Liquidation of a Limited Company

Liquidation of a Limited Company
A limited liability company is a legal entity, meaning it is an entity that is not a person and does not have a body, a kind of ghost, created by law. The company is not an existing thing, but a company can have assets, a company can have a bank account, a company can Being an employer of employees, and a company can be the owner of another company, but a company can also take on obligations such as loans, giving guarantees, and so on.

How do you close a limited company?
Closing a limited liability company is actually the process by which the existence of the company is liquidated. After all, the existence of the company was created by the law, and so is its liquidation done according to the law.

However, since a company can have rights, as well as liabilities, the liquidation procedure of a limited liability company is quite different from the process of opening a limited liability company.

Closing a limited liability company in the company register is actually called "dissolving a limited liability company".

In the essence of the process, two situations must be distinguished:
When a limited company has enough assets or money to pay all its liabilities
When a limited company does not have enough assets or money to pay all its liabilities

Voluntary dissolution of a company
Voluntary liquidation of a company is the process that is relevant in a situation where a limited company has enough assets to pay the company's liabilities.

This is a purely voluntary process, where the shareholders themselves make a decision within the duly called general meeting, according to which the company should be dissolved.

After that, the company will pay all liabilities from the company's assets, including cash balances. The balance of the assets or the cash after paying 100% of the liabilities, will be distributed to the shareholders, and each shareholder will receive the balances according to his relative percentage of holdings in the company's shares. This distribution is called a "dividend in liquidation" (the tax on which is the same as the dividend tax).

Voluntary liquidation is a process that takes about 100 days at the Registrar of Companies. The reason why the process takes so long is that a publication must be made in the government newspaper "Records", according to which the shareholders of the company have made a decision to carry out liquidation, and anyone who declares that the company owes him any debt may file an objection to carrying out said liquidation. In this way, for example, former employees of the company as an employer who did not receive their full social rights, or for example suppliers who worked with the company and provided it with raw materials, goods or services "on credit" meaning with deferred payment, etc. can file an objection.

After the 100 days, if no objection to the liquidation has been registered, the Registrar of Companies will issue a notice of liquidation, that the company has ceased to exist.

liquidation of a company with debts; Liquidation of a company in court
Liquidating a company with debts is the process that is relevant in a situation where a limited company does not have enough assets to pay the company's obligations.

The process can be voluntary, i.e. at the initiative of the company's shareholders, or forced, i.e. at the initiative of the company's creditors (debtors of the company), who as mentioned can be employees or former employees, suppliers, etc.

The liquidation is not carried out through the Registrar of Companies, but it is a liquidation of a company in court.

As far as it is a simple case, there should be only two hearings in court, with the first one approving or rejecting the liquidation request, and the second hearing being a liquidation hearing after the liquidation trustee (on behalf of the court) has done his work to find assets to pay the company's obligations as much as possible .

Liquidation of a company in court - are there personal guarantees?
• Are there any guarantees towards investors in the company?
• Is there a personal guarantee of the shareholders towards creditors?
• Is there a personal guarantee of the shareholders in the banks?

If there are no personal guarantees on behalf of the shareholders for the company's debts, and there are no assets for the company, the case is "simple" (relatively).

If there are personal guarantees on behalf of the shareholders for the company's debts, this affects the scope of the work, and during the liquidation one must try to organize what is called a "creditor arrangement" between the shareholders and the creditors.

Liquidation of a company in court: Can an office bearer such as a director or CEO get involved and be required by the court to pay the company's debts?

The law explicitly states that situations in which an office bearer such as a director or CEO will get into trouble and have to pay the company's debts are only if there was negligence on his part, for example according to the provisions of section 288 of the Insolvency and Economic Rehabilitation Law, according to which if a director or CEO knew or was aware of Knowing that the corporation is insolvent and has not taken reasonable measures to reduce its scope, the court may, at the request of the trustee or the trustee, after issuing the order to open proceedings regarding the corporation, order that the director or general manager bear responsibility towards the corporation for damages caused to the corporation's creditors due to his failure.

However, the office bearer will not get into trouble if he is represented in time by a good liquidation lawyer who knows the ways to block all the possibilities of harming the subject of the office, and to prevent the office bearer from getting into trouble.

There will also be situations where the office bearer simply caused damage to the company, for example when the CEO simply leaves and leaves the business to the shareholders, and leaves, then a court binds him for damages personally, and this is according to section 289 which states that if the court discovered that a person holding a position in the corporation or A person who has been in a position that has breached a duty towards the corporation that establishes grounds for requiring him to compensate, pay, or return an asset to the corporation, may, at the request of the trustee or supervisor, after issuing an order to initiate proceedings regarding the corporation, order that person to compensate, pay, or return the property to the corporation.

How do you decide whether to liquidate a company voluntarily or liquidate a company with debts in court?
There are actually several questions to be asked:
• What are the assets and their amount?
• What are the debts and who are the creditors?

What is the cost of closing a limited liability company?
Voluntary liquidation of a company is a process without a state fee, and its cost, to be done correctly with a liquidation lawyer, is around NIS 2,000 + VAT for a normal case.

Liquidating a company with debts is a process with a court fee of approximately 1500 NIS, and to do it correctly with a liquidation lawyer, the cost will be between 20,000 and 25,000 NIS in the usual case.

It is possible that the court will ask to deposit money to guarantee the liquidator's expenses: between 2,000 and 10,000 NIS.

It should be noted that the costs are subject to a current price offer and depending on the case.

Need to liquidate a limited company? Contact us today and get consultation!