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
- 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.
- Compulsory Liquidation
- Ordered by a Swiss court, typically when a company is declared insolvent and unable to meet its financial obligations.
- Simplified Liquidation
- Applicable for smaller companies with no outstanding liabilities, enabling a faster process.
The Liquidation Process
- Decision to Liquidate
- For voluntary liquidation, shareholders must pass a resolution to dissolve the company.
- Appointment of Liquidators
- Liquidators, often members of the company or external professionals, are appointed to manage the liquidation process.
- 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.
- Distribution of Remaining Assets
- Any surplus after settling debts is distributed among shareholders according to their equity stakes.
- 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.