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7 Steps towards Company liquidation in Armenia

      The global pandemic known as COVID-19 has impacted millions. Economies around
the world have been adversely affected, with many companies facing bankruptcy and/or
liquidation due to loss of business revenue. The economic uncertainty has pushed many
struggling Armenian companies 1 over the edge too and the shareholders of companies
wanting to liquidate their company on the voluntary basis encounter with many procedural
difficulties. Thus, this article guides through the complex and often long-term process of
company liquidation procedures in Armenia which requires legislation knowledge and
development of a clear and step-by-step plan for winding-up.
     The legal entity may be liquidated a) voluntary by the decision of the General
Meeting, b) by a court decision and c) due to bankruptcy. It is important to properly
determine the company liquidation method. Meanwhile, a lot of various aspects should be
taken into account, in particular: the legal status; financial standing; the occurrence of such
encumbrances as pledges; litigations (with debtors, creditors) or a property seizure, etc. of the
company. If the financial standing is positive or zero, then it can be liquidated by the decision
of its shareholders, whereas if the company assets are insufficient to comply with its
monetary obligations, then the latter should be liquidated through the bankruptcy procedure.

Step 1. The decision on the company liquidation as well as on the appointment of
liquidation committee (liquidator) shall be made by the General Meeting of the company.
Such a decision should typically include information on the committee and the deadline for
making claims by the creditors. 2

1 Primarily Limited Liability Companies (LLCs) for their recognition as the most used legal entity form in
Armenia,

Step 2. Shareholders (or the head of executive body) shall be obliged to inform the State Registry of
Legal Entities at the company location about the decision on the company liquidation within 3
business days from the date the relevant decision has been made. The State Registry, on its turn,
makes a record about the process in the Unified State Registry within 2 business days.

Step 3. The liquidator shall post an announcement on the official website of public notices
(http://www.azdarar.am) about the company being in the process of liquidation and shall outline the
terms and period during which the creditors may apply for their supposed claims (not less than 2
months).

Step 4. The liquidation committee takes measures to obtain the receivables owed to the
company, and to identify and notify the creditors about the company liquidation. Upon the
expiry of the deadline for making claims by creditors, the liquidation commission shall draw
up an interim liquidation balance-sheet, containing the data on the company assets, a list of
the claims made by the creditors, as well as the data on the results of their consideration. The
interim liquidation balance-sheet shall be approved by the General Meeting.

Step 5. The property-related claims of the company creditors shall be allowed on account of
its property. The liquidator then pays the creditors (in the order prescribed by Article 70 of
the Civil Code of the RA). The liquidator shall draw up the liquidation balance-sheet, ensure
its approval by the company General Meeting and file the liquidation balance-sheet. If after
the settlement with all creditors the company has any funds or property, then they shall be
distributed among the company’s shareholders proportionally to their shareholding in its
authorised capital.

Step 6. Particular attention should be paid to the employees’ dismissal. In accordance with
the Labor Code of the Republic of Armenia, the company liquidation shall serve as a ground
for the company (liquidation commission or liquidator) to terminate a (fixed-term or
indefinite) employment contract. The employment contract termination in case of the
company liquidation does not require the employee’s consent. The employees should be
served with the 2 month notices of their future dismissal, but not earlier than the day of
decision-making on the company liquidation.

Step 7. The liquidator shall independently destroy the company seals having drawn up the
relevant act, and prepare the documents for storage in the archival institution. Having
received all the necessary documents, the liquidation committee then applies to
the State Registry to complete the liquidation procedure. In order to apply for the company
liquidation, the liquidator must pay a State fee of 10.000AMD and present the following
documents:
 an application,

2 It should be noted that from the date of the liquidation commission (liquidator) appointment all powers and
rights as to managing the company affairs should be transferred to it.

 the decision of the General Meeting about approving the liquidation balance sheet,
 the liquidation balance sheet,
 a reference about completion of the requirements of the law on Archive.
Legelata law firm has a vast practice in the corporate field. Our skilled specialists offer to
liquidate the companies through non-standard means, but most importantly without extra
waste of resources and time.

Author: Maykl Hovhannisyan /Associate

 


Disclaimer:
This material is produced by Legelata LLC. The material contained in this newsletter is
provided for general information purposes only and does not contain a comprehensive
analysis of each item described. Before taking (or not taking) any action, readers should seek
professional advice specific to their situation. No liability is accepted for acts or omissions
taken in reliance upon the contents of this material.

 

 

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