Voluntary dissolution/liquidation of a company

This page was last modified on 29-06-2016

This page is currently being updated.

The voluntary dissolution of a business operating as a commercial company can only be decided by the shareholders/partners.

The decision to carry out the dissolution of the business marks the beginning of the liquidation process and the appointment of one or more liquidators.

After its dissolution, a company only continues to exist for the purpose of its liquidation.

The liquidator is responsible for the full liquidation process until the final general meeting which concludes the liquidation proceedings.

Once this process is finalised, the company is removed from the Trade and Companies Register (Registre de commerce et des sociétés - RCS).

Who is concerned

The voluntary liquidation of a business ensues from a common decision taken by the company's shareholdes/partners not to pursue the business activity.

The causes for dissolution may result from:

  • the achievement or termination of the business purpose;

  • the expiration of the business's fixed term of operation (it is possible to extend the business's existence provided that the extension comes into force before the date of expiration);

  • a common decision by the partners because of disagreements between them or bad business results;
  • legal reasons specific to the legal form of company (see below), which the business may depart from if the articles of association provide for this.

In the event of failure to comply with certain mandatory legal provisions, the company will be dissolved and put into compulsory liquidation (liquidation by the court).

Example: repeated failure to publish the financial statements, disagreement between the partners which hinder the company's proper operation, nullity of the company, etc. 

End of a public limited company (société anonyme - SA)

The SA ends:

  • upon decision by the shareholders in the event of a loss of half of the capital. In this case, the executive management must convene an extraordinary general meeting to rule on the possible dissolution of the company within 2 months from the moment the loss has or should have been noted;
  • upon decision by the shareholders in the event of a loss of 3/4 of the capital. In this case, the management is required to convene an extraordinary general meeting in the same conditions, but 1/4 of the votes of the shareholders present or represented is sufficient to approve the decision.

End of the limited liability company (Société à responsabilité limitée - SARL)

The SARL ends:

  • upon decision by the partners in the event of a loss of half of the capital, in the same fashion as for an SA;
  • if the maximum limit of 40 partners has been exceeded, except in the event of transmission of shares upon death or the dissolution of matrimonial community.
    The company may in this case continue operation temporarily until the situation has been corrected provided this case is stipulated in the articles of association.

End of the partnership (société en nom collectif - SENC)

The SENC ends:

  • in the event of death, ruin, suspension or bankruptcy of one of the partners, unless stipulated in the articles of association that the company can continue operation with the heirs or the remaining partners, or alternatively, that the company will take the form of a limited partnership.
    In the latter case, the heirs of the deceased partner become limited partners in the company;
  • if a partner leaves the company, unless stipulated otherwise in the articles of association (NB: partners are only allowed to leave a company where said company has been established for an unlimited period of time).

End of the limited partnership (société en commandite simple - SECS)

The SECS ends:

  • in the event of death, ruin, suspension or bankruptcy of one of the partners, unless stipulated otherwise in the articles of association;
  • if a partner leaves the company, unless stipulated otherwise in the articles of association (NB: partners are only allowed to leave a company where said company has been established for an unlimited period of time).

How to proceed

Beginning the liquidation process

The managers/directors or members of the management board will convene an extraordinary general meeting to rule on the dissolution of the company. This general meeting must take place in the presence of a notary.

Except where more restrictive provisions are stipulated in the articles of association, the following must attend the meeting for the liquidation to be valid:

  • for a public limited company (société anonyme – SA) or a partnership limited by shares (société en commandite par actions – SCA or SECA):
    • at least half of the share capital (in person or by proxy);
      If this is not the case, the directors will convene a second meeting whose ruling will be valid whatever portion of the share capital is represented;
    • the decision must be approved by at least two thirds of votes (whether this is the first or second meeting);
  • for a limited liability company (société à responsabilité limitée – SARL), partnership (société en nom collectif – SENC) or limited partnership (société en commandite simple – SECS): half of partners representing three quarters of the share capital must approve the decision.

This general meeting will appoint the liquidator(s) and decide on the method of liquidation.

Any natural or legal person may be appointed liquidator.

If no liquidator is appointed, the managing partners (for a SENC or SECS), the managers (for a SARL) or the directors or members of the management board (for an SA or a SECA) responsible for the management of the company prior to its entry into liquidation will be deemed to be the liquidators.

As soon as the company ceases its activities, the managers/directors or, failing this, the liquidator must undertake to declare the cessation of activity to the various official bodies in order to cancel any existing permits/registrations (business permit, social security, VAT, taxes, trade register, etc.).

Responsibilities of the liquidator

Once the dissolution has taken place, the liquidator(s) represent the company and are responsible for carrying out its liquidation.

They take control of the company and the management board/board of directors relinquishes its powers.

Once a liquidator has been appointed, he will generally complete an inventory and produce a liquidation balance sheet in order to determine the assets and liabilities of the company.

The liquidators are liable, to third parties as well as to the company:

  • for completing their mandate;
  • and for any errors made under their management.

The liquidator is not personally liable to pay the company's debts with its own assets. The liquidator must only act carefully and diligently. Errors made may, where applicable, incur its liability as they would in the case of any other mandate.

Recovering and realising assets

The liquidators must recover (collect funds owed to the company) and realise (sell assets belonging to the company) the dissolved company's assets in order to be able to:

  • pay the company's debts;
  • and distribute any remaining funds (the liquidation proceeds) to the partners/shareholders.

To this end, they may notably:

  • bring or support legal action on behalf of the company;
  • collect any payments;
  • issue a release (mainlevée) with or without a payment receipt;
  • realise the company's transferable securities, etc.

The liquidators may also perform certain exceptional actions. For example, they may:

  • continue the company's activities on a temporary basis;
  • take out loans;
  • issue commercial paper, grant pledges and mortgages;
  • surrender property;
  • make contributions to other companies.

The liquidator is also responsible for acting as the company's legal representative.

These powers are not mandatory and may be restricted or extended as specified in the articles of association or in the notice of appointment.

The liquidator may take legal action against the partners to collect any funds that they owe to the company if such action is deemed necessary to complete the liquidation.

Example: when a public limited company (SA) is formed, the shareholders may choose to pay a minimum of one quarter of the subscribed capital.
The liquidator may take legal action against the shareholders to require that the remaining three quarters of the subscribed capital that was not paid-up on the day the company was placed into liquidation be paid in full.

Distribution of assets

The liquidator must distribute the company's assets among its various creditors.

Asset distribution is to be performed proportionally according to the amount owed. Creditors must be treated equally and assets must be distributed fairly and impartially.

However, the liquidator must give priority to types of debt (wages, taxes and social security contributions, mortgages, etc.).

No distinction can be made between payable and non-payable debts, all debts must be paid.

Example: an invoice has not yet reached its due date on the day that the liquidated assets are distributed. This invoice must be paid, regardless of its due date.

Exception: if the assets are clearly sufficient to pay all creditors, the liquidator may pay debts as and when they become due. However, it must ensure that sufficient funds will remain to pay those that do not receive immediate payment.

If any of the company's known creditors do not declare themselves during the liquidation procedure, despite being duly called on by the liquidator, the liquidator must deposit the sum due to them with the Deposits and Consignments Fund (Caisse des dépôts et consignations).

Once all debts owed to the creditors have been paid or deposited, the liquidator may distribute any remaining assets to the partners/shareholders.

When distributing these assets, the liquidators will undertake to pay any taxes owed when the company ceased activities.

If the assets are insufficient to pay all debts owed, so that the company ceases payments and loses its creditworthiness, the liquidator must file for bankruptcy on behalf of the company.

Liquidators' report

If the liquidation lasts more than a year, the liquidator must produce an annual report detailing the obstacles preventing the liquidation from being concluded and present the results of the liquidation to the general meeting. In the case of a public limited company, the liquidator must ensure the publication of the annual financial statements.

Once the liquidation has ended but before concluding proceedings, the liquidator must produce the liquidation accounts.

It will then convene an ordinary general meeting of shareholders (for a SA) or a general meeting of partners (for a SARL) to approve these accounts and the liquidators' report.

At this general meeting, the shareholders/partners must:

  • read the liquidators' report;
  • appoint one or more auditors to assess the accuracy of the liquidators' report and liquidation accounts.
    Large SAs and large SARLs with more than 25 partners must contract the services of a statutory auditor;
  • fix the date of the final ordinary general meeting to allow the presentation of the auditor's report and declare liquidation proceedings concluded.
    This final meeting does not necessarily have to take place in the presence of a notary.

Concluding liquidation proceedings

At the final general meeting, the shareholders/partners must notably:

  • approve the liquidation accounts and the auditor's accounts;
  • release the liquidator from their duties;
  • specify where the company's books and documents will be stored for 5 years;
  • decide how any liquidation proceeds will be distributed.

The conclusion/notice of dissolution must be filed with the Trade and Companies Register so that it can be published in the electronic compendium of companies and associations (Recueil électronique des sociétés et associations - RESA).

The publication will notably specify where the company's books and documents will be stored for 5 years and the action taken to deposit the funds that could not be returned to creditors or partners.

Consultation of the RCS

When a company is under liquidation or if it has been removed from the RCS after the filing of the liquidation notice, the indication "en liquidation judiciaire" (compulsory liquidation) or "radiée" (removed) will show next to the company name in the search results on the website of the Trade and Companies Register Luxembourg (see section "Consulter une personne").