Liquidation of a limited liability company

Content

Liquidation is the process of dissolving a company by converting its assets into cash to the extent necessary, paying off its debts, and distributing any surplus. When a company goes into liquidation, it is represented by its board of directors and managing director until one or more liquidators have been appointed.

From then on the company is represented by the liquidator, who thus takes the place of the board and the managing director. The task of the liquidator is to execute the liquidation, i.e. wind up the company to the point where it is finally dissolved. In most cases the liquidator of a limited company is appointed by Bolagsverket (the Swedish Companies Registration Office).

Voluntary liquidation

The Companies Act, Article 25, sections 1–9

When a shareholders' meeting is summoned, at which the question of liquidation is to be considered, the summons of the meeting must contain the principal proposal. The board or the person moving the liquidation proposal must state in the proposal the reasons for liquidation and what alternatives exist, the proposed date on which the liquidation will take effect, the estimated date of the distribution of the assets, the sum estimated to be available for distribution and, where applicable, the person proposed as liquidator.

If the shareholders' meeting is not the general meeting, at which the annual accounts are considered, the most recent annual accounts and auditor's report, a report by the board on significant subsequent events and statement on this report by the company's auditor shall be appended to the motion. The proposal shall be made available in advance and shall be presented at the shareholders' meeting. Provided that all shareholders agree, a liquidation resolution may be passed even if these documents have not been provided.

The shareholders' meeting passes a resolution in respect of liquidation, and notifies the resolution for registration to Bolagsverket, which appoints a liquidator. The shareholders' meeting must appoint someone to notify Bolagsverket – it may be the board, the managing director or some other person. The company may propose a suitable liquidator to Bolagsverket.

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 would exist for compulsory liquidation – read more under the heading Compulsory liquidation. The resolution takes effect immediately unless otherwise stated.

If no grounds for compulsory liquidation exist, the shareholders' meeting may determine that the resolution shall take effect at a later date. That date must not be set later than the first day of the next financial year unless the articles of association contain a provision allowing this. If the date is set later than allowed, the resolution is void.

Lack of capital

As soon as 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. If the shareholders' meeting does not resolve that the company shall go into liquidation, the board of directors must apply to the district court within two weeks for the company to be placed in liquidation. Such application may also be made by a board member, the managing director, an auditor of the company or a shareholder.

Changing the company name

A company in liquidation cannot change its name. However, the shareholders' meeting can decide to first change the company name and then to go into liquidation. Notify the change of name in one application form, Application for changes, nr 817e and the liquidation in another, Voluntary liquidation (winding-up), nr 832e. Then Bolagsverket will first register the change of name and afterwards the liquidation.

Liability

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

The board and 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.

Notification

The Companies Act, Article 25, section 8 and the Companies Ordinance, Article 1, section 43

The notification to Bolagsverket that the shareholders' meeting has passed a liquidation resolution may be made on form Voluntary liquidation (winding-up), nr 832e. The form contains a template for minutes of a shareholders' meeting. The application form must be signed by a board member, the managing director or the person appointed by the shareholders' meeting to do so.

The notification must contain

• the company's registration number;
• the date on which liquidation proceedings are to begin, if not immediately effective; a resolution to go into voluntary liquidation takes effect on the day it is passed unless the shareholders' meeting resolves otherwise; except in cases where there may be grounds for compulsory liquidation as stipulated in the Companies Act, Article 25, sections 11, 12 or 17, the shareholders' meeting may direct that the liquidation proceedings shall begin at some later date, which may be specified as ”the date on which Bolagsverket shall decide to appoint a liquidator”; it may also be set to a certain date after the shareholders' meeting, which, however, must be no later than the first day of the next financial year unless the articles of association contain a provision allowing this;
• a declaration in the original by each liquidator and deputy liquidator that they are willing to assume the task; or form 806 may be used for this purpose;
• personal particulars of all the proposed liquidators, the deputy liquidators, the person authorized to receive service of process (if appointed by the liquidators). The personal particulars required are: full name, personal identity number or, failing this, the date of birth, postal address, and the municipality in which the person is legally domiciled (only required if it differs from the postal address);
• the signatory power that will apply during the liquidation proceedings; unless signatory power is to be exercised jointly by all the liquidators, a certified copy must be attached of the minutes of a meeting of liquidators showing the signatory power; the words ”in liquidation” or similar must be appended to the name of the company on any document signed on its behalf while the liquidation proceedings are in progress;
• the address of the company during the liquidation proceedings; this will usually be the address of the liquidator's office.

If any new auditor, deputy auditor, layman auditor, or deputy layman auditor is appointed, the notification must include this information plus certified minutes of a shareholders' meeting showing their election, acknowledgement thereof by the auditor(s), and declarations that the company's auditors meet the qualification requirements of Article 9, sections 10–13 of the Companies Act and that the lay auditors meet the requirements of Article 10, section 9 of the Companies Act; see form 817.

Attachments to notification

• Original or certified copy of the minutes of a shareholders' meeting showing that the company has resolved to go into liquidation.
• The registration fee, to be paid by Plusgiro or bankgiro, see Prices and fees for limited liability company. When paying, please state the company name and registration number, and that the fee relates to voluntary liquidation.
• Attach curriculum vitae for the proposed liquidator with information of importance for the assignment, e.g. education, previous assignments as liquidator, experience of jurisprudence on insolvency. If the proposed person is a lawyer with experience as official receiver in bankruptcies, and somebody previously appointed by Bolagsverket as liquidator in winding-up matters, you must state this. If a liquidator's curriculum vitae has previously been forwarded to Bolagsverket, please state the company for which the liquidator has been assigned. If the company wants Bolagsverket to appoint an appropriate liquidator, please state this in the application and in the minutes from the shareholders' meeting. Bolagsverket shall then appoint a liquidator active in the area where the company has its registered office.

When the application is received, Bolagsverket reviews the documents and assesses the proposed liquidator. Bolagsverket then appoints a liquidator and registers the liquidation.

Revocation of application for liquidation

A notification of a decision of liquidation taking effect immediately cannot be revoked. The company is already in liquidation. The shareholders' meeting may merely revoke the decision of a previous shareholders' meeting if the decision of liquidation takes effect at a certain later date. In other cases the shareholders' meeting may decide to discontinue the liquidation and resume business.

Compulsory liquidation

The Companies Act, Article 25, section 11

Bolagsverket will order a limited company to go into liquidation if:

• the company has failed to notify Bolagsverket, in the manner prescribed in the Companies Ordinance, of a duly qualified board of directors, managing director, person authorized to receive service of process, or auditor, who must exist by virtue of the Companies Act;
• Bolagsverket has not received the company's annual accounts and auditor's report within eleven months of the end of the financial year;
• a company having resolved that its share capital shall be stated in euros instead of in kronor does not have a registered share capital or minimum capital complying with Article 1, section 5, of the Companies Act, or with reference to public limited companies Article 1, section 14, and has not within six months notified Bolagsverket of the necessary amendments of its articles of association and the necessary increase in its share capital; or
• the company is obliged by virtue of Article 19, section 6 or 16 of the Companies Act to reduce its share capital below the lowest share capital permitted under Article1, section 5 of the Companies Act, or with reference to public limited companies Article 1, section 14 of the Companies Act.

Bolagsverket may decide on a compulsory liquidation on its own initiative or upon application by the board of directors, a board member, the managing director, a shareholder, a creditor or, in cases where the company has failed to notify Bolagsverket a duly qualified board of directors, any other person whose rights may be dependent on there being a person able to represent the company. The application fee can be found on Prices and fees for limited liability company.

In a compulsory liquidation matter Bolagsverket will send an official notice (föreläggande) to the company, ordering the company as well as any shareholders and creditors who may wish to be heard to submit a written statement, or the required documents, within a certain time.

The official notice must be served on the company. The procedure for special service of documents upon limited companies according to section 9, paragraph 3 of the Service of Process Act may be followed. The official notice will be published in Post- och Inrikes Tidningar (The Swedish Official Gazette) at least one month before the last date for submissions.

If Bolagsverket issues an official notice on its own initiative on the grounds that the company has failed to notify a duly qualified board of directors, managing director, person authorized to receive service of process, or auditor for registration, the company must pay a special fee, currently SEK 2 700, to cover the costs of the liquidation proceedings (see Companies Ordinance, Article 3, section 7).

If the grounds for liquidation cease to exist while the matter is under consideration, Bolagsverket will not issue a liquidation order. In order to avoid liquidation, the company must submit a correct set of annual accounts and auditor's report or proper notification (as prescribed in the Companies Ordinance) of a board of directors, auditor etc. on the basis of which registration can take place. This means that the notification must be complete, including any required attachments and the registration fee. Furthermore, the company must pay the special fee, if imposed.

A compulsory liquidation order must be executed immediately. In some cases a compulsory liquidation order is made by a district court. See Article 25, sections 12, 17, 21, 50 and 51 of the Companies Act. In these cases the liquidator is appointed by the court.

Appeal

A liquidation order issued by Bolagsverket may be appealed to the district court in the municipality in which the company's registered office is located. However, the appeal is to be sent to Bolagsverket.

The liquidation proceedings

The Companies Act, Article 25, sections 30-42

The liquidator takes the place of the board of directors and the managing director with the task of carrying out the liquidation proceedings. Shareholders' meetings must continue to be held, e.g. in order to receive the liquidator's accounts. However, the shareholders' meeting of a company in liquidation cannot appoint a board of directors or direct the payment of dividends. The auditor continues to exercise his functions.

The liquidator ensures that the company's debts are paid and prepares for the winding-up of the company by selling as much of its assets as necessary.

The costs of the liquidation proceedings, including the liquidator's fee, are normally to be paid from the company's assets. If the company's assets are not sufficient to pay its debts or the liquidation costs, the liquidator applies to the district court to institute bankruptcy proceedings against the company.

Accounting during liquidation proceedings

The board of directors and the managing director present accounts for the period from the date of the most recently presented annual accounts until the liquidator's appointment. The accounts shall be audited in much the same way that ordinary annual accounts are.

The liquidator presents annual accounts to the shareholders' meeting for each financial year. No appropriations of profits are made. Special provisions for the auditing and preparation of annual accounts during liquidation proceedings are contained in Article 25, sections 31 and 37 of the Companies Act. Each year the auditors express an opinion as to whether the annual accounts should be adopted and the liquidator discharged from responsibility and whether the liquidation is being unduly delayed, and proposals on the same matters are put to the shareholders' meeting.

For financial years ending on 31st December, 2001 or later, the provisions on late filing fees apply even to companies that have gone into liquidation. If the annual accounts and auditor's report have not been filed with Bolagsverket within seven months of the end of the financial year, Bolagsverket may impose a late filing fee. After registration of a liquidation order, however, Bolagsverket cannot impose a late filing fee on accounts relating to the time prior to the liquidation order, see Annual Accounts Act, Article 8, section7.

The liquidator must apply to Bolagsverket to summon unknown creditors, see form Okända borgenärer – ansökan om kallelse, nr 833 (in Swedish). The form and information concerning the application fee, see Prices and fees for limited liability company.

Liquidation proceedings concluded

The Companies Ordinance, Article 1, section 47

When the period announced in the summons to unknown creditors has expired and the company's debts have been paid, the liquidator distributes the company's assets and at the earliest possible date thereafter presents to the (last) shareholders' meeting his final report according to Article 25, section 40 of the Companies Act.

The final report consists of an administration report on the entire liquidation and an account of the distribution of assets. A set of accounts for the entire liquidation period are appended to the final report (as from the date of the liquidation order or from the date of appointment of the liquidator until the day of distribution of the assets). The final report must be reviewed by the company's auditors. With the presentation of the final report the company is dissolved and the liquidator must immediately notify Bolagsverket. The notification can be made on form Slutredovisning, nr 807 (in Swedish).

The notification must include

• the company's registration number;
• a statement that the final report has been duly presented at the shareholders' meeting;
• signature of the liquidator(s);
• as an attachment, a certified copy of the minutes of a shareholders' meeting stating that the final report has been presented;
• a certificate showing that the summons to unknown creditors was issued by the district court (if summons to unknown creditors was not issued by Bolagsverket);
• certified copies of the final account, including documents attached thereto, and of the auditor's report on the final accounts and the administration during the liquidation.

Unless the articles of association provide otherwise, the surplus after liquidation is distributed among the shareholders in proportion to the number of shares they hold.

Note that although the company is dissolved upon the final report being presented to the shareholders' meeting, the liquidator must still notify Bolagsverket of this event for registration purposes.

Liquidation proceedings discontinued, business activities resumed

The Companies Act, Article 25, section 45 and the Companies Ordinance, Article 1, section 49

Only in certain cases, the shareholders' meeting may pass a resolution to discontinue liquidation proceedings and resume the company's business activities. This is possible in the case of a voluntary liquidation, if liquidation has been ordered by a court on the grounds of lack of capital, if bankruptcy proceedings against a company have been concluded with a surplus or discontinued, or if property forming part of a bankrupt company's assets has been restored to it under a composition. The condition is that the company's equity capital must be at least equal to the registered share capital. Another condition that must be met before the shareholders' meeting may pass such a resolution is that the auditors issue a special statement - see below. A resolution to discontinue liquidation proceedings and resume business activities must not be executed until it has been registered.

The liquidator notifies Bolagsverket that the shareholders' meeting has resolved that liquidation proceedings be discontinued and that the company resume business activities, and that the company has elected a board of directors. A notification, signed by the liquidator, must be sent to Bolagsverket.

The notification must contain

• the company's registration number;
• the company's postal address;
• personal particulars of the chairman of the board and other board members, deputy board members, the managing director, the deputy managing director, other persons authorized to sign on behalf of the company, and (if appointed) a person authorized to receive service of process. The personal particulars required are the same as those stated above for liquidators;
• information on entitlement to sign on behalf of the company.

The following shall appear in or be enclosed to the notification

• A solemn declaration by the liquidator that:
  • no grounds for liquidation exist according to Article 25, sections 11 or 12 of the Companies Act;
  • the company's equity capital, calculated in accordance with Article 25, section 14 of the Companies Act, is at least equal to the total registered share capital;
  • no distribution of assets has taken place;
  • all board members, deputy members, the managing director, the deputy managing director, and other persons authorized to sign on behalf of the company are not declared bankrupt, subject to trade ban or have custodians pursuant to Article 11, section 7 of the Parental Code and (if applicable) that the person authorized to receive service of process does not have a guardian pursuant to Article 11, section 7 of the Parental Code;
  • a statement showing that the board members, the deputy members, the chairman of the board, the managing director, the deputy managing director, the other persons authorized to sign on behalf of the company and the person authorized to receive service of process on behalf of the company have accepted the assignments.

• A certified copy of minutes of a shareholders' meeting showing the above-mentioned resolution and the election of board members and deputy members;
• A certified copy of board minutes showing the following:
  • election of one of the board members as chairman of the board (if the board consists of more than one member);
  • election of managing director and deputy managing director (if appointed). In a public limited company a managing director must be appointed and cannot be the same person as the chairman of the board;
  • election of other persons authorized to sign on behalf of the company (if appointed);
  • election of a person authorized to receive service of process (required if the company has no authorized representative resident in Sweden),
  • resolution concerning signatory power (may be replaced by a solemn affirmation),
  instead of board minutes, a solemn affirmation may be made that the statements relating to the chairman of the board, the managing director, the deputy managing director, specially appointed signatories, signatory power and, if applicable, the person authorized to receive service of process are in conformity with the resolutions of the board;
• A certified copy of a statement by the auditors concerning the company's equity capital, see Article 25, section 45 of the Companies Act
• The registration fee. See Prices and fees for limited liability company.

If new auditors, deputy auditors, layman auditors, or deputy layman auditors have been appointed, the notification must include this information plus certified minutes of a shareholders' meeting showing their election, acknowledgement thereof by the above persons, and declarations that the company's auditors meet the qualification requirements of Article 9, sections 10-13 of the Companies Act and that the layman auditors meet the requirements of Article 10, section 9 of the Companies Act, see form 817. After distribution of assets has taken place it is no longer possible for the company to resume business activities, even if the share capital were paid back to the company. Note that the new board of directors has no powers to act until it is registered. For this reason, notifications of this kind should not include changes in the share capital or the business name.

Liquidation proceedings continues

The Companies Act, Article 25, section 44 and the Companies Ordinance, Article 1, section 48

Even if liquidation proceedings have been terminated, they can be reopened, if previously unknown assets are discovered, if the company is sued, or other liquidation measures are necessary.

In this case the liquidator resumes work. If summons to unknown creditors has been issued previously, it is not necessary to apply again.

Since it may be uncertain whether the most recently registered data on the company are still valid, the liquidator should examine this. The liquidator should take particular care to notify Bolagsverket if any registered data requires updating, such as the company's address, the liquidator's address, persons authorized to sign on behalf of the company, signatory power, the auditor or auditor's address. It is advisable to obtain the auditor's agreement to resume his functions in relation to the company. If this is not possible, a new auditor must be appointed by the shareholders' meeting.

The liquidator convenes a shareholders' meeting in accordance with the articles of association and notifies Bolagsverket that the liquidation proceedings are to be continued.

The notification must contain

• the company's registration number;
• a statement (preferably in the heading) that the liquidation proceedings are to be continued;
• personal particulars of the liquidators, the deputy liquidators, any specially appointed signatories and, if applicable, the person authorized to receive service of process;
• the signatory power;
• the company's postal address (required if it has changed);
• a declaration in relation to the special signatories (required if newly appointed);
• if any new auditors, deputy auditors, layman auditors, or deputy layman auditors have been appointed, certified minutes of a shareholders' meeting showing their election, acknowledgement thereof by the above person(s);
• if any new special signatory has been appointed or if the signatory power is to be changed, a certified copy of minutes of a meeting with the liquidators.

More detailed particulars of the information required will be found under the heading Liquidation proceedings discontinued, business activities resumed above.

When the resumed liquidation proceedings are concluded, the liquidator notifies Bolagsverket that a (new) final report has been presented – see above under the heading Liquidation proceedings concluded.

Liquidation proceedings annulled by a court

The Companies Act, Article 25, section 46 and the Companies Ordinance, Article 1, section 50

If liquidation proceedings are annulled by a court of law, the liquidator convenes a shareholders' meeting for the purpose of electing a new board of directors.

The liquidator must notify Bolagsverket that the liquidation proceedings have been annulled, and attach a certified copy of the judgement or order of the court and the original copy of a certificate showing that it has gained legal force.

As in other cases, the liquidator must present a final report on the liquidation period to the shareholders' meeting. The company must elect a new board of directors. The new board then applies for registration as usual, with required particulars and attachments as provided in the Companies Ordinance.

Liquidation proceedings followed by bankruptcy proceedings

When Bolagsverket issues a compulsory liquidation order it is often found that the company has insufficient assets to pay its debts after the liquidation costs have been covered. In this case the liquidator must apply to the district court to declare the company bankrupt. He must inform the court if a notice to unknown creditors has been issued (see Bankruptcy Ordinance, section 10). The court will appoint an official receiver. The liquidator cannot be appointed as the official receiver in bankruptcy.

The official receiver represents the bankrupt estate and controls the company's property. He does not properly speaking represent the company itself.

At regular intervals during the bankruptcy proceedings a statement of net assets in bankruptcy (konkursbouppteckning) is drawn up. On these occasions the person managing the company (the liquidator) must declare (under oath) at a court meeting for the administration of an oath that he has disclosed all assets and liabilities of the company that he is aware of. As the liquidator has taken over the functions of the board of directors and managing director, the duty of attending this meeting generally devolves on him.

If no surplus exists at the conclusion of the bankruptcy proceedings, the company is dissolved and the court notifies Bolagsverket accordingly for registration. Normally, it is not necessary to complete the liquidation proceedings in these cases.

Bankruptcy proceedings followed by liquidation proceedings

This can happen in a few unusual cases

• If bankruptcy proceedings are concluded with a surplus or are discontinued, or if the property of the bankrupt company's estate is restored under a composition, the court (normally the district court) must order the company to go into liquidation upon the conclusion of the bankruptcy proceedings.
• If the company was already in liquidation prior to the institution of bankruptcy proceedings, and the bankruptcy proceedings are terminated in any of the above-mentioned ways, the liquidation proceedings are reinstated. The liquidator and the auditors resume their functions (subject to the agreement of the auditors – see above under Liquidation proceedings continued.
• In exceptional cases Bolagsverket may issue a liquidation order immediately after the court has made a bankruptcy order. In this case the liquidator's role will generally be limited, as he must hand over the actual winding up of the company's business to the official receiver. If no surplus exists at the conclusion of bankruptcy proceedings, the company is dissolved.

Common mistakes in documents sent to us

• The voting list does not mention the physical person representing a legal entity being a shareholder. The voting list must state present shareholders, representatives and assistants as well as information about the number of shares and votes each person represents at the shareholders meeting.
• A notification that the final report has been presented at the shareholders' meeting and that the company is dissolved, is missing.
• A notification that the liquidation is concluded shall be signed by the liquidator (all liquidators) and filed in the original.
• The final report has not been audited or the auditor's report does not include the entire period of the liquidation. The entire period of the liquidation refers to the period from the date of decision (or order) to go into liquidation or the date of appointment of liquidator until, at least, the date of the final distribution of assets.
• A statement on the final distribution of assets is missing in the directors' report in the final report.

References

• Article 25 of the Companies Act (Aktiebolagslagen 2005:559)
• Article 1, sections 43-50 the Companies Ordinance (Aktiebolagsförordningen 2005:559)
• The Annual Accounts Act (Årsredovisningslagen 1995:1554)
• The Service of Process Act (Delgivningslagen 1970:428)
• The Service of Process Ordinance (Delgivningsförordningen 1979:101)
• Notices to Unknown Creditors Act (Lagen (1981:131) om kallelse på okända borgenärer)
• Section 10 of the Bankruptcy Ordinance (Konkursförordningen 1987:916)

See also various commentaries on the Companies Act, e.g. ”Aktiebolagslagen 12:e och 13:e kap” by Stefan Lindskog.

Check the tax regulations on assets distributed in liquidation proceedings.

Nr 829 ie, 20 July, 2010