What is Company Liquidation?

According to Article 24 of the Company Act, "A company that is dissolved, except for dissolution due to merger or bankruptcy, shall proceed with liquidation." This means that after the company’s dissolution is registered, its legal personality is not yet extinguished. Although the company ceases operations, its external transactions or the resulting rights and obligations still exist. At this point, according to Article 13 of the Tax Collection Act, "When a corporation, partnership, or unincorporated organization is dissolved and liquidated, the liquidator must, before distributing any remaining assets, pay the taxes in accordance with the legal order of tax priority. If the liquidator violates this provision, they shall be responsible for paying any unpaid taxes." The liquidator must settle taxes before distributing any remaining assets.

The primary responsibility of the liquidator is to ensure that all company debts are cleared and to distribute any remaining assets proportionally. According to Article 322 of the Company Act, after a company’s dissolution, the liquidator can be the company's board of directors or one appointed by the shareholders’ meeting. If a liquidator cannot be determined, the court will appoint one based on the application of interested parties.

In practice, it is common for the company's responsible parties or directors to have moved on to other pursuits years after the dissolution, leaving liquidation affairs unattended until they receive a notification from the tax authorities about unpaid taxes. This may even result in travel restrictions. Therefore, liquidation is an essential process to ensure all debts are handled and the company's legal responsibilities are completely extinguished after dissolution.

Liquidation Process

Step 1: Reporting the Liquidator's Appointment to the Court

According to the Company Act, after dissolution, the company must appoint a liquidator to manage the liquidation process. The law stipulates that the board of directors automatically assumes the role of the liquidator, or alternatively, the shareholders’ meeting may appoint one. If a liquidator cannot be determined by law, the court will appoint one based on the request of interested parties. The liquidator must report their appointment to the Civil Division of the local district court within 15 days of taking office, submitting relevant written documents.

Required documents include:

1. The liquidator's consent to take office

2. The official letter or ruling from the competent authority approving the company’s dissolution

3. Company establishment and amendment registration information

4. Shareholder register, listing shareholder names and shareholdings

5. Meeting minutes of the shareholders'meeting where the liquidator was appointed

6. Post-appointment balance sheet, asset inventory, and proof of creditor notification

Step 2: Executing the Company's Liquidation Procedures

After reporting the liquidator's appointment, the liquidator must take a series of steps, including:

1. Preparing the balance sheet and asset inventory: The liquidator must outline the company’s financial status in detail and submit it for review by the supervisor within ten days of the shareholders' meeting. After approval by the shareholders' meeting, the documents are then reported to the court.

2. Handling debts and assets: After submitting the above documents to the court, the liquidator must, in accordance with legal requirements, settle all legal relationships, unresolved debts, and asset liquidation procedures. Priority must be given to repaying debts that have a higher ranking, and the liquidator must ensure that all creditors are treated fairly.

3. Settling debts: During liquidation, all company debts must be dealt with. If the company’s assets are insufficient to cover the debts, the liquidator should file for bankruptcy with the court, and the matter will be handed over to a bankruptcy administrator for further handling.

Step 3: Reporting Completion of Liquidation to the Court

It is important to note that under the Company Act, the liquidator must complete the liquidation within six months. If unable to do so, an extension must be requested from the court. Once all liquidation steps are completed, the liquidator must once again report the completion of the liquidation to the court. This is the final step in the dissolution process and marks the complete extinction of the company’s legal personality, thus ending its legal obligations.

Required documents generally include:

1. Statements of income and expenses during the liquidation period, profit and loss statements, and post-liquidation balance sheets, along with supporting documents: The liquidator must provide detailed records of all income, expenses, and financial changes, along with proof of review by the supervisor and approval by the shareholders' meeting.

2. Liquidation proceeds declaration: This must be accompanied by proof of tax payments.

3. Distribution table for remaining assets: If there are remaining assets after liquidation, the liquidator must distribute them according to the shareholders' shareholding or contribution ratio.

Once these procedures are completed, the court will recognize the company's liquidation as complete. The Ministry of Economic Affairs website will show "Dissolution and Liquidation Completed," at which point the company's legal personality is fully extinguished, and its rights and obligations are terminated.

Company liquidation is a complex but necessary process. Only through proper liquidation procedures can a company's legal personality be fully extinguished without causing unnecessary legal consequences for shareholders, creditors, or society. If a company is poorly managed or needs to dissolve, it is crucial to follow the legal requirements for liquidation. It is also advisable to seek professional legal assistance before liquidation to ensure all debts are properly handled, preventing potential future legal disputes.

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