Reorganisation and Liquidation - Changing or Closing a Company's Structure Without Debts and Tax Coming Back to You
A company's structure changes several times in the life of a business: two companies merge, one business splits in two, an LLC converts into a joint-stock company for an investor, or a company is simply no longer needed. Each change is a procedure in which creditors, the tax authority and counterparties exercise statutory rights, and a breach comes back years later as a debt, an assessment or a void entry.
This page describes both processes: the forms of reorganisation and their tax and contractual consequences, the stages of liquidation from the resolution to deregistration, the liability of the liquidator and the partners, the tax audit on closure, and the most common mistake, "abandoning" a company instead of liquidating it. Closing an insolvent company (bankruptcy) is on a separate page.
Updated · Practice area: Corporate lawyer
Merger, Division, Spin-Off, Conversion - What Each Form Gives You
Reorganisation means succession: the new or surviving company takes over the old one's rights and obligations by law, without individual re-documentation. That is the main advantage and the main risk.
Voluntary Liquidation - From the Resolution to Deregistration
Preliminary check
Only a solvent company can be liquidated; if debts exceed assets, the route is bankruptcy, and starting a liquidation in that case grounds the liquidator's liability. The lawyer checks the balance sheet, debts, pending disputes, the tax position and contract terms.
Resolution and liquidator
A partners' resolution on liquidation by qualified majority, appointment of a liquidator (the director or another person), registration of the liquidation process in the registry. From that moment the company acts only for the purpose of liquidation; no new business is started.
Creditor notice and claims
Written notice to known creditors and public announcement; a period for lodging claims. The liquidator examines claims and admits or rejects them; a sum is reserved for a disputed claim. A creditor not notified can pursue the partners even after liquidation.
Realising assets and paying debts
Terminating or assigning contracts, collecting receivables, selling property, dismissing employees under the Code (with compensation), paying debts in order of priority. The liquidation balance sheet is drawn up after all debts are paid.
Tax audit and settlement
Liquidation involves notifying the tax authority and, as a rule, an audit; assessments must be paid or challenged before liquidation completes. Distribution of assets to partners on liquidation is taxable; the lawyer works out the optimal scheme with the accountant.
Distribution and deregistration
Distribution of the remainder to partners in proportion to shares, approval of the liquidation report, transfer of documents to the archive for the statutory retention period, deregistration. From that day the company does not exist; but the liquidator's and partners' liability to creditors who were not notified remains.
Why a Company Cannot "Just Be Abandoned" - and What Happens When It Stays in the Registry for Years
The most common scenario: the business stopped, the company stayed in the registry on the logic of "I will close it later". A company that does not trade does not stop having obligations: tax returns are mandatory (even nil returns), failure to file accumulates fines, bank account fees keep accruing, and the director and partner left in the registry remain responsible for all of it. After a few years an "empty" company carries thousands of lari in fines and tax arrears that must be paid before liquidation.
The second risk is more serious: an abandoned company with creditors shows signs of insolvency, and the director's failure to file grounds their personal liability to creditors. And the third: a company "nobody remembers" can become the instrument of someone else's schemes through a forged power of attorney or a change of director, in the name of the partner still in the registry.
There are two ways out: liquidation, if debts are covered by assets, a procedure completed within months for an empty company; or bankruptcy, if not. The lawyer's advice is always the same: start closing the company on the day the business stops; every year of delay increases the cost and complicates the procedure.
What to Think About Before Reorganising - Creditors, Contracts, Tax, Licences
- Creditor protection
- Creditors are notified of the reorganisation and may demand early performance or security if the reorganisation worsens their position. Failure to notify is a ground for challenging the reorganisation.
- Transfer of contracts
- By succession contracts transfer automatically, but many contracts (bank, lease, major client) contain a change-of-control or reorganisation clause giving the counterparty a right to terminate. The lawyer checks the contracts for this clause before reorganising.
- Tax neutrality
- Reorganisation is generally tax-neutral: the transfer of assets is not taxed if the procedure is statutory and at book value. A scheme called a "reorganisation" for what is really a sale is a tax risk.
- Licences and permits
- A licence belongs to the company and does not always pass to the successor automatically; certain licences must be applied for again. Reorganising a licensed business is planned in agreement with the regulator.
- Employees
- Employment relationships pass to the successor on unchanged terms; reorganisation is not a ground for dismissal. Redundancies after reorganisation follow the Code's ordinary rules, with compensation.
- Registry and timing
- Resolution, creditor period, registration: a calendar of several months that the lawyer builds in advance. Reorganisation completes on registration in the registry; until then both companies exist.
What Is Needed to Start a Liquidation or Reorganisation
- A registry extract, the charter, the shareholders' agreement: to establish the quorum and procedure for the resolution.
- The latest balance sheet and financial statements, a list of receivables and payables, bank statements: to check solvency.
- Every current contract: clients, suppliers, lease, loan, employees, with terms and termination or change-of-control clauses.
- The tax position: returns, arrears, any current audit or dispute; liquidation cannot complete until they are resolved.
- Pending court and administrative cases, as claimant and as defendant; expected claims (warranties, complaints).
- Licences, permits, intellectual property, domains: to be re-registered on reorganisation, sold or cancelled on liquidation.
Three Reorganisation and Liquidation Cases
A company thought "closed" for 6 years
The partners stopped trading in 2019 and "left" the company; in 2025 the tax authority assessed 14,000 lari in fines for unfiled returns and the bank claimed account fees. Lawyer: part of the fines challenged and reduced, nil returns filed, liquidation in 4 months. In 2019 this would have taken 2 months and no fines.
A spin-off to creditors' detriment
A company spun off its profitable line into a new company, left the debts in the old one and steered the old one towards bankruptcy. Lawyer for a creditor: a challenge to the spin-off for failure to notify creditors and a disproportionate allocation of assets, a claim for joint liability from the new company. The court held the new company jointly liable for the debt.
Converting an LLC into a JSC for an investor
The investor required share classes and a board, which an LLC could not fully provide. Lawyer: conversion into a joint-stock company, a new charter with preferred shares and a board, a shareholder register, notice to the bank and major clients under change-of-control clauses. The investment closed on the day the conversion was registered.
Questions About Reorganisation and Liquidation
How long does liquidation take and what does it cost?
For an empty, debt-free company, a few months allowing for the creditor period and the tax audit; for an operating company with assets, contracts and employees, 6-12 months. The cost is the sum of the lawyer, the accountant and the tax obligations. The most expensive liquidation is the one started after years of abandonment.
We started liquidation and found that debts exceed assets. What happens?
The liquidator must file for bankruptcy as soon as insolvency is discovered: the liquidation stops and the case moves into the insolvency regime. Continuing and paying creditors selectively is the liquidator's personal liability. That is why the lawyer checks the balance sheet before liquidation, not after.
The company was liquidated and now a former client is claiming damages. From whom?
Not from the liquidated company; it does not exist. But if the creditor was not notified during liquidation, or their claim was rejected without grounds, they can claim against the liquidator and, within the limits of the distributed assets, the partners, within the limitation period. A properly conducted liquidation, with notice, announcement and a reserve, reduces that risk to a minimum.
In a merger, do the absorbed company's hidden debts pass to us?
Yes, in full: succession covers every obligation, known and unknown. That is why legal and tax due diligence before absorption is essential, and if the absorbed company has different partners, warranties and escrow on the same logic as buying shares. The alternative is buying assets instead of merging.
We need a holding: is that a reorganisation or forming new companies?
Both in combination: a holding company is formed, existing shares are transferred into it by contribution or sale, and separate lines become separate companies by spin-off. The tax consequences differ at each step (contribution versus sale, neutrality of a spin-off), and the structure is planned with the accountant and the lawyer before the first step is taken.
Lawyers for Reorganisation and Liquidation
Reorganisation and liquidation are won with a procedural calendar, correct creditor notice and tax consequences calculated in advance; a mistake comes back years later. Within 15 minutes the coordinator connects you with a lawyer who handles structural changes and closures of companies.
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Call: 568 330 318Need to Merge, Divide or Close a Company - or Has Yours Been "Abandoned" for Years?
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