of all creditors are satisfied*, the final liquidation balance sheet and the asset distribution plan of remaining property are prepared and presented to the shareholders for examination.
- After the liquidation is finished (however not earlier than 6 months after the entry of the liquidation in the Commercial Register and the publication of the liquidation notification and 3 months after the final liquidation balance sheet and the asset distribution plan of the remaining property are prepared and presented to the shareholders for examination, provided that the company is not a party to any court proceedings currently conducted in Estonia) the liquidator shall submit a notarised application to the Commercial Register for deletion of the company from the Commercial Register.
Drafting the opening and the final balance is not included in the liquidation service (usually, this is done by the customer’s accountant).
* If the assets of the company being liquidated are insufficient for satisfaction of all claims of creditors, the liquidator shall immediately submit a bankruptcy application along with an explanation of financial insolvency and the list of creditors.
Alternative ways of liquidation are merging (acquiring or being acquired companies shall be deemed to be dissolved without a liquidation proceeding) or division (where division is affected upon distribution, the company being divided shall be deemed to be dissolved without a liquidation proceeding).
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