Dissolution and liquidation of companies (Law 31/1990)

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The phrase "voluntary liquidation" in fact covers a wide range of situations, not all of which begin with a decision of the shareholders. They all lead to the same outcome, however: the disappearance of the entity that has been dissolved and has entered liquidation. This article walks through the procedure as governed by Law no. 31/1990, with references to the relevant provisions of the Civil Code.

Dissolution comes before liquidation

Liquidation is preceded by dissolution, of which it is in practice an effect. The governing provisions are articles 252 and following of Law no. 31/1990, and articles 1,941 and following of the Civil Code.

The grounds for dissolution are numerous. The law provides both for situations in which dissolution is a voluntary act of the shareholders and for dissolution by operation of law, generally as a sanction.

Grounds for dissolution

Articles 10, 227, 228, 229 and 237 of Law no. 31/1990 list the main grounds for dissolution that lead to liquidation. The most important are:

  • failure to comply with the requirements on minimum share capital or on the minimum number of shareholders for that type of company;
  • expiry of the term set for the duration of the company;
  • the impossibility of achieving the corporate purpose or, conversely, its achievement;
  • a declaration that the company is null and void;
  • a resolution of the general meeting;
  • a decision of the tribunal, at the request of any shareholder, on serious grounds, such as serious disagreements between shareholders that prevent the company from functioning;
  • the bankruptcy of the company;
  • the company no longer has statutory bodies, or those bodies can no longer meet;
  • the shareholders have disappeared or have no known domicile or residence;
  • the share capital falls below the legal minimum and is not replenished as required by law;
  • for general partnerships and limited liability companies — the bankruptcy, incapacity, exclusion, withdrawal or death of one of the partners, where the number of partners is thereby reduced to one.

The liquidator's powers

The liquidator's main powers are listed in articles 253-255 of Law no. 31/1990:

  • taking over the assets and the records of the company;
  • drawing up an inventory of assets and liabilities;
  • preparing the opening balance sheet of the liquidation;
  • appearing in court in the name of the company;
  • performing and completing the commercial operations relating to the liquidation;
  • selling, by public auction or by another method decided by the shareholders, the real estate and any movable assets of the company;
  • entering into settlements, and liquidating and collecting the company's receivables;
  • contracting bill-of-exchange obligations, taking out unsecured loans and performing any other necessary acts.

Two important limits:

  • In the absence of special provisions in the articles of association or in the instrument of appointment, liquidators may not create mortgages over the company's assets unless authorised by the court.
  • Liquidators who undertake new commercial operations that are not necessary for the purpose of the liquidation are personally and jointly liable for performing them.

The procedure before the Trade Registry

Dealings with the Trade Registry Office take place in four distinct stages.

1. Filing the resolution on dissolution and liquidation

The shareholders' resolution on dissolution and on the appointment of the liquidator, or the court judgment ordering dissolution, is filed with the competent Trade Registry Office. If the shareholders have not appointed a liquidator, the National Trade Registry Office appoints one, ex officio or on request, from among the insolvency practitioners on the official roll.

2. Filing the liquidator's documents

  • the UNPIR registration certificate and the practising certificate for the current year;
  • a copy of the insolvency practitioner's identity document;
  • the practitioner's specimen signature, in the case of the liquidation of an economic interest grouping.

3. Publication of the liquidation financial statements

  • the financial statements — the final liquidation balance sheet — certified by the persons authorised by law, in copy;
  • where applicable, the report of the censors or of the financial auditors, in original;
  • the proposal for the distribution of the assets, where applicable;
  • the shareholders' resolution approving the financial statements and the proposal for the distribution of the assets.

4. Striking the company off the register

  • the liquidator's report, in original;
  • the application for striking off.

How long the procedure takes

The term is set at 1 year, with the possibility of extension for further periods of 1 year, but no more than 3 times. In practice, a simple liquidation, with no significant assets and no litigation, is completed within the first year. Extensions arise where there is real estate to be sold, unresolved litigation, or incomplete accounting records.

The liquidation procedure in practice

The concrete stages, in the order in which they are carried out:

  • Taking over the assets and the records of the company.
  • The inventory of assets and liabilities, in accordance with Order of the Ministry of Public Finance no. 2861/2009 and Accounting Law no. 82/1991, followed by the preparation of the opening balance sheet of the liquidation.
  • The liquidation itself: taking over signature rights at the bank, running the company's activity, collecting receivables, paying creditors, taxes and duties, completing operations in progress, settling litigation, and selling the assets by public auction or in accordance with the shareholders' resolution.
  • The 60-day report. Within 60 days of appointment, the liquidator must file with the Trade Registry Office a report on the economic position of the company, stating whether bankruptcy proceedings need to be opened. This obligation is frequently overlooked.
  • Archiving the company's archival holdings, in accordance with National Archives Law no. 16/1996.
  • The final liquidation balance sheet and the proposal for the distribution of the assets, filed with the competent Trade Registry Office. After the opposition period has expired, or once any oppositions have been resolved, the financial statements are deemed approved and the liquidators are discharged, subject to the distribution of the assets. It is advisable for the shareholders to approve the final balance sheet and the distribution proposal.
  • Distribution of the remaining net assets to the shareholders, after all costs have been paid and all company debts settled.
  • Striking off. Within 15 days of the completion of the liquidation, the liquidator files the application for striking off with the Trade Registry Office, failing which a fine is imposed on the liquidator. A tax certificate issued by the tax authority confirming that no amounts are owed to the state budget may be attached to the application, although this document is not mandatory.

Accounting and tax aspects

Corporate income tax during the liquidation period

The ordinary rules on the computation, declaration and payment of corporate income tax apply, with one important qualification: in the year in which the company is struck off, the deadline for declaring and paying corporate income tax is the date on which the liquidation operations are completed, and at the latest the date on which the final financial statements are filed with the competent tax authority.

Tax on amounts received by shareholders from the liquidation

At the end of the liquidation, before amounts are distributed to the shareholders, the tax on the income realised is computed, declared, withheld and paid.

Taxable income means distributions in cash or in kind in excess of the contribution to the share capital. The taxable income is taxed at the rate provided by law, which may differ depending on the status of the shareholder — natural or legal person — on their tax residence, and on any applicable double taxation treaty where the shareholder is a non-resident.

The obligation to compute, withhold and pay the tax lies with the company, acting through the liquidator. The tax computed and withheld at source is paid before the final financial statements are filed with the Trade Registry Office.

What it costs

The fee is set after assessing the specific situation: the number of shareholders, the assets to be realised, pending litigation and the state of the accounting records. However simple the procedure may appear, a liquidation conducted properly does not come in under 15-20 billable hours — notifications, publications, dealings with the Trade Registry and with the tax authority, preparing and filing the final liquidation balance sheet, and the striking off.

Applicable legal framework

  • Law no. 31/1990 on companies, articles 227-237 and articles 252-270;
  • the Civil Code, articles 1,941 and following, on the liquidation of companies;
  • Accounting Law no. 82/1991;
  • Order of the Ministry of Public Finance no. 2861/2009 on the organisation and conduct of inventory taking;
  • National Archives Law no. 16/1996;
  • the Fiscal Code, for the treatment of corporate income tax and of tax on liquidation income.

Prepared by Florin Daniel Barbu, attorney at law and insolvency practitioner, member of the Board of INPPI, on the basis of the course material "Liquidation outside insolvency", delivered within the UNPIR trainee education programme, October 2024.

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