Company liquidation can happen for a number of reasons:
- by the decision of its founders (shareholders, participants) (including on expiry of the period or the accomplishment of the objectives for which it was established)
- by a court decision to invalidate its registration based on violations of law during the registration
- by a court ruling
- for performing unlicensed or prohibited by the law activities
- for multiple or serious violations of legal acts and laws
- if a public Union or foundation systematically engages in activities not defined in its charter goals
- bankruptcy may also be a reason for company liquidation.
A regular company liquidation process must follow an order defined by Armenian legislation, otherwise the State Registry of Legal Entities may not allow it.
In order to be liquidated, the company has to go through the following steps:
- The founders (shareholders, participants) make a decision about company liquidation, then appoint a liquidation committee (liquidator), and from this moment, the liquidation committee gets the company management responsibilities.
- The head of the executive body of the company immediately notifies the State Registry of Legal Entities about the company being in process of liquidation, and the State Registry of Legal Entities within two business days makes a record about it in Unified State Registry.
- The liquidation committee posts an announcement to the official website of public notices about the company being in liquidation process and defines the procedure and period during which the creditors may apply their claims. This period can not be less than two moths from the date of announcement.
- The liquidation committee takes measures to obtain the receivables owed to the company, and to identify and notify the creditors about the company liquidation.
- After the deadline of submission of claims by the creditors, the liquidation committee draws up an interim liquidation balance sheet which contains information about the company assets and a list of creditors’ claims. The interim liquidation balance sheet is then approved by the founders (shareholders, participants) who made the decision about company liquidation.
- If the company’s funds are insufficient to satisfy the claims of its creditors, the liquidation committee holds a public auction to sell the company’s property. Property remaining after satisfying the claims of creditors is returned to its founders (shareholders, participants), unless otherwise provided by law or the company’s Charter.
- The liquidation committee then pays the creditors (in the order defined in the Article 70 of Armenian Civil Code). After completing the settlements with creditors, the liquidation committee prepares a liquidation balance sheet which has to be approved by the founders (participants, shareholders) who made the liquidation decision.
- The liquidation committee then applies to the State Registry of Legal Entities to complete the liquidation procedure. In order to apply for company liquidation, the liquidation committee must pay a State fee of 10 thousand AMD and present the following documents:
- an application,
- the decision of company founders (participants, shareholders) about approving the liquidation balance sheet,
- the liquidation balance sheet,
- a reference about completing the requirements of paragraph 5 of Article 20 of the law on Archive.
- If the company is included in the list of monopolistic or dominant economic entities, within three days after receiving the liquidation application the State Registry of Legal Entities sends an inquiry to the State Commission for Protection of Economic Competition to find out about possible administrative proceedings initiated against the company and to confirm the lack of its obligations to the Commission. The Commission has to respond within 10 days after the sending date. If it fails to do so, State Registry of Legal Entities takes that as a confirmation of an absence of obligations or proceedings against the company.
- Within a business day after receiving the liquidation application, the State Registry of Legal Entities send an inquiry to the tax authorities about the absence of obligations to the State budged and social insurance funds. The tax authorities must respond within 20 days after receiving the inquiry, if they fail respond on time, or the response doesn’t comply with the format defined by the law, the State Registry of Legal Entities takes that as a confirmation of an absence of obligations. If the liquidation committee submits a reference given by the tax authorities on the day of liquidation balance sheet approval or after that about the absence of obligations to the State budget or social security funds, the State Registry of Legal Entities does not send the inquiry to the tax authorities.
After completing these steps and not finding reasons to decline the liquidation application, the State Registry of Legal Entities within a business day makes a record about company liquidation in State Unified Registry, and the company is dissolved and ceases to exist.
The law defines a different procedure for the liquidation process of banks, investment funds, investment fund managers, and insurance companies.