The process of closing down a business and distributing its assets is called liquidation. A limited corporation is shut down formally through the process of “liquidation” by a licensed insolvency practitioner who has been appointed(liquidator). In a liquidation, the company’s assets are sold (or “liquidated”) and any proceeds are distributed to creditors and/or shareholders in priority order. The final step regarding the liquidation procedure involves the liquidator dissolving the company’s house registrar firm.
The liquidation process
Liquidation can be used to wind up both solvent and insolvent businesses (those that can pay their bills and/or have assets greater than liabilities). A corporation in Albania that needs to be dissolved must abide by the rules of Law No. 9901, dated 14.04.2008 of Entrepreneurs and Companies. Additionally, this legislation governs the four corporate entities that the Albanian economy accepts: the limited liability company, the joint-stock company, the general partnership, and the limited partnership.
Circumstances for dissolving
The General Partnership may be dissolved for the following reasons:
- The partnership date has passed.
- Decision made by one partner.
- A court has made this decision.
- A bankruptcy proceeding has been initiated against it.
- The General Partnership has been inactive for more than two years without being registered.
In Albania, the death or withdrawal of a limited partner does not result in the dissolution of the limited partnership. The limited partnership may be dissolved if a general partner makes this choice if the court orders it if a bankruptcy proceeding is initiated against a general partner. In Albania, a Limited Liability Company may be dissolved if the General Meeting of Shareholders so decides, if it is ordered by a court if an insolvency procedure has been initiated, if the company has been inactive for more than a year without registering this, or if the date specified in the Articles of Association has passed.
If the decision to dissolve the company was reached at a general meeting, the controlling members of the firm or the court must register the dissolution with the National Registration Center.
National registration center
The National Registration Center in Albania must also be notified of the dissolution of a joint-stock company, and the same grounds must be given as in the case of a limited liability company. The decision to liquidate the firm may be made by the shareholders during a general meeting, or it may be made by a court. The expiration of the date from the articles of association or a period of inactivity longer than two years without registration could also be factors. The application for deregistration must be submitted to the Commercial Registry for legal entities, branches, and representative offices of foreign firms to voluntarily dissolve. The company will next choose a liquidator, who will need to submit the necessary paperwork to verify the execution and conclusion of the voluntary liquidation processes. The appointed liquidator will also carry out the following tasks:
- Sell the business’s assets.
- Pay all outstanding obligations and debts.
- Distribute surplus assets to shareholders as they become available.
If the Commercial Registry has not received notice of the intermediate acts of the liquidation procedure or if there are objections from creditors, unpaid taxes and fines, etc, the deregistration is not carried out. The complete process of a company being dissolved in Albania typically takes 6 to 9 months.
The directors’ situation
The most crucial thing for directors to understand before dissolving a company is that, in the event of insolvency, their obligations significantly change. The directors of the company must demonstrate that they operated in the creditors’ best interests once it becomes bankrupt. Directors should behave properly and seek timely professional counsel to reduce their risk of personal culpability. Directors must be aware that once an insolvency practitioner is hired, they have to look into the decisions they made as board members in the months and weeks before the company’s liquidation.
Albanian tests for insolvency
A firm is deemed to be insolvent standing under the Bankruptcy Law when it is unable to pay its bills on time or has a large debt load. When a corporation’s liabilities to third parties outweigh its assets and it is impossible for the company to continue its economic activity, this situation is referred to as being overloaded with debts. Additionally, Article 104 of Law No.9920 of May 19, 2008, “On Tax Procedures,” as modified (the “Tax Procedure Law”), deals with the tax office’s ability to start insolvency procedures for taxpayers who are registered as business enterprises. The tax administration must request that taxpayers’ insolvency proceedings be initiated (registered in the form of commercial companies).
