What is Liquidation?

Liquidation is the formal process of closing down a company and distributing its assets to settle debts and obligations. In Switzerland, liquidation is governed by the Swiss Code of Obligations (CO) and typically occurs when a company ceases its operations, becomes insolvent, or undergoes restructuring.

Types of Liquidation in Switzerland

  1. Voluntary Liquidation
    • Initiated by the shareholders or owners of a company when they decide to dissolve the business, often due to achieving its objectives or strategic reasons.
  2. Compulsory Liquidation
    • Ordered by a Swiss court, typically when a company is declared insolvent and unable to meet its financial obligations.
  3. Simplified Liquidation
    • Applicable for smaller companies with no outstanding liabilities, enabling a faster process.

The Liquidation Process

  1. Decision to Liquidate
    • For voluntary liquidation, shareholders must pass a resolution to dissolve the company.
  2. Appointment of Liquidators
    • Liquidators, often members of the company or external professionals, are appointed to manage the liquidation process.
  3. Asset Realization and Debt Settlement
    • Liquidators sell the company’s assets to settle outstanding debts. Creditors are paid in a legally defined order of priority.
  4. Distribution of Remaining Assets
    • Any surplus after settling debts is distributed among shareholders according to their equity stakes.
  5. Deregistration
    • The company is removed from the Swiss Commercial Register, officially marking the end of its legal existence.

Importance of Liquidation

Liquidation ensures a structured and legally compliant process for closing a business while protecting the interests of creditors, shareholders, and other stakeholders. In Switzerland’s transparent and stable legal environment, liquidation provides clarity and finality for businesses concluding their operations.