Dissolution
Decision that ends the company's purpose and opens its liquidation, published in the BODACC to be enforceable against third parties.
Definition
Dissolution is the decision that brings the company's existence as an organisation to an end. It is taken by the partners, or by the court in certain cases, and it opens a liquidation period during which the legal personality continues to exist for the purposes of the operation.
This distinction often comes as a surprise. A dissolved company has not disappeared from the register and does not cease to exist overnight. It enters a phase in which a liquidator realises the assets, settles the debts and distributes what remains. The striking off, which removes it from the register, comes at the end of this phase, not at the beginning.
Dissolution is subject to publicity. The notice is published in a journal of legal announcements, the formality is recorded in the register, and the BODACC publishes a mention of it. From the date of that publication, the mention of liquidation accompanies the company name in its deeds, which informs third parties that they are dealing with a company in the process of liquidation.
Three routes lead to this outcome. Voluntary dissolution, decided by the partners, is the most common. Judicial dissolution is ordered by a court. The universal transfer of assets allows a sole company to take over its subsidiary's assets and brings about its dissolution without liquidation.
What dissolution triggers
Entry into liquidation
The dissolved company must appoint a liquidator, unless it is a universal transfer of assets. The liquidator represents the company, completes ongoing operations, sells what must be sold and pays creditors in the prescribed order. The liquidation period varies in length, from a few months when the assets are straightforward to several years when there are disputes or assets that are difficult to dispose of.
Protection of creditors
The publicity given to the dissolution and the liquidation opens a period during which creditors may assert their rights. This period exists precisely because the announcement is enforceable against third parties. A creditor who consults the BODACC or the register discovers the company's situation and knows that it must come forward before the closure is ordered.
Dissolution, striking off, cessation of activity
The three terms refer to different points in time. Cessation of activity is an economic fact, the stopping of operations. Dissolution is a legal decision, taken once that decision has matured. Striking off is the final registration that removes the company from the register. A file that stops at dissolution leaves a company in liquidation, sometimes for years.
Frequently asked questions
Does dissolution mark the end of the company?
It marks the end of its purpose to continue its business activity, not the end of its legal personality. The company continues to exist during the liquidation and only disappears from the register upon removal, at the close of operations.
Who decides on dissolution?
The partners or shareholders in the case of voluntary dissolution, in accordance with the majority rules provided for by the articles of association and by law. The court may order it in the cases provided for by the applicable rules, in particular where the partners are insufficient in number or where the company is no longer operating normally.
What does the BODACC publish at the time of a dissolution?
The BODACC publishes the notice of dissolution and the commencement of liquidation, together with the company concerned and its identifying details. The closing of the liquidation, followed by the removal, will be the subject of separate publications, at a later date.