Duties of a Liquidator

Duties of a Liquidator

Liquidation of a company is most commonly perceived as the end of a business journey: the moment when the company ceases to exist and its operations are brought to a close. However, behind this process lies not merely the administrative closure of a company, but a whole series of legal and financial steps that must be carried out precisely and responsibly. Thus, liquidation is not just a formality, but a procedure that requires careful and diligent management.

At the heart of this process is the liquidator. Their role is not sloely to close the company on paper, but also to safeguard the interests of creditors, manage the company’s assets, ensure compliance with legal obligations, and oversee the proper winding-up of the business. The manner in which the liquidator performs these duties often determines how efficient, transparent, and complication-free the entire procedure will be. For that reason, it is important to understand not only what liquidation entails, but also the specific duties and responsibilities of a liquidator in practice.

Upon initiating the liquidation procedure, the company adopts a resolution on the commencement of liquidation, by which, among other things, it appoints a liquidator. The law does not prescribe any specific requirements that a liquidator must fulfill in order to perform this function. Furthermore, a liquidator does not necessarily have to be a single individual, as it is possible to appoint several persons to perform this role jointly. If no liquidator is appointed at the time the resolution on the commencement of liquidation is adopted, the person who previously acted as the company’s legal representative shall be deemed to be the liquidator.

After the appointment of a liquidator, the most significant legal consequence is the termination of the authority of all legal representatives of the company. The primary duties of the liquidator consist of undertaking all actions necessary for conducting the liquidation procedure, including:

1. completion of transactions and business activities commenced prior to the initiation of liquidation;
2. undertaking actions necessary for carrying out the liquidation, such as the sale of assets, settlement of creditors’ claims, and collection of receivables;
3. undertaking all other actions necessary for the implementation of the company’s liquidation procedure.

The liquidator is obliged to comply with the special duties prescribed under Article 61 of the Law on Companies, which relate to the duty of care, the duty to disclose transactions and activities involving a personal interest, the duty to avoid conflicts of interest, the duty to preserve business secrets, and the duty to comply with non-compete obligations.

One of the fundamental duties of the liquidator is the preparation of the initial liquidation balance sheet and the initial liquidation report. The initial liquidation balance sheet constitutes an extraordinary financial statement, while the initial liquidation report essentially provides a current overview of the company and contains:

1. a list of receivables;
2. a list of recognized claims;
3. a list of disputed claims;
4. information on whether the company’s assets are sufficient to settle its liabilities, including disputed claims;
5. the necessary actions for carrying out the liquidation procedure;
6. the estimated time required to complete the liquidation process.

The initial liquidation balance sheet and the initial liquidation report must be prepared and submitted to the company’s members’ assembly no later than 150 days from the commencement of liquidation. The decision on their adoption must be made within 30 days from the date of submission. If the liquidation procedure is not completed within one year, an annual liquidation report must be prepared, containing an explanation of why the liquidation has not been concluded. The deadline for submitting the annual liquidation report is six months from the end of the financial year.

The liquidator is obliged to notify known creditors within 15 days from the date of commencement of liquidation. The notification must contain information on the date of publication and the duration of the notice on the initiation of liquidation, the company’s registered seat or mailing address, as well as a warning to creditors that they must report their claims no later than 30 days from the expiry of the publication period of the liquidation notice.

After settling the creditors and fulfilling the company’s obligations, the liquidator prepares the final liquidation balance sheet and the final liquidation report:

1. the final liquidation balance sheet;
2. a report on the conducted liquidation procedure;
3. a written statement confirming that all creditors have been notified, that the company’s obligations have been settled, and that no other proceedings are pending against the company;
4. a draft resolution on the distribution of the liquidation surplus.

All of these documents must be adopted by the resolution terminating the liquidation procedure.

It should be emphasized that the liquidator is entitled to reimbursement of expenses incurred during the liquidation procedure, as well as to remuneration for their work. If the remuneration amount is not determined, the liquidator may request the competent court to determine the amount of remuneration and reimbursement of costs in non-contentious proceedings. In addition, the liquidator shall be liable for any damage caused in the performance of their duties to the members of the company and the company’s creditors.

Finally, it can be concluded that the role of a liquidator goes far beyond the mere formal closure of a company. The liquidator is expected to conduct the entire liquidation procedure in a lawful, responsible, and efficient manner, while simultaneously protecting the interests of creditors, company members, and other participants in the process. Although the law relatively briefly regulates the requirements for the appointment of a liquidator, their duties in practice carry significant responsibility. For this reason, the way in which the liquidator carries out the liquidation often determines whether the procedure will be completed without additional disputes and financial complications. Liquidation, therefore, does not represent only the end of a company’s business operations, but also a legal procedure that requires careful management until its very conclusion.