How to Close a Company: The Difference Between Liquidation and Bankruptcy

Closing a company can happen for various reasons—lack of business opportunities, financial difficulties, or simply the owner's decision that it's time to shut down. In such situations, there are two key legal processes through which a company can be closed: liquidation and bankruptcy.

 1.  LIQUIDATION OF A COMPANY

Liquidation is the process of closing a company when there are no debts to creditors and there are sufficient funds to settle all its obligations. This process is quite straightforward and takes between 7 and 15 days.

The steps for liquidation are as follows:

• The company must not have any debts to creditors (suppliers, the state for taxes and contributions, municipal authorities, employees)
• The founder notarizes a statement that the company has no outstanding obligations.
•  The founder is liable with his own assets if it is proven within 36 months that there are debts of the company to creditors.
• The liquidation request is submitted by the founder to the Central Register of Business Entities

2. BANKRUPTCY OF A COMPANY

 Bankruptcy, on the other hand, is the process of closing a company when it may have debts to creditors but does not have the means to settle those debts. The bankruptcy process lasts at least two months and has the following characteristics:

• The company may have debts to creditors (suppliers, the state for taxes and contributions, municipal authorities, employees).
• The process lasts a minimum of 2 months.
• The founder is not liable with his own property
• Creditors submit claims for debts owed to them by the company to the Commercial Court of Montenegro.
• Creditors are paid from the bankruptcy estate only if there is a bankruptcy estate (the company's assets).
• The request to initiate bankruptcy can be submitted to the Commercial Court of Montenegro by either the founder or a creditor (supplier, government agency, employee).

When you decide to close a company, it is important to understand the difference between liquidation and bankruptcy. 

Liquidation is a faster and cheaper process, but the founder assumes responsibility for any potential debts. Bankruptcy allows for closing the company without risk to the founder's personal assets, but the process may take longer, be more expensive, and require court oversight.

In both cases, it is crucial to have a professional team to advise you and facilitate these processes. The Perfectum Agency has experience in over 500 liquidation and bankruptcy procedures. Our team includes a bankruptcy administrator who will ensure that the bankruptcy process is simple.

If you are in doubt, Perfectum is the right choice to ensure that your company is closed in the most efficient manner.

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