The Greek Sociétés Anonymes Law (Law 2190/1920, hereinafter referred to as S.A. Law) applies both to the dissolution and the execution of the insolvency proceedings of a Société Anonyme (AG/S.A.) and, in analogous application, to the Limited Liability Company (GmbH/EPE) and the Private Capital Company (IKE). The relevant provisions are found in Art. 47 et seq.
- Dissolution of a Greek Société Anonyme
2. Dissolution by Resolution of the General Meeting and Voluntary Liquidation
3. Insolvency of a Greek Société Anonyme
4. Comparison of Voluntary Liquidation and Insolvency Proceedings
- Dissolution of a Greek Limited Liability Company
- Dissolution of a Greek Private Capital Company
I. Grounds, Procedure, and Consequences of the Dissolution of a Greek Société Anonyme
The Greek Sociétés Anonymes Law (Law 2190/1920, hereinafter referred to as S.A. Law) applies both to the dissolution and the execution of the insolvency proceedings. The relevant provisions are found in Art. 47 et seq.
The dissolution of an S.A. may be required due to mandatory legal grounds (e.g., due to insolvency) or may be decided voluntarily. Following the dissolution of the company, it must be liquidated, and only then can it be deleted from the register. Depending on the ground for dissolution, the deletion can occur either through insolvency proceedings or through a voluntary liquidation.
1. Grounds for Dissolution
If the share of equity capital of the S.A. falls to less than half of the total share capital, the Board of Directors must convene a General Meeting (Art. 47 S.A. Law). The convocation must take place within six months after the end of the preceding fiscal year. The shareholders in the General Meeting decide whether the company should be dissolved or the capital should be increased.
Further grounds for dissolution are found in Art. 47a S.A. Law. Accordingly, the company is dissolved:
- upon expiration of the stipulated duration of the company;
- by resolution of the General Meeting pursuant to Art. 29 para. 3 and 31 para. 2 S.A. Law; and
- upon the opening of insolvency proceedings.
Furthermore, an S.A. may be dissolved pursuant to Art. 48 S.A. Law if:
- the share capital subscribed at the time of formation has not been paid in;
- a member of the Board of Directors, a managing director (the AG’s managing director), or another senior employee authorized to manage the company, who has been convicted of a relevant criminal offence, has not been removed from management;
- the share of equity capital relative to the total share capital falls below 10%.
The dissolution can be compelled by court order through a lawsuit filed by a single or multiple shareholders. The single shareholder must hold at least 1/3, or in the case of a class action, the shareholders must hold at least 1/5 of the total share capital. The main prerequisite for this procedure is the existence of an important reason, which must be related to the impossibility of the company’s orderly operation. An important reason is recognized, for example, as the impossibility of appointing a Board of Directors due to a lack of quorum.
The grounds for dissolution are summarized again below:
- The company holds less than 50% of the market capital share (Either dissolution or another measure)
- Equity capital share relative to the share capital is less than 10% (Mandatory rule)
- The share capital was not increased to the stipulated minimum amount of 24,000 Euros within 15 years (Art. 8 S.A. Law) (applies to old companies founded before the year 2000)
- Retention of relevantly convicted senior Board members etc. in a leading position
- Failure to submit three balance sheets to the Ministry of Commerce
- Expiration of the stipulated company duration
- By resolution of the General Meeting (voluntary liquidation)
- Upon insolvency of the company
- By court order upon application by one or more shareholders for an important reason
2. Dissolution by Resolution of the General Meeting and Voluntary Liquidation
The path of voluntary liquidation is only possible if the company is not over-indebted and not threatened by insolvency, or if the shareholders provide the necessary capital. According to Greek law, the company can initiate a voluntary liquidation despite a crisis. However, if a creditor files for insolvency in this specific case, only insolvency proceedings will follow.
In voluntary liquidation, the company winds itself up. In this procedure, all liabilities of the company must be immediately examined and settled from the remaining tangible assets and monetary funds. Any tangible assets must be sold and outstanding receivables collected. The company’s business activities may only be continued in a restricted manner and only for the purpose of the company’s liquidation. The liquidation is referred to as voluntary (or “silent”) in this context because no insolvency court is involved.
Following the completion of these examinations and settlements, the dissolution of the company follows—after a resolution of the shareholders. The shareholders are not subject to the stigma of insolvency proceedings after a voluntary liquidation.
Dissolution by resolution of the General Meeting without an insolvency background, followed by voluntary liquidation, is possible at any time, even without an important reason. The company continues to exist until the conclusion of the liquidation with the sole purpose of winding up the company.
During the winding-up, besides the sale of tangible assets, collection of receivables, payment of liabilities, etc., the termination of employment contracts, continuing obligations, leasing, rental, and other contracts must also be considered.
3. Insolvency of a Greek Société Anonyme
The objective prerequisite for initiating insolvency proceedings by operation of law is the permanent impossibility of the company to meet its due financial obligations. Accordingly, insolvency proceedings can also be initiated upon application by a creditor in the event of impending insolvency. According to Greek law, it must be a general and permanent, and not merely a temporary, inability to pay (thus, a merely temporary liquidity shortage is not considered a sufficient reason). Furthermore, the company must have permanently ceased payment of its due liabilities; it is irrelevant that certain isolated liabilities could potentially be settled. The lack of liquidity is, of course, characteristic of this. A company with high fixed assets but lacking liquid funds can therefore also become insolvent.
The application for the opening of insolvency proceedings can be filed either by a creditor or by the company itself. According to Art. 5 para. 2 of the Greek Insolvency Code (InsO), there is an obligation to apply for the opening of insolvency proceedings by the debtor without culpable delay, but no later than within a period of 15 days after the determination of the inability to pay (general and final inability to settle due claims).
The insolvency court is obliged to examine the existence of the insolvency prerequisites, even if the application was filed by the debtor itself. If the prerequisites are not met, the application is rejected. Under the new Greek Insolvency Code, which came into force in September 2007, there is also the possibility of conducting composition proceedings pursuant to Art. 99 InsO. According to Art. 99 para. 1 InsO, the prerequisite for this is that the company is in crisis but has not yet ceased payments. If the application is accepted by the insolvency court, it appoints a mediator who is to initiate the compositions between the debtor and the creditor.
4. Comparison of Voluntary Liquidation and Insolvency Proceedings
The differences between voluntary liquidation and the execution of insolvency proceedings are significant. Both processes are based on fundamentally different prerequisites. While dissolution by resolution of the General Meeting and subsequent voluntary liquidation can be decided by the General Meeting at any time and without special reasons, the insolvency proceedings require the existence of certain, usually negative prerequisites (inability to pay).
This means that in the case of voluntary liquidation, the shareholders themselves control whether they wish to continue the company or not, while the initiation of insolvency proceedings is based on mandatory legal grounds.
In voluntary liquidation, the decision regarding the dissolution of the company can therefore be based, for example, on purely entrepreneurial considerations, such as comprehensive business planning and reorientation of the company. Inability to pay is usually not given. The company also retains control over the liquidation process itself and without the involvement of the insolvency court, insolvency administrators, etc., thus not relinquishing the, albeit only temporary, corporate management.
In contrast, the insolvency proceedings must be initiated mandatorily when the prerequisites are met and constitute a judicial process. As a rule, the execution of insolvency proceedings also has negative consequences for the brand’s reputation, especially if it operates across borders.
5. Procedure for Voluntary Liquidation
The procedure is initiated by a resolution of the General Meeting regarding the dissolution and liquidation of the company, observing the majority stipulated in the articles of association. Furthermore, one or more liquidators are appointed in the resolution. This resolution of the General Meeting must be published in the Government Gazette.
The liquidator represents the company from this point on and takes all measures and steps required for the liquidation; they can, however, be recalled by the General Meeting. The General Meeting retains all its competences during the liquidation procedure. During the liquidation, the company’s letterhead must state that the company is in liquidation.
The next step is the realization of assets and settlement of liabilities of the company from the remaining tangible assets and monetary funds. Any tangible assets must be sold and outstanding claims collected. For this purpose, a balance sheet as of the effective date is first prepared and subsequently published in the Government Gazette.
Although the company continues to exist as a legal entity during the liquidation, its business activities may only be continued in a restricted manner and only for the purpose of the winding-up of the liquidation. The actual objective of the company is not pursued further.
Outstanding claims can, and even must, be collected in the company’s name during the voluntary liquidation.
During the winding-up, besides the sale of tangible assets, collection of receivables, payment of liabilities, etc., the termination of employment contracts, continuing obligations, leasing, rental, and other contracts must also be considered.
The goal of the procedure is the realization of all assets and settlement of all liabilities and winding up of all obligations. If the assets are sufficient to settle all liabilities, there is still the possibility, besides insolvency proceedings, for the liquidators to carry out a type of composition procedure through the proportionate distribution of the company’s assets to the creditors by application to the court. As soon as the liquidation is completed, a final balance sheet is prepared and published in the Government Gazette.
II. Grounds, Procedure, and Consequences of the Dissolution of a Greek Limited Liability Company (GmbH/EPE)
The dissolution of the Limited Liability Company has numerous similarities with the dissolution of the Société Anonyme. In contrast to the significant corporate law differences between the two forms of company, there are only minor differences in dissolution and liquidation.
1. Grounds for Dissolution
The Limited Liability Company is dissolved:
- in the event of the existence of a special statutory or contractual reason;
- by resolution of the partners’ meeting, which must be passed by ¾ of all partners who hold at least ¾ of the total company capital;
- by court order due to the existence of an important reason, following a corresponding application by one or more partners who represent at least ¾ of the total company capital;
- upon filing for insolvency proceedings.
According to Greek law, neither the personal insolvency nor the death of a single partner leads to the dissolution of the company. Exceptions may, however, be provided for in the articles of association.
In the event of a loss of more than half of the company capital, the managing directors are obligated to convene a meeting for the purpose of voting and resolving on a possible dissolution of the company, or on the reduction of the company capital. It must be noted here, however, that the company capital must not fall below the minimum capital of €2,400 stipulated by law.
2. Procedure for Liquidation
If the company is dissolved for a reason other than insolvency, a liquidation follows. Until the conclusion of the liquidation and dissolution, the company continues to exist as such and must add the words “under liquidation” to the company name. The company’s activities are restricted to the measures necessary for the winding-up.
The liquidation is carried out by appointed liquidators. However, it can also be carried out by other persons provided for in the articles of association or designated by the meeting. The liquidators can be recalled, provided the partners agree, either by the partners’ meeting or by the court following a prior application by partners who represent at least 1/10 of the total company capital.
The main duty of the liquidators is the immediate preparation of an inventory and the creation of a liquidation opening balance sheet, which must be published. It is their duty to wind up all outstanding matters of the company, settle the debts, collect the company’s claims, and liquidate the company’s assets. The liquidators may take new actions for the purpose of winding up outstanding matters.
3. Insolvency of a Greek Limited Liability Company
Regarding the insolvency proceedings of an LLC, the principles of the S.A.’s insolvency proceedings apply. In contrast to the partners of a General Partnership and a Limited Partnership, the insolvency does not lead to the private insolvency of the partners.
III. Grounds, Procedure, and Consequences of the Dissolution of a Greek Private Capital Company (IKE)
The dissolution of the IKE has numerous similarities with the dissolution of the Société Anonyme and the LLC.
1. Grounds for Dissolution
The Private Capital Company is dissolved:
- by resolution of the partners’ meeting;
- if the duration of existence has expired;
- upon filing for insolvency proceedings;
- in other cases where the law or the articles of association may provide.
According to Greek law, neither the personal insolvency nor the death of a single partner leads to the dissolution of the company. Exceptions may, however, be provided for in the articles of association.
2. Procedure for Liquidation
If the company is dissolved for a reason other than insolvency, a liquidation follows. Until the conclusion of the liquidation and dissolution, the company continues to exist as such and must add the words “under liquidation” to the company name. The company’s activities are restricted to the measures necessary for the winding-up.
The liquidation is carried out by appointed liquidators. However, it can also be carried out by other persons provided for in the articles of association or designated by the meeting. The liquidators can be recalled, provided the partners agree, by the partners’ meeting.
The main duty of the liquidators is the immediate preparation of an inventory and the creation of a liquidation opening balance sheet, which must be published. It is their duty to wind up all outstanding matters of the company, settle the debts, collect the company’s claims, and liquidate the company’s assets. The liquidators may take new actions for the purpose of winding up outstanding matters.
3. Insolvency of a Greek Private Capital Company
Regarding the insolvency proceedings of an IKE, the principles of the S.A. and LLC’s insolvency proceedings apply. In contrast to the partners of a General Partnership and a Limited Partnership, the insolvency does not lead to the private insolvency of the partners.
(Status: January 2013. All information is provided subject to change and without guarantee.)