How to Proceed with the Liquidation of a Company: A Complete Guide
Liquidating a company is a formal process triggered by specific legal causes such as fulfilling the company’s purpose, the partners’ decision, or insolvency. The goal is to monetize the company’s assets, pay off debts, and distribute remaining assets to shareholders. This guide outlines how liquidation works for both partnerships and corporations, including implications for inheritance in Italy and issues like donation in Italy, inheritance tax Italy, and Italian estate planning when business ownership is passed down.
What Is Company Liquidation?
Liquidation begins after a company’s dissolution, shifting the focus from profit-making to settling debts and distributing remaining assets. The company still exists legally during this phase. In cases involving inheriting property in Italy, especially business shares, understanding Italian inheritance law and Italian succession law is essential, as this can affect the liquidation process and the Italian estate tax owed.
Liquidation of Partnerships
In partnerships (s.s., s.n.c., s.a.s.), liquidation is more flexible. The process begins when a dissolution cause occurs—e.g., loss of partners. Directors retain management powers only for urgent affairs until liquidators are appointed, either unanimously or by court order.
Key legal steps include:
- Preparing an inventory
- Paying creditors before asset distribution
- Distributing remaining assets per profit shares
If informal agreements are reached, the legal procedure may be streamlined, but creditors must always be paid first. Liquidation is completed with final balance approval and removal from the business register. Any overlooked rights or assets transfer to partners in joint ownership.
For those selling inherited property in Italy or dealing with probate in Italy, these steps matter, especially if heirs are liable for unresolved business matters.
Liquidation of Corporations
For corporations (S.p.A., S.a.p.A., S.r.l.), the process is more formal, governed by Art. 2484 of the Civil Code. Causes for dissolution include expiration of term, achievement of business purpose, shareholder withdrawal, or bankruptcy.
Once dissolution occurs, directors convene a shareholders’ meeting to:
- Appoint liquidators
- Set liquidation criteria
- Transfer books and a management report
Liquidators must register with the business register. The company’s name is updated to include “in liquidation.” They may temporarily continue operations if beneficial for asset realization.
The primary duty is to satisfy creditors. Only afterward can remaining assets be distributed based on shares. The Italian estate tax applies if shares are passed to heirs.
Completion of Liquidation
The process ends with the creation and approval of a final liquidation balance and distribution plan. The company is then officially removed from the business register. However, any unpaid liabilities may be claimed from shareholders up to the value received. Similarly, heirs assuming company shares through inheritance in Italy could face such liabilities under Italian succession law.
Creditors can also pursue claims if a donation in Italy has altered asset distribution unfairly. Even after formal cancellation, undistributed rights transfer to members in co-ownership.
In conclusion, company liquidation in Italy—whether for a business you’re closing or one you’ve acquired through inheritance in Italy—demands careful compliance with legal and financial duties. Whether you’re handling probate in Italy, navigating Italian inheritance law, or managing selling inherited property in Italy, having a solid grasp of liquidation steps, liabilities, and Italian estate planning tools is vital—especially for foreign nationals, for example a US citizen inheriting property in Italy.
VGS Family Lawyers is a law firm that offers assistance to English-speaking clients with interests in Italy.
In case you need assistance, please write to: info@vgslawyers.com.