The aim of the liquidation process is to conclude ongoing business, collect the company’s receivables, liquidate assets, and settle any obligations of the company in liquidation, while the remaining assets are distributed among the members of the company. In practice, it is not uncommon for a company in liquidation, even after settling all public dues, costs of the liquidation process, and obligations to creditors, to have undistributed assets, real estate, or movable property. However, a dispute has arisen in practice as to whether such unliquidated assets of a company in liquidation can be distributed or whether they must be liquidated and the resulting cash amount distributed among the members of the company, in accordance with their decision.
Thus, the position of the head of the court register of a commercial court is that in such a case, i.e., until the complete liquidation of assets, it is not possible to carry out the liquidation of the company, while on the other hand, identical applications for the termination of the company after the completion of liquidation are accepted in the court registers of other courts without the need for prior liquidation of assets. There are many reasons why certain assets of the company have not been liquidated during the liquidation process, which the liquidators and members of the company cannot influence. The most common reason is that there were no interested parties for its purchase because it concerns, for example, low-value assets or assets that are not suitable for use or are located with a third party or are of high value, so the members of the company have an interest in acquiring them. After settling the creditors, the interest of the members of the company prevails, so the decision to distribute the assets among the members of the company should not be controversial.
Misinterpretation of the Law
The head of a commercial court register bases her position that all assets must be liquidated before the completion of the liquidation process, and not distributed to the members of the company, on a misinterpretation of the provision of the Companies Act (hereinafter: ZTD) which prescribes the duties of liquidators in the case of the liquidation of a public company. Thus, Article 117 of the ZTD states that liquidators must complete ongoing business, collect the company’s receivables, liquidate remaining assets, and settle creditors. Therefore, the emphasis here is on ‘liquidating remaining assets’. A similar provision is prescribed in Article 374 of the ZTD for joint-stock companies, which is appropriately applied to limited liability companies as well.
However, the provisions of Articles 378 to 380 of the ZTD indicate that the provision on the duties of liquidators must be interpreted in accordance with the previously mentioned goals of the liquidation process. They explicitly state that the assets of the company can be distributed among the members of the company. The emphasis here is on ‘distribution of assets to the members of the company’. Thus, the legislator refers to a comprehensive term of assets that does not limit only to the monetary value obtained from the liquidation of the company’s assets, as incorrectly assumed by some court registers. The legislator only prescribes an initial period before which the assets cannot be distributed to the members of the company, i.e., prescribes that they can only be distributed after a year has passed from the date of publication of the call to creditors to submit their claims.
