Dissolution is the process of de-registering a company from the company registry at the Department of Business Development („DBD“). When considering the life cycle of a business operation, the voluntary dissolution by the shareholders appears to be the usual way to end the company’s operations. There are several circumstances that will lead companies to the dissolution and subsequently, the liquidation process. Under Sections 1236 and 1237 of the CCC, a limited company may be dissolved by the following causes:
Special Resolution (above item 1): With regards to dissolution by using a special resolution, a general shareholders‘ meeting shall be summoned by the director(s) or shareholders. Invitations to the meeting have to be sent to shareholders and published in at least one local newspaper at least 14 days before the meeting date. At the meeting, one-fourth of the total shares must be present to achieve a quorum. The special resolution for the dissolution requires a majority of not less than three-fourths of votes present voting in favor, per the requirements under Section 1194 of the CCC. The required period for an invitation, a quorum, and the voting may differ depending on the articles of association (by law) of the company. Apart from the dissolution, shareholders will also get to appoint a liquidator(s) and auditor(s). The dissolution and the name of auditor(s) should be registered at the Ministry of Commerce within 14 days after the meeting.
Dissolution by Court (above item 6): On the other hand, under Section 1237 of the CCC, companies can also be dissolved by the Court if the business of the company can only be carried on at a loss with is no prospect of generating profit. The Court will only adjudge the company’s dissolution in cases where the company has been continuously experiencing losses. However, this will not be the case if the company occasionally suffers losses. A restructuring process may be possible under certain circumstances and such a procedure has been introduced to save certain businesses with viable business plans. A party with a vested interest (e.g., minority shareholder) may be eligible to file such motion to the Court.
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