Liquidation of a company with assistance of the prosecutor

Termination of a company through a prosecutor - grounds and procedure. Court decision to terminate the company.
прекратяване дружество чрез прокурор

In practice, the only possibility for liquidation of OOD / EOOD and AD / EAD, in the absence of a representative (ie director) or disputes between the shareholders

Nature of the procedure

Termination of a company through a prosecutor is a specific procedure that can be applied only in the cases explicitly stated in the law. In certain cases, the prosecutor’s office supervises compliance with the requirements of the Commercial Law (CL) in the establishment and operation of commercial companies.

The commercial company, within the meaning of the Commercial Law, is an union between two or more persons for carrying out commercial transactions with mutual capital and in pursuit of common goal. As such an entity, companies form and express their will through their officers. In different cases these are – manager, board of directors, supervisory board, etc. Through them the company participates in commercial trade. If the company does not have such officers – it cannot form and express its will, it cannot participate in the commercial activities and its existence becomes futile. It is in these cases that the law gives rights to the prosecutor to initiate an action for termination of the company. And it is basically the only option for some shareholders to liquidate their companies, when they don’t have quorum to appoint an officer or representative (ie CEO).

The termination of the company is an action that is basically the opposite to its establishment. The grounds on which a company can be terminated are generally divided into legal and contractual. The legal grounds are specified in the law. With the advent of these grounds, the competent authorities have the right to request the district court to terminate the company.

Termination of Ltd. through the prosecutor

The grounds for termination of a commercial company through the prosecutor’s office are specified in Art. 155, item 2 and item 3 of the Commercial Law. The first ground will be present when the activity of the company contradicts the law. The second – if the company has no registered representative (officer, CEO, etc.) for a period of at least three months. In this article we will study the second hypothesis – when the company does not have a registered manager.

According to Art. 135, para. 1, item 2 of the Commercial Law, the manager is an obligatory and necessary body of the limited liability company. He is elected at the conclusion of the company contract with which the company is established. The manager organizes and manages the activity of the company. Through it the company expresses its will and participates in the trade turnover. If there is no manager, the company would not be able to operate. Its existence will be superfluous.

However, when this ground arises, the company is not automatically terminated and liquidated. It is necessary to take the necessary actions to enter the company in a new phase – the liquidation phase.

Procedure

The proceedings for termination of a commercial company by referring to the prosecutor goes through several stages. First of all, the prosecutor, on the signal of an interested person, should check whether the legal grounds are indeed present. The prosecutor must check whether the company has a registered manager (officer, CEO, etc,). If the company does not have a registered manager – the prosecutor checks for how long a manager has been missing from the history of the company in the Commercial Register.

If the prosecutor deems that there are grounds for termination of the company, he must refer to the competent district court. The court has to be referred with a claim to terminate the company. In this proceedings, the company will be constituted as a defendant.

The district court at the seat of the company is always competent to consider and pronounce on the claim of the prosecutor. If the court finds that the prerequisites are actually present – there is no registered manager for more than 3 months, he must issue a judgment with which to terminate the company. The decision of the court will be constitutive – from its entry into force, the company will be considered terminated.

Posted by Neli Minkova

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