Glossary · Winding up

Liquidation

Also: Liquidation, Abwicklung, stille Liquidation, Auflösung, winding up, voluntary liquidation

In short

Liquidation is the orderly winding up of a dissolved company: completing ongoing business, realising assets, paying creditors and distributing the rest to the shareholders. For a GmbH and UG, it follows the dissolution resolution and ends with deletion from the commercial register.

Liquidation explained

Closing the company takes place in three stages: dissolution, liquidation and deletion. The dissolution resolution requires three quarters of the votes cast unless the articles of association provide otherwise (Sec. 60 (1) no. 2 GmbHG). The blocking year begins with the call to creditors in the Federal Gazette, which is why a liquidation takes at least 13 to 15 months. Only a company that can pay all its debts may be liquidated. If the company is insolvent or over-indebted, insolvency must be filed instead. Without a blocking year, a GmbH can only end through deletion for lack of assets by the register court (Sec. 394 FamFG).

Legal basisSec. 60, 65 to 74 GmbHG; Sec. 394 FamFG

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Related terms

Blocking year (Sperrjahr)The blocking year begins with the call to creditors in the Federal Gazette and lasts twelve months; only then may the remaining assets of a dissolved GmbH or UG be distributed to the shareholders. It protects creditors who still come forward.Articles of association (Gesellschaftsvertrag)The articles of association (or partnership agreement) are the contractual basis of a company and set out, for example, its name, registered office, purpose, capital and the rights of the shareholders; for a GmbH they are also called the Satzung. For a GmbH and UG they must be notarised; for a GbR no particular form is required.GmbH (limited liability company)The GmbH is a corporation and legal entity formed by one or more persons with at least €25,000 share capital. As soon as it is entered in the commercial register, in principle only the company's assets are liable for its debts.UG (haftungsbeschränkt)The UG (haftungsbeschränkt) is not a separate legal form, but a GmbH with less than €25,000 share capital, mathematically from €1, which must be paid in full in cash before the application. In return, it must put a quarter of its annual net profit into a reserve every year.Duty to file for insolvency (Insolvenzantragspflicht)If a GmbH or UG is insolvent or over-indebted, the management must file for insolvency without culpable delay, at the latest three weeks after insolvency occurs and six weeks after over-indebtedness occurs. Anyone who fails to do so commits a criminal offence.GmbH in liquidation (i. L.)After dissolution, the GmbH carries a suffix indicating liquidation, usually "i. L.", and may only conduct business that serves the winding up. It is only deleted after the blocking year and the distribution of the remaining assets.

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