How to wind up an s.r.o.: liquidation and deletion from the Commercial Register
Winding up an s.r.o. is not the same as merely “stopping doing business”. If the company is sound and has enough assets to settle its debts, it is wound up as a rule by voluntary liquidation. It is a managed process: the liabilities are settled, the remaining assets are distributed, and the company is finally deleted from the Commercial Register. The whole procedure has steps set by law and its own timeline — it cannot be done overnight. Below we explain how liquidation works and what to watch out for.
Key points
- Liquidation is for a company that has enough to settle its debts; a company in insolvency is dealt with by bankruptcy.
- The company enters liquidation on the liquidator's registration in the Commercial Register; before that a €1,500 advance is deposited into notarial escrow.
- Creditors are invited to lodge their claims; a liquidation can be completed no sooner than six months after the notice of entry into liquidation.
- Where there is a tax arrears or an ongoing tax audit, the period is extended by a further six months.
- After the surplus is distributed and the company deleted, it ceases to exist; the advance is released by the notary 30 days after deletion.
When is an s.r.o. wound up by liquidation and when by bankruptcy?
What decides is the company's assets. If the company can pay its debts and something remains after they are settled, it is wound up by liquidation. If, on the contrary, it is in insolvency — unable to pay or over-indebted — liquidation is not the right route and bankruptcy generally follows. That is precisely why the first step is always a sober assessment of the company's actual financial condition. The difference matters for the director too, because insolvency carries the duty to file for bankruptcy in time; more in the article When a managing director must file for bankruptcy.
How does liquidation begin?
The first step is the shareholders' decision to wind up the company, together with which a liquidator is appointed. Before the liquidator is registered in the Commercial Register, a liquidation advance of €1,500 is deposited into notarial escrow — it serves to cover the liquidator's remuneration and expenses. The company enters liquidation only on the liquidator's registration in the Commercial Register; from that moment it uses its name with the addition “in liquidation” and the liquidator takes over acting in its name (Sections 70, 75 and 75b of the Commercial Code).
Who is the liquidator and what do they do?
The liquidator is the person who manages the company during liquidation and leads it to an orderly close. They realise the assets, settle liabilities to creditors, recover the company's receivables, and ensure that the process is carried out in accordance with the law. They act with due care and are liable for their activity. In simple companies the existing managing director may also act as liquidator, if they meet the statutory conditions. It is worth paying attention to the choice of liquidator — how smoothly and quickly the whole process runs depends on their diligence.
What about creditors and claims?
The company's entry into liquidation is published and creditors are invited to lodge their claims. The liquidator compiles a list of them and settles them in turn. Protecting creditors is precisely why a liquidation cannot end at once — the basic list of lodged claims is compiled by the liquidator only after 45 days have elapsed from publication of the notice, and the liquidation itself can be completed no sooner than six months after the notice of entry into liquidation (Sections 75e and 75j of the Commercial Code). That is also the main reason why a liquidation generally takes more than half a year.
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We will go through with you whether liquidation or another solution suits your company, and guide you through the whole process — from the shareholders' decision to deletion from the register.
Book a consultationWhat about tax and accounting during liquidation?
Liquidation also has its accounting and tax side. The company prepares financial statements at the decisive dates (before entering liquidation, during it and as at the day it ends) and meets its tax duties on an ongoing basis. It is important to settle matters with the tax administrator — if the company has a tax arrears or is undergoing a tax audit, the period for completing the liquidation is extended by law by a further six months, and the liquidator must attach to the petition for deletion a declaration that the arrears no longer exist and that no audit is under way (Section 75j(2) and (6) of the Commercial Code). This part should not be underestimated, because it is precisely where liquidations most often get delayed.
How does liquidation end and the company get deleted?
After the liabilities are settled, the liquidator prepares the financial statements and a final report on the course of the liquidation, together with a proposal for distributing the remaining assets (the liquidation surplus). The liquidator publishes a notice that these have been prepared; if the shareholders do not decide otherwise within 60 days, the documents are deemed approved. After the liquidation surplus is distributed, the liquidator files a petition to delete the company from the Commercial Register. On deletion the company ceases to exist in law. The deposited advance is then released by the notary to the liquidator only after 30 days have elapsed from the company's deletion from the register. The new liquidation rules that tightened this process are examined in the article Clean-up of the Commercial Register and the new company-liquidation rules.
Summary and recommendation
Voluntary liquidation is the right route for a company that has enough to settle its debts and wants to close in an orderly way. It has clear steps — the shareholders' decision, a liquidator, the advance, settling creditors, the accounting and tax close, and finally deletion from the register — and its own timeline. Its opposite is setting up a company, which we covered in the article How to set up an s.r.o. If you are unsure whether liquidation or another solution suits your company, go through it with an expert before the first step.
Frequently asked questions
Can an s.r.o. be wound up overnight?
No. A liquidation can be completed no sooner than six months after the notice of entry into liquidation, and where there is a tax arrears or an ongoing tax audit, a further six months later. In practice it therefore generally takes more than half a year.
What if the company cannot settle its debts?
Then it is not a matter of liquidation but, as a rule, of bankruptcy. If the company is in insolvency, insolvency additionally carries the director's duty to file for bankruptcy in time; and if over-indebtedness is discovered only by the liquidator during the liquidation, they must file the bankruptcy petition without undue delay.
What happens to the €1,500 advance?
The advance is held in notarial escrow and serves to cover the liquidator's remuneration and expenses. The notary releases it to the liquidator after 30 days have elapsed from the company's deletion from the Commercial Register.
Does the tax authority have to agree to the liquidation?
Tax duties must be settled during the liquidation. Where there is a tax arrears or an ongoing tax audit, the liquidation is extended by law by six months and the liquidator attaches to the petition for deletion a declaration that no arrears exist and no audit is under way — which is why the tax side is dealt with on an ongoing basis.