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

Closing a company can result from various circumstances – lack of business opportunities, financial difficulties, or simply the owner’s decision to cease operations.

In practice, there are two key legal procedures for closing a company: liquidation and bankruptcy.

Understanding the difference between these two processes will help you make the best decision.

1. COMPANY LIQUIDATION

Liquidation applies when the company has no outstanding debts to creditors and has sufficient funds to settle all obligations. The process is relatively simple and usually lasts between 7 and 15 days.

• The company must not have any outstanding debts to suppliers, the state, municipal authorities, or employees.
• The founder certifies a statement before a notary that the company has no debts.
• If it is determined within 36 months that debts do exist, the founder is liable with their personal assets.
• The request for liquidation is submitted to the Central Registry of Business Entities (CRPS).

2. COMPANY BANKRUPTCY

Bankruptcy is initiated when the company has debts but lacks sufficient funds to cover them. Unlike liquidation, the process is more complex and lasts at least two months.

Key features of bankruptcy:

• The company may have debts to suppliers, the state, the municipality, or employees.
• Duration of the process: minimum of 2 months.
• The founder does not assume liability with personal assets.
• Creditors file their claims with the Commercial Court of Montenegro.
• Creditors are paid only if the company has assets (the so-called bankruptcy estate).
• A petition for bankruptcy can be filed with the Commercial Court either by the founder or by a creditor (supplier, government authority, or employee).

LIQUIDATION OR BANKRUPTCY – WHICH TO CHOOSE?

• Liquidation: faster and cheaper procedure, but the founder assumes risk, as they may be held personally liable.
• Bankruptcy: allows the company to close without risk to the founder’s personal assets, but the process is longer, costlier, and requires court supervision.

WHY CHOOSE PROFESSIONAL SUPPORT?

Whether you decide on liquidation or bankruptcy, it is important to have a reliable team of experts guiding you through the process.

Perfectum Agency has experience in handling over 500 liquidation and bankruptcy procedures. Our team includes a licensed bankruptcy trustee who ensures the process runs efficiently and without complications.

If you are uncertain, contact us – we will make sure your company is closed in the safest and most efficient way possible.