Liquidation of legal entity

A company has ongoing costs and obligations while it is active, inactive companies can be sold, transferred or there is a voluntary liquidation procedure. Different jurisdictions have unique processes and procedures. Let’s use Cyprus as an example of this.

Voluntary Liquidation

Members’ voluntary liquidation:

  • Company is solvent.
  • Directors believe that the company can pay its debts.
  • Appointment of a liquidator.
  • Decision of the directors that the company does not have any further purpose and available assets should be realised and distributed to the shareholders.

Creditors’ voluntary liquidation:

  • Absence of the declaration of solvency by the directors (the company cannot by reason of its liabilities continue its business).
  • Appointment of a liquidator or provisional liquidator.

Effects of voluntary liquidation:

  • Company must cease to carry on its business.
  • Directors’ powers cease.
  • Any transfer of shares is void.