Liquidation of a Company (UG or GmbH)

The liquidation of a limited liability company (GmbH) is subject to a series of formalities, compliance with which is checked by the registry court. Liquidation requires a resolution by the shareholders' meeting. Alternatively, the company is dissolved if it was established for a specific period or if insolvency proceedings have been initiated over the assets of the GmbH.

The dissolution of a GmbH is not a one-time event but takes place in three procedural steps:

• Initiation of liquidation
• Conducting the liquidation
• Deletion of the GmbH

Within these procedural steps, there are various accounting obligations that occur in the following chronological order:

• Final balance sheet for the last (short) financial year
• Opening balance sheet for liquidation
• Annual balance sheets during liquidation
• Final liquidation balance sheet
• Final account

Dissolution by Shareholders' Resolution or Expiry of Time

The dissolution of a GmbH must be resolved by the shareholders with a three-quarters majority (§ 60 Abs. 1 Nr. 2 GmbHG), although this majority requirement can be altered by the articles of association, either upwards or downwards.

The resolution must express the shareholders' intention to dissolve the company, but a specific wording or the term "dissolution" is not required.

The resolution, which does not require a specific form, can also be made verbally or through conclusive actions. For example, the mutual, interrelated termination of the articles of association by all shareholders or the signing of an application for dissolution to the commercial register by all shareholders is sufficient. However, merely ceasing business operations is not sufficient.

The resolution does not require notarization or registration in the commercial register to be effective.

The dissolution becomes effective at the time of the valid resolution.

The dissolution by shareholders' resolution or expiry of time must then be reported in publicly certified form by a notary for entry in the commercial register. At the same time, the shareholders' meeting appoints the liquidator(s). The previous managing director can act as liquidator. Another suitable person is also conceivable. In the commercial register application, the liquidators must assure the registry court that there are no criminal, commercial, or professional reasons against their appointment. This declaration obligation also applies if the previous managing directors are appointed as liquidators.

Duties of the Liquidators

The duties of the liquidator(s) include winding up the ongoing business and fulfilling the still ongoing obligations of the dissolved company. All measures necessary for the liquidation may be carried out. During the liquidation, new contracts may still be concluded that serve the liquidation goal.

Opening Balance Sheet for Liquidation

It is required that an opening balance sheet for liquidation be prepared as of the date of the liquidation resolution.

The balance sheet date is the date of the company's dissolution. The timing of the registration of the liquidation in the commercial register is not relevant, as the registration is only declaratory.

The opening balance sheet for liquidation follows the last annual financial statement of the operating company but is not legally identical to it. Therefore, the liquidators remain obligated to prepare the liquidation balance sheet even if an annual financial statement has already been prepared as of the date of dissolution.

The opening balance sheet for liquidation forms the accounting basis for the company's liquidation.

Registration of Dissolution in the Commercial Register

According to § 65 GmbHG, the dissolution of the company must be registered for entry in the commercial register.

In addition to the dissolution itself, the liquidators must also be registered in the commercial register.

According to § 10 HGB, the completed registration is then announced. This act of publicity is intended to make the transition from the company's purpose to the liquidation purpose apparent.

From the resolution to dissolve the company or from the date specified in the dissolution resolution, the status of legal representative passes from the managing directors to the liquidators; the managing directors' power of representation as legal representatives ends.

Consequently, the liquidators are responsible for the registration of the liquidation with the commercial register, compare § 78 GmbHG. The managing directors remain responsible if an amendment to the articles of association is to be registered before or simultaneously with the dissolution.

Publication in the Federal Gazette and Creditor Call

One of the most important tasks of the liquidators is the so-called creditor call. This involves asking creditors to come forward to assert any existing claims. The creditor call is made with the announcement of the GmbH's dissolution in the official gazettes, particularly in the Federal Gazette, which is mandatory. The creditor call must be made independently of the register court's announcement.

If this creditor call has not yet been made, the GmbH cannot be deleted from the commercial register.

Termination of the Company

Only after the blocking year, which begins with the creditor call, has expired and all transactions have been completed can the distribution of the remaining assets to the shareholders begin. Finally, the liquidators must register the termination of the company in publicly certified form via a notary for entry in the commercial register and specify who will keep the company's books and records for ten years.