Liquidation of solvent companies

Solvent Liquidation – A Structured and Controlled Closure

A solvent liquidation is a voluntary and carefully planned process where a company is dissolved while still being able to meet all of its obligations. This means the company has sufficient assets to cover its debts and no outstanding liabilities.

This method is often chosen when a company no longer has a business purpose, or when shareholders want to ensure a proper, transparent, and structured closure where both creditors and owners are treated fairly.

The Process of Solvent Liquidation

Shareholder resolution – at least two-thirds of the votes at the general meeting must approve the liquidation.

1. Appointment of a liquidator – who assumes management of the company and oversees the process.

2. Assessment of assets and liabilities – a full review of the company’s financial position.

3. Public notice (proclamation) – published in the Danish Gazette (Statstidende) to allow creditors to file claims.

4. Realization of assets – converting assets into liquid funds to settle outstanding debts.

5. Debt settlement – creditors are paid according to legal priority rules.

6. Distribution of surplus – any remaining funds are distributed among shareholders according to their ownership stakes.

Liability and Compliance in Solvent Liquidation

• Shareholders are normally not personally liable as long as all obligations are covered.

• The liquidator carries legal responsibility for handling claims and distributing assets correctly.

• The company must continue to comply with accounting and filing obligations until the process is completed.

A solvent liquidation ensures an orderly and transparent wind-down, minimizes disputes with creditors, and allows shareholders to retain control throughout the process.

Declaration of Solvency – The Quick and Simple Option

If a company has no assets or outstanding liabilities, it may be dissolved via a declaration of solvency in accordance with section 216 of the Danish Companies Act. This process is faster and far less complex than a solvent liquidation, as it does not require the appointment of a liquidator or the sale of assets.

The Process of Dissolution by Declaration of Solvency

Shareholder decision – dissolution is approved at the general meeting.

Submission of declaration – the company formally declares that it has neither debts nor assets.

Registration with the Danish Business Authority – the company is deleted from the official company register.

Liability Considerations

Shareholders face no liability if the declaration is accurate.

However, if undisclosed debts surface later, shareholders may be held personally liable.

This method is most suitable for inactive companies, where a quick and uncomplicated termination is desired. ‍

The Importance of Professional Advisory

Regardless of the chosen method, compliance with legal and tax regulations is crucial. Mishandling the process can result in legal disputes or unexpected tax liabilities for the shareholders.

By seeking professional advisory services, shareholders ensure a correct, efficient, and tax-optimised closure of their company. Advisors can guide on compliance, manage creditor communication, and secure the best possible financial outcome for the owners. ‍

FAQ – Company Liquidation in Denmark

When should solvent liquidation be chosen?

Solvent liquidation is appropriate if the company has assets and liabilities that need to be handled properly. It provides a structured closure and reduces the risk of disputes with creditors.

When is a declaration of solvency the better choice?

A declaration of solvency is best suited for companies without assets or debts, typically inactive companies. It offers a fast and simple resolution.

Who can act as a liquidator?

The liquidator is appointed by the shareholders and is usually a lawyer, accountant, or another qualified professional with the expertise to manage the process.

What happens if hidden debts are discovered after a declaration of solvency?

If undisclosed obligations are found, shareholders may be held personally liable. This is why accuracy and due diligence are essential before submitting the declaration.

How long does a solvent liquidation take?

The process typically takes 6–12 months, depending on the complexity of the company’s assets and creditor relations.

Are there tax implications when liquidating a company?

Yes. Any distributions, profits, or gains may be taxable for shareholders. Professional tax advice is recommended to ensure correct treatment and avoid unnecessary tax burdens.

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