Company Liquidation
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What is liquidation?
Liquidation is a formal insolvency procedure where a company is brought to an end (also often termed ‘closing’ a company). All of its assets are liquidated and the proceeds from the sale of assets are used to settle debts, pay expenses and transfer any remaining balance to shareholders of the company.
When a company is liquidated it will cease doing business and employing people. When liquidated, a company’s business license is revoked, its name is removed from the Business Trade Registry and the entity is considered to have ceased to exist.
Why is liquidation required?
There are two main reasons liquidating a company may be necessary in Montenegro:
- The original purpose for setting up of the company is attained and fulfilled and the entity is no longer required to operate.
- The company goes bankrupt and/or is unable to pay it’s debts.
Types of liquidation
Voluntary Liquidations
Shareholders of a company may elect to liquidate a company or the directors of the company may choose to cease (permanently stop) further trading by liquidating the company’s assets for various reasons (example: in order to pay it’s debts to its creditors).
Compulsory Liquidations
If a company’s debts are not paid on time, creditors may file a lawsuit and request the court to liquidate the company in order for them to collect their dues. The courts may decide to force a company to liquidate and sell its assets in order to pay any outstanding debt.
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