The winding up of a foreign company requires strict compliance with the laws, regulations and rules of its jurisdiction. Many jurisdictions operate detailed company dissolution regulations and each has specific legal and administrative differences. It would not be practical to review each in detail here but, in general practise, the main principals apply giving rise to two main winding up options:
- partial liquidation with administrative strike off of the company from the Register;
- complete liquidation of the company.
Complete liquidation requires a higher resource outlay, both in terms of time (around 6 months) and money. However, this is totally compensated by the potential inability to impose any liability on the directors or shareholders, bring actions, claims or sue the company. Partial liquidation would not terminate such risks as the officers and shareholders of the company retain liability.
Company strike off from the Register (partial liquidation):
This winding up option is applied only when the company is ready and the full set of financial statements have been prepared and there are no outstanding liabilities to third parties. A company partially wound up will not pay any annual government fees (levies) and it is not subject to taxation or the requirement to submit financial statements (if at all applicable in the specific jurisdiction). The company is then struck off (deleted) from the Register but remains in the general list of companies as a dormant company. The company may be revived, if needed.
If the company fails to comply with all requirements applicable to international companies or pay statutory levies within the specified time period, it is subjected to enforced deletion from the Register. Thereafter the company is no longer considered as a company of good standing and is marked as “not of good standing”. The Registrar freezes the processing of the company, terminates the issue of any certificates and instructs the bank to suspend accounts until any irregularities have been made good and payments made.
The main distinction between these two options is that the striking off of the company from the Register does not release the company from taxation, levies and the requirement to prepare financial statements.
Liquidation of the company:
There are two types of liquidation: voluntary liquidation (at the decision of the directors and shareholders) and forced liquidation (by order of a court).
This option implies official winding up of a foreign company and involves a specific procedure to be followed according to the Law. With this option the decision for voluntary liquidation is made by the shareholders and the completion of the procedure is verified by a Certificate of Liquidation.
The main stages:
- the adoption of a decision to wind up the company;
- the preparation of financial statements and audited accounts;
- the preparation of a liquidation plan to be approved by the directors and shareholders of the company;
- the preparation and signature of the declaration of solvency by the directors of the company;
- the appointment by the directors/shareholders of the Liquidator who assumes control over the assets and the business of the company;
- an announcement in the press (local and in the countries of operation) of the commencement of liquidation of the company;
- the submission by the Liquidator to the Registrar of the set of documents for the commencement of the winding up.
When winding up is complete, the Liquidator serves a special liquidation completion notice on the Registrar who then deletes the company from the Registry. Upon special request and after expiry of the specific term, the Registrar will issue a Certificate of Liquidation and the company is then deemed to be wound up. When the procedure is complete, the Liquidator will then publish an announcement to that effect. At this point the company terminates as a corporate entity and no claims from any of its creditors are considered.
Forced liquidation of the company is effected by order of a court (if the company is insolvent and unable to meet its obligations to its creditors).
At the request of the client, the Interstatus Group of Companies will undertake all administrative procedures for the liquidation of the company in compliance with the laws of the jurisdiction of incorporation.
To ensure that you are making the correct decision relating to the winding up of your company, please contact us.