Dissolution of a limited liability company
A limited liability company must always be dissolved using a procedure laid down in the law. If you want to close down a limited liability company altogether, dissolve it through liquidation proceedings. The liquidator will then manage the payment of the company's debts, the distribution of its assets, the final settlement of accounts and the other practicalities required in the process. There are also situations where the authorities may require that the company must be put into liquidation or removed from the Trade Register.
You can dissolve the company voluntarily through liquidation proceedings. As a result, both the company and your operation will end completely. Liquidation proceedings may be the right option when you are unwilling or unable to continue the operation of your company even though it is profitable. For example, you may have become seriously ill or have reached your retirement age.
A limited liability company can also be dissolved by merging it with another company or by dividing it into new companies.
If the limited liability company is insolvent, heavily in debt and unprofitable, it may have to be dissolved through bankruptcy proceedings. You can file for a bankruptcy yourself. One of the company’s creditors may also file a petition for bankruptcy.
The general meeting makes the decision on putting a limited liability company into liquidation. It chooses a liquidator who replaces the company’s board of directors and the possible managing director. For example, the liquidator may be a board member or another person from inside the company.
The liquidator or a person authorised by the liquidator notifies the Finnish Patent and Registration Office of the beginning of the liquidation proceedings and the appointment of a liquidator. At the same time, the liquidator also applies for a public summons to the creditors, even if the company is not aware of any creditors. The summons states the date by which creditors must register their claims from the company.
The liquidator converts the company’s assets into cash and pays its debts. The liquidator also divides the remaining property and draws up the final settlement of accounts. The company is considered to have been dissolved when the liquidator has presented the final settlement of accounts to the general meeting.
The liquidator notifies the Trade Register and the Tax Administration of the final settlement of accounts and the dissolution of the company. After that, the company will be removed from the Trade Register and the registers of the Finnish Tax Administration.
Make sure that the limited liability company submits the required notifications to the authorities and makes the required payments on time even if it is no longer active. These include value added taxes and employer's contributions. The company must also submit a tax return to the Finnish Tax Administration for its last financial year. In addition, the company should apply to the Tax Administration for an amendment to its prepaid tax amount.
Take into account that the dissolution of a limited liability company may also have tax consequences to the company, to you personally and to other shareholders. Plan any solutions related to taxation carefully in advance.
Even if the company has been closed down, keep its accounts and financial statements for the time period determined in law. The accounts should be kept for six years from the end of the year during which the last fiscal year has ended. The financial statements in turn should be kept for at least ten years from the end of the last fiscal year.
After the limited liability company has been closed down, cancel all insurance policies and other agreements connected to your business operations.
The Finnish Patent and Registration Office may remove a limited liability company from the Trade Register or order it to be put into liquidation in the following situations:
- the company has not registered a competent board of directors with the Trade Register
- the company has not given proper notification of its financial statements to the Trade Register
- the company has been declared bankrupt and the bankruptcy has lapsed because of lack of funds
- no representative for the company has been entered into the Trade Register even though this is required by law.
However, the Finnish Patent and Registration Office will first request the company to rectify the deficiencies by a certain date.
A court may order the company to be put into liquidation if a shareholder has taken legal action against the company. There must, however, be extremely weighty reasons for the order.
A court may order the removal of a limited liability company from the Trader Register if
- the company's funds are insufficient to cover the liquidation costs or there is no detailed information available on the amount of the funds
- a shareholder, a creditor or another party does not announce that it will assume responsibility for the liquidation costs.