Dissolution, liquidation and completion

Dissolution

The company is wound up if one of the following grounds exists:
  • Time lapse: The company is dissolved at the end of the period specified in the articles of incorporation.
  • Winding-up resolution: In practice, companies are usually dissolved when the general meeting passes a resolution to wind them up. Unless the articles of incorporation provide otherwise, this resolution must be adopted by a 75 % majority of the votes cast.
  • Decree of dissolution: The company may be wound up as the result of a court judgment. A decree of dissolution requires a petition for dissolution to be filed. This action may be brought by one or more shareholders, provided they hold at least 1/10 of the share capital. A petition for dissolution is admissible only if the purpose of the company can no longer be achieved or if other important grounds exist for winding up the company (e.g. if there is a serious breakdown in the relationship between the shareholders, or the company has no prospect of profitability in the long term).
  • Opening of insolvency proceedings: The company is wound up as a result of the opening of insolvency proceedings. If the insolvency proceedings are discontinued at the debtor’s request or after confirmation of an insolvency plan which envisages the continued existence of the company, then the shareholders may resolve to continue to operate.
  • Rejection of the petition to open insolvency proceedings due to a lack of assets: The company shall be wound up if a legally binding resolution is adopted which rejects the initiation of insolvency proceedings due to a lack of assets.
  • Other grounds for winding up the company may also be specified in the articles of incorporation.
The dissolution of the company must be entered in the Commercial Register. This may be dispensed with only if the reason for the dissolution is the initiation of insolvency proceedings or a rejection of their initiation. The dissolution must also be announced in the electronic Federal Gazette and in the official press specified in the articles of incorporation for official announcements.

Liquidation

The dissolution of the company is not the final stage; it must now be liquidated. During liquidation, current business operations must be brought to an end, the company’s obligations met and all claims collected on behalf of the company. The company’s assets must be converted into cash. Any corporate assets which remain once liquidation has been completed shall be distributed between the shareholders in accordance with the size of their shareholding. This distribution may not be made before the end of a one-year waiting period (Sperrjahr). This period begins when the creditors are notified of the company’s status in the electronic Federal Gazette.

Completion

Liquidation is complete once the corporate assets have been distributed. At this point, final accounts must be prepared. The completion of the company’s liquidation must then be recorded in the Commercial Register, and the Registration Court deletes the company accordingly.