Creditors’ Involvement in Company Dissolution

If a company decides to close, as with voluntary dissolution/liquidation, or is forced into bankruptcy/enforced liquidation, and it owes you money from an invoice, it can difficult to understand what to do next. It is important to make yourself known as a creditor in order for the person responsible for the company’s assets to include you in the distribution.

In some situations the company may be closed, for example if it is seen to be in the public’s best interests or if a creditor makes a move for its closure. This may be done through a petition for closure or through an application for a bankruptcy declaration from the competent court (UK and Italy respectively). The bankruptcy proceedings in Switzerland are initiated by a court declaration after an application of over indebtedness or insolvency from a creditor or company shareholder. This legislation gives the creditor the power to take action against the company to which it is owed money and actively receive its payment. If this does occur, the creditor becomes a part of the distribution plan outlined by the bankruptcy administrator to ensure that they are paid.

Company closure regulations in Italy put the company into a state of “pending dissolution” for up to a year once the liquidation process begins. This ensures that all taxes and debts are paid before the company is dissolved. Again creditors can apply for a bankruptcy declaration against the company. The creditor is then put on a list and the court manages all its activities and debts.

When a company is in the process of dissolution it is a legal requirement to inform third parties. This is to notify creditors of the situation and allow them to come forward with any unpaid invoices. Most countries enforce this through a publication in a national newspaper. In Belgium it must be published specifically in the Moniteur Belge by the appointed notary public to inform any third parties. Polish company law places a timescale of 6 months for creditors to come forward and claim their debts. It may also be required to make details of the company’s seat and contact information readily available throughout the dissolution, such as in Hungary.

The high court may become involved in some methods of company closure, such as bankruptcy or enforced liquidation. This level of authority can play a pivotal role between the business and the creditor and can be particularly helpful if you are owed a significant amount of money. In some countries the government funds the remainder of the company’s debts if the assets are not enough to settle all creditors. This is true in Latvia especially and is great for creditors as it guarantees your payment.

Additional methods creditors may use to receive their invoice payments include a payment declaration or agreement. A payment declaration may sometimes be used as an easy and cost efficient way to dissolve a company. It is an official document used by creditors to ensure all debt has been paid. Once this has been settled it will be announced by the company shareholders. A payment agreement can be made with creditors under the 2003 Bankruptcy Act in Spain for the payment of the debt in instalments. This is only finished when the agreement has been fulfilled.