Liquidation steps in the new corporate system
The decision to terminate a company is one of the most difficult decisions partners make, as it means the death of the company and the end of its business activity forever.
Due to the difficulty of this decision, the Companies Law came to organize the process of terminating the company and liquidating its dues in a way that guarantees the rights of creditors, partners or shareholders in the company by clarifying the steps for liquidating the company, the mechanism for appointing the liquidator and his authority, the liquidation period and when these procedures end.
What is the corporate liquidation system?
Liquidation of companies is a legal procedure aimed at ending a company’s activity, settling all its obligations, and paying off its debts.
What are the types of corporate liquidation?
The corporate liquidation system is divided into two main types:
- Optional liquidation: which is the dissolution of the company by mutual consent based on a General Assembly decision or partners’ agreement.
- Judicial liquidation: Judicial liquidation is carried out by issuing a final ruling from the competent court stipulating the termination of the company and the commencement of its liquidation procedures in certain cases, which are:
- Committing serious violations.
- The company has not been operating for more than one year.
- If the company’s debts exceed its capital without taking any action to limit this.
What are the optional liquidation conditions for companies in Saudi Arabia?
What are the optional liquidation conditions for companies in Saudi Arabia?
- Expiration of the company term.
- The partners’ desire to end the activity.
- Achieving the purpose for which the company was founded.
- The company’s director or members of its board of directors must submit a statement confirming that the company’s assets are sufficient to pay off its debts and that the company is not in default.
Liquidation steps in the new corporate system
How are companies liquidated according to the Saudi system?
The new Companies Law stipulates the steps for liquidating companies, which are as follows:
- Issuing a liquidation decision either with the approval of the partners or by a court ruling.
- Appointing a liquidator to manage the liquidation procedures. The decision to appoint him must be announced in the commercial register.
- The liquidator shall inventory the company’s assets, rights and obligations.
- Paying off the company’s debts according to priority. Debts that are due for payment are given precedence over future debts.
- The liquidator must return the value of the shares and stocks to the partners or shareholders after completing the debt repayment.
- The loss is distributed among partners or shareholders if the company’s assets are not sufficient to meet the value of the shares or stocks.
Liquidation steps in the new corporate system
In corporate liquidation cases, it is not enough to simply understand the regulatory procedures. You need the support of a competent commercial lawyer who will ensure a safe legal liquidation that protects the rights of partners and creditors and spares you any future responsibilities.
“Get advice from a specialized lawyer from the office of Lawyer Abdul Majeed Al Rashid in commercial cases“
What are the powers of the company’s liquidator?
- Representing the company before competent courts and others.
- Converting company assets into cash by selling movables or real estate at auction.
- The liquidator may sell the company’s assets in bulk or offer them as a share in another company.
- The liquidator may not start new works unless they are necessary to complete previous works.
- The liquidator shall be responsible for compensating the damage caused to the company, partners, shareholders or third parties due to errors he commits in the performance of his work.
What is the difference between liquidation and bankruptcy?
Liquidation is the last resort taken when a company declares bankruptcy. The bankruptcy system aims to provide solutions for preventive settlement and regulate debt repayment, enabling the company to resume operations and resume operations.
The difference between liquidation and bankruptcy is that liquidation is a legal procedure to terminate a company and settle its debts, whether it is able to pay them or has been declared bankrupt.
While bankruptcy is the inability of a company to meet its obligations and debts exceed the company’s capital.
What is the liquidation period?
The liquidation period of the company must not exceed 3 years, and this period may not be extended except by order of the competent court, in accordance with what is stipulated in Article 247 of the Companies Law.
When does liquidation end according to the new corporate system?
The liquidation ends with the approval of the authority that appointed the liquidator of the report that he submits after the end of the procedures, and then the liquidator submits a request to delete the company’s registration from the commercial register.
Liquidation of companies remains a delicate legal procedure that requires specialized systemic expertise and knowledge.
Liquidation steps in the new corporate system
Do not leave the fate of your company to interpretation or error, and hire a commercial lawyer who will guarantee you a regular liquidation that protects your interests and closes your obligations legally and properly.
The office of Lawyer Abdul Majeed Al Rashid provides you with a group of commercial lawyers licensed by the Ministry of Justice to assist you in all liquidation procedures and commercial consultations with professionalism and speed.
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