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Voluntary liquidation means that you decide on the dissolution and subsequent removal of the company from the register. The partners meet, decide that it is time to close the chapter, and initiate the entire process themselves. Perhaps because the business has ended. Perhaps because the company has been sitting idle in the register for years with no activity. Or perhaps because you have other plans and simply no longer need this company.
The decision to dissolve a company with liquidation is generally made either by you alone as the sole shareholder, or through a general meeting. The decision must be in the form of a notarial deed. It is then entered into the Commercial Register, and the company begins using the suffix "in liquidation."
We describe the entire process below, but what is absolutely crucial is that you have full control over the process. From start to finish.
Dissolution and liquidation of a company – close the past and start with a clean slate. We will help you with company liquidation.
Compulsory liquidation occurs when a company consistently fails to meet its basic obligations. You are not updating the collection of documents. You are not filing tax returns. Or you are simply not responding—your data mailbox is filling up with reminders, and no one is addressing them.
First, you will receive a notice from the court. This is your last chance to act. If you do nothing by the deadline, the court will decide ex officio to dissolve the company and proceed with compulsory liquidation. And that is very difficult to reverse.
From this moment on, you are no longer in control. The court appoints a liquidator who oversees the entire process and acts regardless of your interests.
A detailed comparison of voluntary and compulsory liquidation, including duration and risks, can be found in the table below.
Voluntary liquidation is the right way to close a chapter. With respect for what you have built. And most importantly—with the certainty that it won't come back to haunt you.
The business has ended, but the company remains in the register. And with it, all the obligations. You must prepare financial statements every year. File a tax return. Update the collection of deeds. Even if the company is not doing anything, the obligations continue. If you do not fulfill them, the court will call on you to rectify the situation, and if you do not respond, compulsory liquidation follows. Voluntary liquidation ends these obligations once and for all. And under your control.
Your investors, banks, or business partners can easily find out that you are a partner in a company that is not active and is not fulfilling its legal obligations, and this fact can negatively affect your business. Voluntary liquidation of such a company allows you to continue your business with a clean slate.
Within the time limit set by the court, it is possible to prevent compulsory liquidation and rectify the cited deficiencies. After that, it is possible to decide to dissolve the company and proceed with voluntary liquidation, where you can keep the entire process under control.
In a voluntary liquidation, you choose the liquidator – as partners or through the general meeting. You can appoint a managing director who knows the company. Or a partner you trust. Alternatively, an external person with the necessary expertise. You decide, not the court. In a compulsory liquidation, the court appoints the liquidator.
Dissolution of a company with liquidation is possible for companies that are not over-indebted. After all company liabilities have been settled, its assets are distributed among its partners as the liquidation balance.
The liquidation process has six basic phases. In both cases – voluntary and compulsory – the procedure is similar, but the fundamental difference lies in who decides on the individual steps and how much control you have.
Voluntary liquidation:
The partners meet (or a sole partner decides) and approve the dissolution of the company with liquidation. The decision must be in the form of a notarial deed. At the same time, you choose a liquidator – often this is a managing director of the company, sometimes a partner, or an external person you trust. You also decide on the date on which the company enters liquidation.
Compulsory liquidation:
The court decides to dissolve the companyand liquidate it ex officio. This usually follows after the company has failed to respond to previous calls to remedy a defective state – for example, an incomplete collection of documents, unfiled tax returns, or long-term vacancies in corporate bodies. The court appoints the liquidator. The partners have no way to influence the final selection of the person. If there is no other option, the court appoints a person from the list of insolvency administrators as the liquidator.
The same for both:
The decision to dissolve the company and enter liquidation must be recorded in the Commercial Register. From this moment on, the company must use the suffix "in liquidation" – this is visible to anyone who looks you up in the register.
Voluntary liquidation:
The liquidator you have chosen will prepare an opening balance sheet and an inventory of assets without undue delay – they will determine what the company owns and who it owes money to. Subsequently, they will publish a notice for creditors to file their claims and notify all legally required authorities (such as the tax office or health insurance companies) of the entry into liquidation. They will keep you informed about the progress throughout the process.
Compulsory liquidation:
The court-appointed liquidator performs the same steps – preparing an opening balance sheet, publishing a notice to creditors, and notifying the relevant authorities of the entry into liquidation. However, they act completely independently and follow the court's instructions. They report primarily to the court, not to you. Their remuneration is also determined by the court.
Voluntary liquidation:
The liquidator will liquidate the company's assets and settle its liabilities to creditors. If the company has receivables (money owed to it by others), they will ensure these are collected. At this stage, all contractual relationships are terminated and all obligations are settled. You have an overview of how the process is proceeding and can consult with the liquidator on the steps taken.
Compulsory liquidation:
The liquidator follows the court's instructions. They will liquidate the company's assets and settle liabilities to creditors, or ensure the collection of receivables. However, assets are often liquidated through public auction – you have no influence over the method of sale.
And a word of caution: since compulsory liquidation often follows a breach of legal obligations,it may involve audits and investigations into the actions of the statutory body.
Voluntary liquidation:
Once everything is settled, the liquidator prepares a final report on the liquidation process. This is submitted for approval to the relevant authority – usually the general meeting or the sole shareholder. The final report also includes a proposal for the distribution of the liquidation balance – that is, what remains after all debts have been paid. This remainder is distributed among the shareholders according to the approved proposal. You approve how the assets are divided.
Compulsory liquidation:
After completing all steps, the liquidator prepares a final report on the liquidation process. However, they do not submit it to you for approval, but to the court. Through this report, they inform the court, the shareholders, and third parties about the progress of the liquidation. The final report also includes a proposal for the distribution of the liquidation balance – the remaining assets after all debts have been paid. This is then distributed among the shareholders according to the approved proposal. You are informed, but you do not make the decisions.
The same for both:
After the liquidation is concluded, the liquidator files a motion to strike the company from the Commercial Register. Upon this deletion, the company ceases to exist definitively. All obligations come to an end.
The difference:
In voluntary liquidation, you know exactly when and how the process will end because you are in communication with the liquidator and have an overview. In compulsory liquidation, the process often takes longer, and you have no control over the timing or the progress.
Yes, you can. But you must act quickly. Compulsory liquidation can be prevented right up until the moment the court order dissolving the company becomes legally binding. In other words – As long as the court has not issued a final decision, there is still a chance. If you have received a court order to remedy deficiencies, you have a limited deadline—usually 15 days. You must correct the cited defects within this period.
What does "remedying defects" mean? It depends on what the court is pointing out. Most often, it involves: - Filing missing tax returns - Adding documents to the collection of deeds (such as financial statements) - Electing a new executive if the company lacks appointed bodies - Updating contact information if you cannot be reached.
It is crucial not to ignore the notice. Ignoring it usually leads to compulsory liquidation. If you do not know how to proceed or are running out of time, contact an attorney immediately. The sooner you start addressing the situation, the better your chances of turning it around.
Without penalties, without worries, and with the certainty that your previous business activities will not affect your future. We will help you dissolve your company, navigate the entire situation, and find the best and fastest way out.
Petra as an attorney and partner at the firm, focuses primarily on commercial and contract law, with an emphasis on corporate matters and providing comprehensive legal advice to both Czech and international corporate clients. Professionally, she has overseen the implementation of many significant business transactions. Within the firm, she also manages the professional development of junior colleagues.
Specialization: Corporate Law • Mergers & Acquisitions • Contract Law • French Law
Valentina focuses on commercial law, corporate law, and contract law. She provides comprehensive legal advice in the areas of corporate agenda and commercial legal relations.
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