Understanding the Liquidation Process in Cyprus: A Step-by-Step Guide
Liquidation, also known as dissolution, is the process undertaken when a company decides to wind up its operations and settle its obligations by realizing its assets. In Cyprus, the liquidation process can be carried out through voluntary or compulsory methods, depending on the circumstances and the decision of the company’s Board of Directors. This comprehensive guide will provide a step-by-step explanation of the liquidation process in Cyprus, shedding light on both voluntary and compulsory liquidation methods.
Voluntary liquidation is initiated when certain conditions outlined in Article 261 of the Companies Law, Cap. 113, are met. These conditions include:
a) Expiry of the company’s duration:
- If a specific period was set by the company’s articles of association, the company may be liquidated upon the expiration of that period.
b) Occurrence of a dissolution event:
- The articles of association may specify a particular event that, upon occurrence, triggers the dissolution of the company.
c) Special resolution:
- A company may vote by special resolution to voluntarily liquidate itself.
d) Extraordinary resolution:
- In cases where the company’s obligations prevent it from continuing operations, an extraordinary resolution may be passed, indicating that liquidation is advisable.
Notice and Registration: After the company has approved the resolution for voluntary liquidation, Article 262(1) mandates the delivery of a copy of the notice of resolution to the Registrar of Companies within 15 days from approval. The Registrar of Companies proceeds with the registration of the notice and arranges for its publication in the Official Gazette of the Republic. The date of approval of the resolution is considered the commencement date of voluntary liquidation.
Voluntary Liquidation by Members:
When one or more members of a company decide to dissolve it voluntarily, the following steps are typically followed:
a) Solvency declaration:
- The directors of the company make a statutory declaration stating that the company can pay its debts within 12 months from the commencement of the liquidation process.
b) Statement of Assets and Liabilities:
- A Statement of Assets and Liabilities, reflecting the company’s financial position up to the date of the declaration, accompanies the solvency declaration.
c) General meeting and special resolution:
- Company members convene a general meeting to pass a special resolution declaring the voluntary liquidation and appointing a liquidator.
d) Asset realization and creditor payment:
- The appointed liquidator collects the company’s assets, which are then realized and used to pay off the creditors. Any surplus remaining is distributed among the shareholders.
Compulsory Liquidation: In certain circumstances, a company may be subject to compulsory liquidation. However, this guide primarily focuses on the voluntary liquidation process. Further information on compulsory liquidation can be obtained from the Companies Law, Cap. 113.
Understanding the liquidation process is crucial for companies considering winding up their operations in Cyprus. This step-by-step guide has provided an overview of the voluntary liquidation process, outlining the conditions, procedures, and requirements involved. By following these steps, companies can navigate the liquidation process in Cyprus with clarity and ensure a smooth transition towards dissolution.
Note: It’s important to consult legal professionals or experts in Cyprus company law for specific advice and guidance regarding the liquidation process.