Compulsory dissolution of a commercial association
The compulsory dissolution of a commercial association takes place on the basis of a court decision.
There may be various reasons for a compulsory dissolution; in general the reason is that the company or its activities do not conform to legislation. If it is possible to eliminate deficiencies related to the company, the court shall grant a term before making a compulsory dissolution decision. This term allows you to eliminate deficiencies and continue the company’s activities.
Reasons for compulsory dissolution
- shareholders did not adopt a dissolution resolution, even though they were required to do so;
- the powers of the management board expired two years ago, but a new management board was not elected;
- the company’s share capital no longer conforms to the requirements specified in legislation.
In addition, compulsory dissolution may be based on other reasons arising from legislation. Among other things, compulsory dissolution may be a punitive sanction for an offence committed by the company.
Compulsory dissolution process
The petition for compulsory dissolution must be submitted to the County Court on whose territory the company is registered.
Submit to a court the petition for compulsory dissolution of the commercial association. The petition may be submitted by the company’s management board or another person entitled to do so under law. A compulsory dissolution may be initiated by a court itself. Attach to the petition the dissolution resolution adopted by the members of the commercial association along with the minutes of the general meeting.
Begin liquidating the commercial association. You will have to follow a specific series of steps.
Liquidation consists of the following stages:
- Appointment of liquidators and entry of their names into the Commercial Register. In a compulsory dissolution, the court will appoint the commercial association liquidators.
- Publication of a notice regarding liquidation of the commercial association in the Ametlikud Teadaanded and notification of all known creditors. The liquidation notice must specify that the creditors must present their demands within four months of publication of the notice.
- Preparation of the final balance sheet and distribution of assets. After all of the creditors’ demands have been satisfied and the necessary deposits have been made, the liquidators shall prepare the final balance and the residual asset distribution plan. The liquidators shall present the final balance and asset distribution plan to all members.
After all claims by creditors have been satisfied or secured by deposits as necessary, the contributions paid by the members shall be returned to them. The residual assets left after the contributions are returned shall be distributed among the members in accordance with the size of their contributions, unless provided otherwise in the partnership agreement. In general, the assets may be distributed after six months have passed since the dissolution of the commercial association was entered into the Commercial Register and the liquidation notice published and after two months have passed since the shareholders were notified of the presentation of the final balance sheet and asset distribution plan.
Liquidation of a commercial association is a fairly time-consuming process that lasts at least six months.
If your company was subject to compulsory dissolution because the objective of your activities or the activities itself were prohibited or in conflict with the public order and good morals, the residual assets left after the creditors’ demands are satisfied will belong to the state.
The compulsory dissolution will be effective as of the moment the corresponding court ruling enters into force. The court will communicate the relevant information to the Commercial Register for the making of the dissolution entry into the Commercial Register.