Company dissolution / Liquidation : What is it?
The notions of dissolution of a company and liquidation of a company are often confused in the minds of readers. However, there is a legal difference between the notions in the Moroccan law.
First, note that dissolution is the first step in the process of closing a business. It consists of making a decision to stop the business activity. This decision is made by the partners through an extraordinary general meeting.
Then, the dissolution of a company in Morocco is followed by its liquidation. This phase consists of the realization of assets (disposal of fixed assets, inventories, collection of trade receivables …), and the settlement of liabilities (payment of debts to the State, social organizations, employees …).
Finally, it ends with the possible distribution of a liquidation bonus to the partners.
Reasons behind the Dissolution and Liquidation of companies in Morocco
There are several reasons that can lead a company to terminate its business. According to article 1051 of Dahir 9 Ramadan 1331 constituting the Code of Obligations and Contracts, the company is terminated in the following situations :
- expiration of the term set for its duration, or by the fulfillment of the condition under which it was contracted ;
- achievement of the purpose for which it was contracted, or by the impossibility of achieving it;
- extinction of the common thing, or a partial loss considerable enough to prevent its useful exploitation;
- death, declared absence, prohibition, infirmity of mind, of one of the partners, if it has not been agreed that the partnership will continue with the heirs or representatives, or that it will continue among the other partners;
- declaration of bankruptcy or judicial liquidation of one of the partners;
- common will of the partners;
- judicial authority.
In addition, a company can also be dissolved if the amount of shareholders’ equity (net worth) is less than a quarter of the share capital. Indeed, when this case arises, the law obliges the partners to decide whether to continue the company’s activities or not.
In the limited liability company (SARL), for example, the partners are required to decide whether to continue the company’s operations or to stop the business. This decision is made, moreover, in compliance with the provisions of article 86 of the law 5-96 as supplemented and modified by the laws N°21-05 and N°24-10. When the partners do not decide on continuity, this entails the early dissolution of the limited liability company.
Procedures and formalities of the dissolution of a limited liability company.
The main steps to follow for a successful dissolution and liquidation of your LLC are the following:
- To hold an extraordinary general meeting with as agenda the dissolution of the company, the appointment of the liquidator, the determination of the seat of the liquidation and the effective date of the dissolution.
- Sign, legalize and register the minutes of the Extraordinary General Meeting (EGM);
- Submit EGM’s minutes to trade court’s office;
- Fill out the amending declaration of the Trade Register ;
- Publish in a newspaper of legal announcements;
- Prepare and file with the tax authorities a balance sheet called “total cessation of activity”, formerly called “Liquidation balance sheet”;
Main steps of the Liquidation Closing
- Prepare a balance sheet at the end of the period called “Liquidation Balance Sheet”;
- Prepare the liquidator’s report;
- Hold an extraordinary general meeting to close the liquidation with as agenda the examination of the liquidator’s report, the approval of the liquidation accounts, the final closing of the liquidation and to give discharge to the liquidator.
- Report and minutes to be signed and legalized and registered ;
- Submit the following documents to the trade court’s office: the liquidator’s report, the minutes of the EGM, and the certificate of deposit
- Fill in the amending declaration of the Trade Register (sign, stamp and legalize) ;
- Publish in a newspaper of legal announcements;
- Filing the tax result declaration with the tax authorities.
These steps must be followed by the removal of the company from the trade register, the role of the business tax, the FI and other bodies such as CNSS, CIMR …
At the end of all these operations and legal formalities, the status of legal personality and the legal framework of the company disappear and the company no longer exists.
What role does the liquidator play in the liquidation procedure of a limited liability company (SARL)?
The liquidator is the representative of the company in liquidation. He can play multiple roles. Indeed, he :
- is in charge of making an inventory of the assets and liabilities of the company;
- has the most extensive powers to continue the business in progress;
- executes the role of initiating new business for the purposes of liquidation
- has extensive powers to realize all assets,
- is responsible for paying the liabilities and allocating the remainder to the partners
The liquidator also takes care of all the necessary legal formalities and publicity. The main purpose of the advertisement is to inform the creditors so that they can submit their claims.
Liquidation lasting more than one fiscal year
If the duration of the liquidation exceeds one financial year, the liquidator shall prepare the annual accounts on the basis of the inventory of the various assets and liabilities existing at the end of the period in three months after the end of each financial year.
The partners must approve the annual financial statements within six months of the end of each fiscal year;
A liquidator must make a declaration of the final result within 45 days following the closing of the liquidation operations. He may be a partner or a third party. The partners of a company in liquidation must appoint one or more liquidators.
What are the notable effects of the dissolution/liquidation of a company ?
- First, the legal personality of the company only disappears after the total liquidation of the company. In the meantime, it remains after the dissolution of the company for the purposes of its liquidation;
- Second, functions of the liquidator cease to exist upon completion of the liquidation;
- Finally, sharing of the liquidation bonus.
What is the advantage of using a chartered accountant during the dissolution of a limited liability company ?
The procedure of company dissolution in Morocco involves, at the same time, legal formalities and accounting work.
Therefore, a Chartered Accountant has a global vision of all the aspects of a company dissolution. This allows him to carry out a procedure of dissolution and liquidation of a company.
The Chartered Accountant is, without doubt, a reference contact during a liquidation procedure. Several companies choose this professional to appoint him as liquidator, for example.
Indeed, when appointing a Chartered Accountant, the latter has a varied mission. He has the task of preparing the minutes of the meetings, takes care of the necessary reports and bundles at each step.
We can assist you
We are chartered accountants in Casablanca and Marrakech.
For assistance in the dissolution and liquidation of your company CONTACT US.
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