Winding up a limited liability company

Content

In the following material you will find guidelines as to “how to get rid of“ a limited liability company. This material will not deal with mergers.

Three alternatives (besides merger)

• Sell the limited company (i.e. the total number of shares of the limited company),
• declare the limited company bankrupt, or
• liquidate the limited company.

Please note that the owner himself cannot “close down“ the limited company. However, it is possible to let the company be “dormant“ but this cannot be registered and it does not mean that the company’s or the board’s liabilities will disappear. Annual accounts and income tax returns must be filed every year. Bolagsverket cannot strike off a limited company from the register just because the business activities have ceased or because the owner does no longer want the company.

When winding up by liquidation (and bankruptcy) the cost of the winding up will be paid from the company’s assets. Therefore, many owners first examine the possibilities of selling the company.

Briefly on sale

The sale of the shares of a limited company is agreed upon by the seller and the buyer. Changes of the board of directors of the company must be reported for registration with Bolagsverket.

Notification and information

In the webservice verksamt.se you may file the changes of the board, or use form Application for changes, Limited liability company, nr 817 e at our website. For more information on changes of the board of directors see the information brochure Aktiebolag, Tips och råd i ändringsärenden (in Swedish) and the information in Swedish on the sale of limited liability companies, Försäljning.

Briefly on bankruptcy

If the company is insolvent (in other words unable to duly pay its debts), bankruptcy may be the solution. Bankruptcy is resolved by the court. The official receiver is appointed by the court. The receiver takes control over the board’s possibilities of deciding on the company’s assets. Application for bankruptcy may be filed by the board of the company or by a creditor with a claim on the company. The application should be filed with the district court of the municipality in which the board of the company has its registered office as stipulated in the filed articles of association. Even if the bankruptcy should be concluded with surplus, the company must be dissolved.

Briefly on liquidation

The purpose of liquidation is to wind up the limited company after payment of the debts. Bolagsverket (or the district court) appoints one or more liquidators to replace the board of directors and the managing director, if any. The auditors remain registered. Please note that the limited company is not considered dissolved until the liquidator has reported to Bolagsverket for registration that the final accounts have been presented to the shareholders’ meeting. Finally the surplus is paid (distributed) to the shareholders, unless otherwise stipulated in the articles of association. However, the outcome of the liquidation is reduced as the liquidator must be paid for his work and as the surplus may be liable to taxation. For more information see Liquidation of a limited company.

Who decides on liquidation?

Compulsory liquidation is the commonest form of liquidation; Bolagsverket passes the resolution on liquidation. The shareholders’ meeting passes a resolution on voluntary liquidation. If more than half of the company’s equity capital has been spent, the capital must be restored, otherwise the company must go into liquidation. In some rare cases the district court may pass a resolution on compulsory liquidation.

Lack of capital (the shareholders’ meeting or the district court passes the resolution)

When it is suspected that more than half of the company’s equity capital has been consumed, a balance sheet for liquidation purposes (kontrollbalansräkning) shall be drawn up and examined by the company’s auditors. The question of liquidation must then be referred to the shareholders’ meeting. If it is found that more than half of the equity capital has been consumed, the shareholders’ meeting has the choice of passing a liquidation resolution at once or referring the matter to a new shareholders’ meeting to be held within eight months. If the new shareholders’ meeting does not receive a newly drawn–up balance sheet for liquidation purposes (likewise examined by the company’s auditors) showing that the company’s equity capital is at least equal to the registered share capital, the company must go into liquidation.

Liability

A board member who continues carrying on business in the company while aware that it is obliged to go into liquidation may personally be liable. The board of directors should consult the auditor at the slightest suspicion that an obligation to go into liquidation or to draw up a balance sheet for liquidation purposes may exist.

The board members and the managing director can also become personally liable for the company’s obligations if the annual accounts are not submitted to Bolagsverket within fifteen months of the end of the financial year.

Voluntary liquidation

The shareholders’ meeting passes the resolution. Unless otherwise provided in the articles of association, a simple majority is required for the proposal to pass. (Whatever stated in the articles, a simple majority is always sufficient if grounds exist for compulsory liquidation, see above). The resolution takes effect immediately unless otherwise stated.

References

At Bolagsverket

Registration department or legal department.

Elsewhere

The district court (regarding the special cases when the district court decides on liquidation), lawyer’s offices or auditing firms.

Legislation on liquidation:

• The Companies Act, Article 25 (2005:551).
• The Companies Ordinance, Article 1, section 43–50 (2005:559).
• Notice to Unknown Creditors Act, section 1 and section 4–6 (1981:131).

Nr 829 ae, 20 July, 2010