Corporate accounting_2021_voorbeeldhoofdstuk

1 The dissolution

1.1

Causes of dissolution

A company may be dissolved for one of the following reasons:

1.1.1 Voluntary dissolution According to article 2:71 BCCA, a private limited liabily company (BV), a cooperative company (CV), a public limited liability company (NV), a European company (SE) or a European Cooperatieve Society (SCE) may be dissolved at any time by a resolution of the general meeting, after observing the formal requirements, attendance quorum and majority stipulated in the Belgian Code of Companies and Associations.

The proposal to dissolve the company shall be set out in a report drawn up by the management body and shall be included in the agenda of the general meeting that is to decide on the dissolution. In most cases, that report shall discuss the reasons and consequences of the proposed dissolution.

The statutory auditor or, if there is no statutory auditor, a company auditor or external auditor appointed by the management body, shall audit that state, report thereon and, in particular, indicate whether it gives a true and fair view of the state of the company.

A copy of the aforementioned reports and statement of assets and liabilities will be sent to the partners (in accordance with articles 5:84 or 7:132 BCCA, depending on whether it concerns a private limited liability company (BV), a cooperative company (CV) or a public limited liability company (NV)).

The decision of the general meeting taken in the absence of these reports shall be null and void.

Chapter V – The liquidation of a company

The report shall be accompanied by a statement of assets and liabilities drawn up not more than three months previously. For those cases in which the company decides to cease its activities or if it can no longer be assumed that the company will continue its activities, the aforementioned statement of assets and liabilities shall be drawn up in accordance with the valuation rules adopted in implementation of article 3:1 BCCA, unless a deviation is justified. Article 3:6, § 2 RD/BCCA shall apply: ‘(...) If the company, VZW, IVZW or foundation – whether or not as a result of a liquidation decision – decides to cease trading or if it can no longer be assumed that it will continue trading, the accounting principles shall be adjusted accordingly and the following shall apply in particular: a) formation expenses must be fully amortised; b) for fixed and current assets, if necessary, additional depreciation or write-offs must be applied in order to reduce the book value to the probable realisable value; c) a provision must be made for the costs of cessation of activities, in particular the allowances to be paid to personnel (...).’

305

Before the decision to dissolve the company is drawn up by authentic deed, the notary must, after examination, confirm the existence and external legality of the above legal acts and formalities that the company must comply with. The deed reproduces the conclusions of the report drawn up by the statutory auditor, the company auditor or the external auditor.

1.1.2 Dissolution by operation of law Without prejudice to the special provisions of the Belgian Code of Companies and Associations, the companies shall be dissolved by operation of law: (1) the expiry of the term for which they have been entered into, or (2) by an explicit resolutive condition to which the partners or shareholders have subjected the company in the articles of association (article 2:72 BCCA).

Unless the articles of association provide otherwise, a BV or NV is entered into for an indefinite period of time. If the term is fixed, the general meeting may decide to extend it for a definite or indefinite period (articles 5:157 (BV) or 7:230 (NV) BCCA). This resolution requires an amendment of the articles of association. If this is not done, the company is dissolved after expiry of the term of the articles of association.

1.1.3 Judicial dissolution The dissolution of the company can be claimed in court for legal reasons (article 2:73 BCCA). This dissolution is based on the principle of good faith which must govern relations between the partners.

By legal reasons, one therefore means reasons that are so weighty that they make it impossible for the company’s business to continue normally. The Belgian Code of Companies and Associations gives a few examples of valid legal reasons, such as (1) when a shareholder or partner grossly fails to fulfil his obligations, or a disease makes it impossible for him to carry them out, or (2) the existence of a deep and lasting disagreement between the shareholders or partners. In such situations, only the dissolution can offer a solution. It is the judge who is sovereign over the dissolution for lawful reasons.

The court may also, at the request of any interested party or of the public prosecutor, or following notification by the Chamber of Enterprises in Difficulty, order the dissolution of a company which has not complied with the obligation to file annual accounts, unless a regularisation of the situation is possible and takes place before ruling on the merits of the case.

Such an action for dissolution may be brought only after the expiry of a period of seven months from the date of closure of the financial year. Dissolution shall take effect from the date on which it is pronounced.

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1.2

The alarm bell procedure in the NV and BV

Articles 5:153 (BV) and 7:228 (NV) BCCA provide that, if as a result of a loss incurred the net assets have decreased to less than half of the capital (NV) or the net assets are at risk of becoming or have become negative (BV), the general meeting1 must be convened by the management body to discuss the dissolution of the company or measures announced in the agenda to safeguard the continuity of the company. This meeting must be held within two months after this situation has been ascertained or should have been ascertained pursuant to statutory provisions or provisions of the articles of association.

Unless the management body proposes the dissolution of the company in accordance with article 5:157 (BV) or article 7:230 (NV) BCCA, it shall explain in a special report2 which measures it proposes to take to safeguard the continuity of the company. This report shall be included in the agenda. A copy can be obtained in accordance with article 5:84 (BV) or article 7:132 (NV) BCCA. If this report is missing, the resolution of the general meeting shall be null and void. If the general meeting is not convened in accordance with articles 5:153 (BV) and 7:228 (NV) BCCA, the loss suffered by third parties shall, subject to evidence to the contrary, be deemed to result from the absence of the convening notice.

The same approach is taken when the management body determines that it is no longer certain that the company will be able to pay its debts as they fall due (BV) for at least the next twelve months or when the net assets have fallen to less than one quarter of the capital (NV) as a result of losses incurred. In the latter case, the dissolution of the NV may take place if it is approved by one quarter of the votes cast, with abstentions not included in the numerator nor the denominator.

1

Subject to more stringent provisions in the articles of association.

2

In the NV, this report must be made available to the shareholders at the registered office of the company fifteen days prior to the general meeting. A copy shall also be sent to those who have complied with the formalities prescribed by the articles of association for admission to the general meeting.

Chapter V – The liquidation of a company

Finally, article 7:229 of the Belgian Code of Companies and Associations also provides that, where the net assets have fallen below 61 500,00 EUR, any interested party or the public prosecutor may claim the dissolution of the company before the court. Where appropriate, the court may grant the company a binding period in which to regularise its situation.

307

2 The liquidation

2.1

Legal personality of the company in liquidation

The dissolution of the company shall not result in the disappearance of its legal personality. After all, according to article 2:76 BCCA, the companies are deemed to continue to exist for their liquidation after their dissolution. During the liquidation process, the company’s assets are liquidated, after which the proceeds are used to pay the outstanding debts. Any surplus (i.e. the liquidation balance) is distributed to the shareholders. The company only loses its legal personality after the closure of the liquidation. However, all documents originating from a dissolved company must state that it is in liquidation.

2.2

Liquidation by one or more liquidators

When a company is dissolved, the mandate of the management body also ends; the liquidation will be carried out by one or more liquidators. Unless the articles of association provide otherwise, the liquidators shall be appointed by the general meeting, which shall decide by a simple majority. However, the liquidators will only take up their duties after the company court has confirmed their appointment.

This confirmation by the company court is not required when it is expected that the liquidation will not be in deficit (in other words, when the assets present are sufficient to pay off the company’s debts) or when the company only has debts towards its shareholders and all shareholders who are creditors confirm in writing that they agree to the appointment. Otherwise this will have to be submitted and the chairman of the court will only confirm the appointment after he has established that the liquidators offer ‘all guarantees of competence and integrity’ (articles 2:82-2:84 BCCA).

If no liquidators are appointed or designated, the managing partners (VOF or CommV), the members of the board of directors or the members of the executive board (SE or SCE), or the directors (BV, CV and NV) will be regarded as liquidators by operation of law with respect to third parties (article 2:79 BCCA). However, these liquidators do not have the powers in respect of the liquidation operations that the law and the articles of association assign to appointed or designated liquidators. For example, they cannot liquidate the company by selling and distributing assets.

Unless the articles of association stipulate otherwise in the deed of appointment or the court decision, the liquidator is competent for all acts necessary or useful for the liquidation of the company.3 The liquidator shall also represent the company towards third parties, including representation in court. Unlike in the case of a VOF or CommV, in a BV, NV and CV restrictions on the (representation) authority of a liquidator cannot be invoked against third parties, even if they have been made public (articles 2:87-2:88 BCCA).

3

308

Certain acts as listed in article 2:88 BCCA may only be performed by the liquidator with the authorisation of the general meeting.

2.3

Liquidation operations

If the annual accounts relating to the last financial year and the financial year ending as a result of the dissolution have not yet been submitted to the partners or to the general meeting for approval, the liquidator shall convene the general meeting within six months after the closing date of the financial year (articles 2:94 and 3:1, § 1, second subparagraph BCCA).

For each liquidation, a liquidation file shall be kept at the clerk’s office of the company court, in which a number of documents shall be kept that may be inspected free of charge by any interested party (article 2:103 BCCA).

In this liquidation file you will find, among other things, the liquidation statements submitted by the liquidator. A liquidation statement shows the state of the liquidation; it indicates, among other things, income, expenditure and benefits, and indicates what still has to be liquidated. A first liquidation statement shall be submitted between the seventh and thirteenth month after the liquidation.

From the second year of liquidation onwards, this statement is only sent to the registry every other year and is added to the company file (article 2:96 BCCA).

Each financial year, the liquidator shall also submit the annual accounts to the general meeting, stating the reasons why the liquidation could not be completed (article 2:99 BCCA). However, the general meeting no longer has to vote on these annual accounts; in other words, no approval is required.

Upon termination of the liquidation and at least one month before the general meeting, the liquidator shall deposit a numerical report on the liquidation at the registered office of the company. The report shall contain the liquidation accounts, together with supporting documents and information con­cerning the return of the contributions and the distribution of any liquidation balance to the shareholders or members. These documents shall be checked by the auditor. If there is no statutory auditor, the partners or shareholders have an individual right of investigation, in which case they may be assisted by a company auditor or an external auditor.

After the general meeting has taken note of the auditor’s report, it shall decide on the approval of the accounts. In a separate vote, it shall then also decide on the discharge of the liquidators and, if applicable, the auditor, and on the closure of the liquidation (article 2:100 BCCA).

Chapter V – The liquidation of a company

It is the duty of the liquidator, after the realisation of the assets, to pay all the debts of the company in proportion and without distinction between debts due and debts not due. Of course, the rights of preferential creditors are taken into account. After payment of the debts (or consignment of the neces­ sary funds to pay them), the liquidator distributes to the shareholders (or partners) the funds that can be equally distributed as well as the assets that he had to keep for further distribution.

If it appears that not all creditors can be repaid in full, the liquidator, before the liquidation is concluded, submits the plan with the distribution of assets among the different categories of creditors to the competent court for approval. However, this approval of the distribution plan is not necessary if the creditors who are not fully repaid are shareholders or partners of the company and agree in writing to the distribution plan (article 2:97 BCCA).

309

2.4

Practical procedure

Once the liquidator has drawn up the correct accounting statement, taking into account the liquidation values of the assets and liabilities, he shall proceed with the liquidation operations. Depending on the complexity, these liquidation activities may take several months or years.

The liquidator will first liquidate the assets; in other words, he will convert the assets into liquid assets. The results of these sales will be recorded to the account 768 ‘Liquidation proceeds’ or to the account 668 ‘Liquidation costs’. The counterpart of the sales will be placed in an available account (‘Cash’, ‘Bank’). When all assets have been sold, only these available accounts remain on the assets side. The liquidator then pays the debts. In doing so, he may, if necessary, ask the shareholders or partners to pay the part of the capital not yet paid up or the unavailable equity in full to settle the debts.

If an amount remains after that (the liquidation balance), this is distributed to the equity providers and possibly the tax authorities. For the registration of these funds still to be distributed, we use the account 489 ‘Capital to be repaid’ or the account 489 ‘Contributions to be repaid’. If, on the other hand, there are insufficient funds to pay all the debts, it is necessary to check that some shareholders or partners are not jointly and severally liable for the whole. Normally this is not the case with an NV or BV. It is then up to the liquidator to reach an agreement with the creditors. Depending on the success of this settlement, different settlement scenarios are possible. For example, after agreement with the creditors, the liquidation can be concluded, while unpaid debts remain in the liquidation statement of the company. This will lead to negative equity. If, on the other hand, debts are waived or the creditor renounces them, these debts will be booked off and, if necessary, it will still be possible to conclude the liquidation in a non-deficit manner. Another possibility is that the shareholders take over the deficit. Finally, if it is not possible to reach an agreement with the creditors, the liquidator is forced to file the books and the company can be declared bankrupt.

In the event that not all debts are repaid, the liquidator will always initially pay the preferential creditors (e.g. tax authorities, staff, social security office, etc.). What remains after the preferential creditors have been paid must be distributed among the ordinary creditors in proportion to the debt.

During the liquidation procedure, the liquidator may grant advance payments to the shareholders or members on the distribution of the net assets accruing to them at the closure of the liquidation. From an accounting point of view, this advance payment is deducted globally from the shareholders’ equity (CBN advice 2010/22), i.e. without distinction whether these advance payments relate to the share capital or the contributions outside capital, share premiums or reserves. To this end, the account 190 ‘Advances to associates on the distribution of net assets (–)’ has been provided for in the Belgian chart of accounts, where these advance payments remain in the accounts until the closure of the liquidation.

At the end of the liquidation, the account 190 ‘Advances to associates on the distribution of net assets (–)’ is then balanced by debiting the various items concerned from the shareholders’ equity.

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2.5

Taxes in the event of liquidation

Companies that are put into liquidation remain subject to ordinary corporate income tax even after their liquidation. When the liquidators liquidate the assets of a company, any capital gains realised are taxable as ordinary operating profits.

Whatever is distributed by the dissolved company in excess of the fiscal paid-up capital (possibly revalued in accordance with article 2, § 1, 7° of the Income Tax Code 1992) is considered as profit and as such is subject to withholding tax.

For more details, we refer to the manuals on tax law.

2.6

Publication obligations

1 The decision of the general meeting to liquidate must be drawn up by authentic deed and published in the Annexes to the Belgian Official Gazette. The appointment and termination of office of the liquidator(s) in companies must also be announced by filing and publication of the extract from the relevant deed. If the liquidator is a legal person, the extract contains the designation or amendment of the designation of the natural person who represents it for the execution of the liquidation.

2 The liquidators of companies in liquidation, in the form of an NV, BV, CV, SE or SCE, must file the annual accounts and other required documents with the National Bank of Belgium within thirty days after they have been submitted to the general meeting (or to the court in the event of a judicial dissolution) and at the latest seven months after the end of the financial year (article 2:99 BCCA). The general meeting does not have to deliberate on the annual accounts (in other words, they do not have to be submitted for approval).

Chapter V – The liquidation of a company

3 The liquidator must announce the closure of the liquidation operations in the Annexes to the Belgian Official Gazette in accordance with the provisions of articles 2:7 and 2:13 BCCA. The announcement shall also mention: 1° the place, designated by the general meeting, where the books and documents of the company must be deposited and kept for at least five years; 2° the measures taken for the consignment of monies and assets that accrue to creditors or partners and that could not be handed over to them.

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3 Examples

3.1

Liquidation whereby all creditors are satisfied

Situation no. 1 Due to lasting disagreements between the partners of NV GENEROUS, the general meeting decided to dissolve the company early on 12 May 20X0.

The balance sheet on 20 May 20X0 looks as follows:

312

Account no.

Account

100

Issued capital

130

Legal reserve

2310

Machinery

2319

Machinery – Depreciation

2400

Office equipment

2409

Office equipment – Depreciation

2410

Vehicles

2419

Vehicles – Depreciation

300

Stock of raw materials

320

Work in progress

400

Trade debtors

440

Suppliers

451

VAT due

5500

Credit institution X – Current account

57

Cash at hand

Balances Debit

Credit 7 000 000,00 700 000,00

13 800 000,00 11 940 000,00 204 000,00 122 400,00 4 670 000,00 3 736 000,00 2 306 000,00 762 000,00 9 753 000,00 9 853 000,00 590 600,00 1 605 000,00 173 000,00

Total balance sheet accounts

33 273 000,00

600

Purchases of raw materials

30 051 000,00

6090

Changes in stocks of raw materials

610

Services and other goods

9 472 000,00

6200

Remuneration of the manager

1 700 000,00

6202

Remuneration of employees

2 083 000,00

6203

Remuneration of workers

7 063 000,00

621

Employer's contribution for social insurance

2 195 000,00

6302

Depreciation of tangible fixed assets

2 354 800,00

64

Other operating charges

1 114 900,00

657

Other financial charges

72 100,00

70

Turnover

33 942 000,00

412 000,00

54 917 800,00

712

Changes in stocks of work in progress

319 000,00

763

Gain on disposal of fixed assets

612 000,00

Total profit and loss accounts

56 517 800,00

55 848 800,00

General overall total

89 790 800,00

89 790 800,00

After examination of this balance sheet by the liquidator, it appears that some corrections need to be made: 1 in the balance of the ‘Trade debtors’ account, there is a doubtful debt of 3 841 024,00 EUR (3 174 400,00 EUR + 666 624,00 EUR) to customer Arens, which has gone bankrupt. The probable recoverable receivable amounts to 50 %; 2 at the time of the inventory taking, a part was forgotten to be included. It concerns a stock of raw materials of 293 000,00 EUR; 3 the members of staff were dismissed. According to a calculation made by the social secretariat, the redundancy payments due amount to 1 057 000,00 EUR. The company prefers not to make a provision for those allowances, since the liquidation will be carried out this financial year.

The liquidator shall record these corrections in the accounts.

31.05.20X0 407 400

Doubtful debtors

3 841 024,00

to Trade debtors

3 841 024,00

DIV/… – Transfer of doubtful customer Arens 31.05.20X0 6340 409

Amounts written off trade debtors within one year

1 587 200,00

to Amounts written off

1 587 200,00

DIV/… – Amount written off of 50 % of 3 174 400,00 EUR 31.05.20X0 300 6090

Raw materials – Cost of acquisition

293 000,00

to C hanges in stocks of raw materials

293 000,00

DIV/… – Stock adjustment 31.05.20X0 623 457

Other personnel charges

1 057 000,00

to S ocial debts

1 057 000,00

DIV/… – Severance payments due

141 793

Loss carried forward to Losses to be carried forward

3 020 200,00 3 020 200,00

…

Then, on 31.05.20X0, he obtains the following situation:

4

The loss to be carried forward shall be determined as follows: (55 848 800,00 EUR – 56 517 800,00 EUR) + (293 000,00 EUR – 1 587 200,00 EUR – 1 057 000,00 EUR).

Chapter V – The liquidation of a company

After these correction entries, the liquidator can draw up a correct initial situation for the liquidation and determine the result. He transfers the loss.4

313

314

Cash

Total balance sheet accounts

Credit institution X – Current account

Trade debtors

400

57

Work in progress

320

5500

Stock of raw materials

300

Social debts

Vehicles – Depreciation

2419

VAT due

Vehicles

2410

457

Office equipment – Depreciation

2409

451

Office equipment

2400

Suppliers

Machinery – Depreciation

2319

440

Machinery

2310

Doubtful debtors

Loss carried forward

141

Amounts written off

Legal reserve

130

407

Issued capital

100

409

Account

Account no.

33 273 000,00

173 000,00

1 605 000,00

9 753 000,00

762 000,00

2 306 000,00

4 670 000,00

204 000,00

13 800 000,00

Debit

33 942 000,00

590 600,00

9 853 000,00

3 736 000,00

122 400,00

11 940 000,00

700 000,00

7 000 000,00

Credit

Balances on 20.05.20X0

4 134 024,00

3 841 024,00

293 000,00

Debit

6 485 224,00

1 057 000,00

1 587 200,00

3 841 024,00

Credit

Adjustments

3 020 200,00

3 020 200,00

Debet

Credit

Adjustments

36 586 200,00

173 000,00

1 605 000,00

3 841 024,00

5 911 976,00

762 000,00

2 599 000,00

4 670 000,00

204 000,00

13 800 000,00

3 020 200,00

Debit

36 586 200,00

1 057 000,00

590 600,00

9 853 000,00

1 587 200,00

3 736 000,00

122 400,00

11 940 000,00

700 000,00

7 000 000,00

Credit

Balances on 31.05.20X0

315

89 790 800,00

Depreciation

Amounts written off trade debtors within one year

Other operating charges

Other financial charges

Turnover

Changes in stocks of work in progress

Gain on disposal of fixed assets

Losses to be carried forward

Total profit and loss accounts

Total balance sheet accounts

General overall total

630

6340

64

657

70

712

763

793

Chapter V – The liquidation of a company

33 273 000,00

Other personnel charges

623

3 020 200,00

3 020 200,00

56 517 800,00

Employer's contribution for social insurance

621

72 100,00

1 114 900,00

2 354 800,00

89 790 800,00

33 942 000,00

55 848 800,00

612 000,00

319 000,00

6 778 224,00

4 134 024,00

2 644 200,00

1 587 200,00

6 778 224,00

6 485 224,00

3 020 200,00

3 020 200,00

2 195 000,00

2 195 000,00

95 455 200,00

36 586 200,00

58 869 000,00

72 100,00

1 114 900,00

1 587 200,00

2 354 800,00

1 057 000,00

7 063 000,00

2 083 000,00

1 700 000,00

9 472 000,00

119 000,00

30 051 000,00

Debit

95 455 200,00

36 586 200,00

58 869 000,00

3 020 200,00

612 000,00

319 000,00

54 917 800,00

Credit

Balances on 31.05.20X0

7 063 000,00

2 083 000,00

1 700 000,00

293 000,00

3 020 200,00

Remuneration of workers

6203

54 917 800,00

Remuneration of employees

9 472 000,00

Remuneration of the manager

Credit

6202

1 057 000,00

Debit

6200

293 000,00

Credit

Changes in stocks of raw materials

412 000,00

Debit

Adjustments

Services and other goods

30 051 000,00

Credit

Adjustments

6090

Purchases of raw materials

600

Debit

Balances on 20.05.20X0

61

Account

Account no.

On 12 June 20X0, the liquidator finds a buyer, NV BATI, for all of the tangible fixed assets, raw materials and work in progress for an amount of 5 041 322,31 EUR + 1 058 677,69 EUR VAT = 6 100 000,00 EUR. From customer Arens, the company will receive a final balance of 1 900 000,00 EUR on the bank account (dated 23 June 20X0). The other customers normally pay their debts, so that at the end of July 20X0 no more receivables are outstanding. These transactions are recorded in the accounts as follows: 12.06.20X0 416 2319 2409 2419 667 2310 2400 2410 300 320 451

Other amounts receivable – NV BATI Machinery – Depreciation Office equipment – Depreciation Vehicles – Depreciation Liquidation costs

6 100 000,00 11 940 000,00 122 400,00 3 736 000,00 1 195 277,69 13 800 000,00 204 000,00 4 670 000,00 2 599 000,00 762 000,00 1 058 677,69

to Machinery Office equipment Vehicles Stock of raw materials Work in progress VAT due Sale of tangible fixed assets 23.06.20X0

5500 451 409 667 407

Credit institution X – Current account VAT due Amounts written off Liquidation costs

1 900 000,00 336 871,93 1 587 200,00 16 952,07

to D oubtful debtors

3 841 024,00

Receipt final balance receivable Arens 31.07.20X0 5500 400

Credit institution X – Current account to Trade debtors Collection of outstanding trade receivables

After these transactions, the situation on 31.07.20X0 is as follows:

316

5 911 976,00 5 911 976,00

317

Vehicles – Depreciation

Stock of raw materials

Work in progress

Trade debtors

Doubtful debtors

Amounts written off

Suppliers

VAT due

Social debts

Other amounts receivable – NV BATI

Credit institution X – Current account

Cash

2419

300

320

400

407

409

440

451

457

416

5500

57

Chapter V – The liquidation of a company

Total balance sheet accounts

Vehicles

Machinery – Depreciation

2319

2410

Machinery

2310

Office equipment

Loss carried forward

141

Office equipment – Depreciation

Legal reserve

130

2400

Issued capital

100

2409

Account

Account no.

36 586 200,00

173 000,00

1 605 000,00

3 841 024,00

5 911 976,00

762 000,00

2 599 000,00

4 670 000,00

204 000,00

13 800 000,00

3 020 200,00

Debit

36 586 200,00

1 057 000,00

590 600,00

9 853 000,00

1 587 200,00

3 736 000,00

122 400,00

11 940 000,00

700 000,00

7 000 000,00

Credit

Balances on 31.05.20X0

25 722 471,93

1 900 000,00

6 100 000,00

336 871,93

1 587 200,00

3 736 000,00

122 400,00

11 940 000,00

Debit

26 934 701,69

1 058 677,69

3 841 024,00

762 000,00

2 599 000,00

4 670 000,00

204 000,00

13 800 000,00

Credit

Adjustments

5 911 976,00

5 911 976,00

Debit

5 911 976,00

5 911 976,00

Credit

Adjustments

18 710 176,00

173 000,00

9 416 976,00

6 100 000,00

3 020 200,00

Debit

19 922 405,76

1 057 000,00

1 312 405,76

9 853 000,00

700 000,00

7 000 000,00

Credit

Balances on 31.07.20X0

318 -

0

36 586 200,00 36 586 200,00

Total profit and loss accounts

Total balance sheet accounts

General overall total

36 586 200,00

36 586 200,00

1 212 229,76 26 934 701,69

25 722 471,93

26 934 701,69

26 934 701,69

Credit

0

1 212 229,76

Debit

Liquidation proceeds

Credit

767

Debit

Liquidation costs

Adjustments

667

Balances on 31.05.20X0

Account

Account no.

5 911 976,00

5 911 976,00

Debit

5 911 976,00

5 911 976,00

Credit

Adjustments

19 922 405,76

18 710 176,00

1 212 229,76

1 212 229,76

Debit

0 19 922 405,76

19 922 405,76

Credit

Balances on 31.07.20X0

On 6 August 20X0, NV BATI will pay its debt into the bank account of NV GENEROUS. The liqui­ dator makes the following payments on 8 August: VAT administration, staff severance payments of 1 140 531,00 EUR and suppliers. The liquidator charges a fee of 20 000,00 EUR, which is paid via the bank. These transactions are recorded in the accounts as follows: 06.08.20X0 5500 416

Credit institution X – Current account

6 100 000,00

to O ther amounts receivable – NV BATI

6 100 000,00

C/A extract no. … – Collection of receivable from NV BATI 08.08.20X0 451 5500

VAT due

1 312 405,76

to Credit institution X – Current account

1 312 405,76

C/A extract no. … – Transfer of VAT 08.08.20X0 457 667 5500

Social debts Liquidation costs

1 057 000,00 83 531,00

to Credit institution X – Current account

1 140 531,00

C/A extract no. … – Severance pay of staff 08.08.20X0 440 5500

Suppliers

9 853 000,00

to Credit institution X – Current account

9 853 000,00

C/A extract no. … – Payment of suppliers 08.08.20X0 667 5500

Liquidation costs to Credit institution X – Current account

20 000,00 20 000,00

C/A extract no. … – Payment of liquidator’s fee

Chapter V – The liquidation of a company

After these entries, the situation on 31.08.20X0 is as follows:

319

320

Issued capital

Legal reserve

Loss carried forward

Other amounts receivable – NV BATI

Suppliers

VAT due

Social debts

100

130

141

416

440

451

457

667

57

19 922 405,76

1 212 229,76

Total profit and loss accounts

General overall total

1 212 229,76

18 710 176,00

173 000,00

9 416 976,00

6 100 000,00

3 020 200,00

Debit

19 922 405,76

-

19 922 405,76

1 057 000,00

1 312 405,76

9 853 000,00

700 000,00

7 000 000,00

Credit

Balances on 31.07.20X0

Liquidation costs

Total balance sheet accounts

Cash

5500 Credit institution X – Current account

Account

Account no.

7 412 405,76

-

7 412 405,76

6 100 000,00

1 312 405,76

Debit

7 412 405,76

-

7 412 405,76

1 312 405,76

6 100 000,00

Credit

Adjustments

11 013 531,00

103 531,00

103 531,00

10 910 000,00

1 057 000,00

9 853 000,00

Debit

11 013 531,00

-

11 013 531,00

11 013 531,00

Credit

Adjustments

7 700 000,00

1 315 760,76

1 315 760,76

6 384 239,24

173 000,00

3 191 039,24

3 020 200,00

Debit

7 700 000,00

-

7 700 000,00

700 000,00

7 000 000,00

Credit

Balances on 31.08.20X0

The final closure will then take place via the following journal entries:

100 130 489

Issued capital Legal reserve

7 000 000,00 700 000,00

to Capital to be repaid

7 700 000,00

Transfer of issued capital and legal reserve 489 667 141

Capital to be repaid

4 335 960,76

to Liquidation costs Loss carried forward

1 315 760,76 3 020 200,00

Transfer of liquidation costs and loss carried forward

The current situation of the company in liquidation is as follows: Account no.

Account

Balances

489

Capital to be repaid

5500

Credit institution X – Current account

57

Cash

Debit

Credit 3 364 039,24

3 191 039,24 173 000,00

Total balance sheet accounts

3 364 039,24

3 364 039,24

The payment to the shareholders is recorded in the accounts. Note that the shareholders will receive 3 364 039,24 EUR at the end of the liquidation instead of the 7 000 000,00 EUR initially paid:

489 5500 57

Capital to be repaid to Credit institution X – Current account Cash

3 364 039,24 3 191 039,24 173 000,00

Repayment to the shareholders

Chapter V – The liquidation of a company

In this payout, shareholders are paid back on a pro rata basis, taking into account the privileges attached to certain shares. For example, the holders of preference shares will be repaid first, after which any surplus will be distributed among the ordinary shares.

321

Situation no. 2 Now suppose that, after the liquidation operations (realisation of assets and repayment of creditors), the balance sheet of NV GENEROUS shows the following picture: Account no.

Account

Balances

100

Issued capital

130

Legal reserve

5500

Credit institution X – Current account

57

Cash

Debit

Credit 7 000 000,00 700 000,00

7 289 039,00 655 200,00

Total balance sheet accounts

7 944 239,00

7 700 000,00

768

Liquidation proceeds

667

Liquidation costs

1 315 761,00

1 560 000,00

Total profit and loss accounts

1 315 761,00

1 560 000,00

General overall total

9 260 000,00

9 260 000,00

In this case, the company in liquidation realises a profit of 244 239,00 EUR. Since a company in liquidation is subject to the ordinary tax regime, it will be subject to corporate income tax. If we assume that the rate of corporation tax is 25 % and the company has not made any advance payments on this, this means the following5: Corporate income tax at 25 %: Increase at 6,75 %: Estimated tax debt:

61 059,75 EUR 4 121,53 EUR 65 181,28 EUR

We record this tax debt as follows:

6702 450

Estimated taxes to E stimated taxes Estimated tax liability

5 322

Please note that the tax part of this chapter is presented in a very simplified way.

65 181,28 65 181,28

We then register the transfers to account 489 ‘Capital to be repaid’:

100 130 768 489

Issued capital Legal reserve Liquidation proceeds

7 000 000,00 700 000,00 1 560 000,00

to Capital to be repaid

9 260 000,00

Transfer of issued capital, legal reserve and liquidation proceeds 489 670 667

Capital to be repaid

1 380 942,28

to Belgian taxes on income for the current accounting year Liquidation costs

65 181,28 1 315 761,00

Transfer of liquidation costs and estimated taxes

The current situation of the company in liquidation is as follows: Account no.

Account

Balances

450

Estimated taxes

489

Capital to be repaid

5500

Credit institution X – Current account

57

Cash

Debit

Credit 65 181,28 7 879 057,72

7 289 039,00 655 200,00

Total balance sheet accounts

7 944 239,00

7 944 239,00

In the end, the sum to be distributed amounts to 7 879 057,72 EUR, while the shareholders contri­buted capital of 7 000 000,00 EUR to that company. This means that a liquidation bonus of 879 057,72 EUR will be distributed to the shareholders. However, the legislator considers this liquidation bonus to be distributed profits (article 209 of the Income Tax Code 1992), which means that withholding tax must be deducted from this amount. Note that small companies are free to set up a liquidation reserve, which can be distributed tax-free in the event of liquidation.6 NV GENEROUS does not meet the criteria for small companies according to article 1:24 BCCA, and has therefore not created a liquidation reserve. If we assume that the withholding tax rate is 30 %, the deduction of this withholding tax gives rise to the following entry:

489 453

Capital to be repaid to D educted advance tax payments

263 717,32 263 717,32

6

As stated in the chapter ‘Choosing a company’, a separate taxation of 10 % must be paid on this amount when a liquidation reserve is created.

Chapter V – The liquidation of a company

Withholding tax liquidation bonus

323

Before distributing the remaining balance of the account 489 ‘Capital to be repaid’, the liquidator consults the articles of association to know how this should be distributed. The articles of association state the following: ‘In the event of liquidation of the company, after repayment of the paid-up subscribed capital, the balance will be distributed pro rata to the shareholders.’

The liquidator will therefore distribute the balance of the account 489 ‘Capital to be repaid’ proportionally among the shareholders. Together with the payment of the withholding tax on the liquidation bonus, this gives rise to the following entry:

453 489 5500 57

Deducted advance tax payments Capital to be repaid

263 717,32 7 615 340,40

to C redit institution X – Current account Cash

7 223 857,72 655 200,00

Repayment of capital, payment of liquidation bonus and payment of withholding tax

After this entry, only the accounts 450 ‘Estimated taxes’ and 5500 ‘Credit institution X – Current account’ can be found on the balance sheet, both with a balance of 65 181,28 EUR. After receipt of the assessment notice and payment of the tax due, these accounts are also netted off.

3.2

Liquidation whereby not all creditors are satisfied

After years of loss-making activity, the general meeting of BV MODIO decides to dissolve and liquidate the company. After the realisation of the assets, the balance sheet of BV MODIO shows the following picture: Account no.

Account

111

Unavailable contributions outside capital

141

Loss carried forward

250 000,00

5500

Credit institution X – Current account

400 000,00

440

Suppliers Total balance sheet accounts

768 667

Balances Debit

Credit 450 000,00

520 000,00 650 000,00

Liquidation proceeds

970 000,00 60 000,00

Liquidation costs

380 000,00

Total profit and loss accounts

380 000,00

60 000,00

1 030 000,00

1 030 000,00

General overall total

The company has only 400 000,00 EUR in cash at its disposal to meet its debts of 520 000,00 EUR. After consultation with the creditors, they grant permission to waive 120 000,00 EUR. The payment of the remaining debts is entered in the accounts as follows:

324

440 5500

Suppliers

400 000,00

to C redit institution X – Current account

400 000,00

Payment of non-waived debts

According to CBN 170-1, the waiver must also be booked off from the company’s liabilities and re­flected in the profit and loss account:

440 768

Suppliers

120 000,00

to Liquidation proceeds

120 000,00

Book off of debts waived

After these entries, the liquidation will be closed as follows:

111 768 489

Unavailable contributions outside capital Liquidation proceeds

450 000,00 180 000,00

to Contributions to be repaid

630 000,00

Transfer of the unavailable contributions and liquidation proceeds

141 667

Contributions to be repaid to L oss carried forward Liquidation costs

630 000,00 250 000,00 380 000,00

Transfer of the loss carried forward and liquidation costs

Chapter V – The liquidation of a company

489

325

4 Dissolution and liquidation in a single act

This procedure makes it possible to decide in a single deed on the dissolution of the company with immediate completion of the liquidation. This so-called ‘turbo liquidation’ occurs frequently in practice and is an interesting alternative to the relatively laborious and expensive ordinary liquidation procedure.

4.1

Legal terms and conditions

According to the articles 2:80-2:81 BCCA, this simplified procedure can only be applied if: > no liquidator has been appointed; > all debts towards partners, shareholders or third parties have been repaid or the necessary funds to pay them have been consigned. The statutory auditor, company auditor or external auditor confirms this payment or consignment in the conclusions of his report.

However, this repayment or consignment is not required in respect of debts owed to share­ holders, partners or third parties who have confirmed in writing their agreement to the dissolution and liquidation in a single deed. The statutory auditor, company auditor or external auditor confirms this written agreement in the conclusions of his report; > the general meeting of partners or shareholders decides on the dissolution and closure of the liquidation in a single deed: a) subject to the unanimous consent of all partners in a general partnership (VOF) or ordinary limited partnership (CommV); or b) by a unanimous vote of the shareholders present or represented provided that, in a private limited liability company (BV) or public limited liability company (NV), they represent at least half of the total number of shares issued or, in an NV, at least half of the capital.

4.2

Practical working method

Of course, in this abridged procedure, the legal formalities for the dissolution of a company must also be complied with. In this case, too, the management body will draw up a special report and a statement of assets and liabilities with the proposal to dissolve the company. As in the ‘normal’ procedure, this report must be audited by a company auditor or external auditor. After this, the general meeting can then decide to dissolve the company and immediately close the liquidation. This decision is drawn up by the notary by means of a notarial deed filed with the clerk’s office of the company court and published in the Annexes to the Belgian Official Gazette.

In this procedure, it is advisable to liquidate most of the company’s assets prior to the formal liquidation decision, so that the liquidation can be completed immediately thereafter. This means that the 326

Chapter V – The liquidation of a company

distribution of the liquidation balance will be the only liquidation entry if all debts and costs of the liquidation (fees and costs related to the notary, company auditor, auditor or accountant) have already been paid before the final statement of assets and liabilities is drawn up.

327

5 Exercises related to the chapter ‘The liquidation of a company’

1 NV LIQUIDO FACTS: The balance sheet of NV LIQUIDO on 31 December 20X0 is as follows: Account no.

Account

Balances

100

Issued capital

130

Legal reserve

140

Profit carried forward

17

Amounts payable after more than one year

200

Formation expenses and expenses related to capital increases or increases of contributions

2300

Plant, machinery and equipment – Cost of acquistion

15 000 000,00

2309

Plant, machinery and equipment – Depreciation

(2 500 000,00)

340

Stock of goods purchased for resale

400

Trade debtors

440

Suppliers

5500

Credit institution X – Current account

Debit

Total balance sheet accounts

Credit 12 000 000,00 1 000 000,00 300 000,00 12 000 000,00

300 000,00

4 500 000,00 10 000 000,00 3 000 000,00 1 000 000,00 28 300 000,00

28 300 000,00

On 1 January 20X1, the general meeting decides to dissolve the company. The articles of association provide for the following distribution of the liquidation balance, if any: first, the shares are fully repaid; then, the remaining balance is distributed among the holders of the founder’s certificates up to a maximum of 10 % of the capital. Any surplus shall be distributed among the shareholders.

Withholding tax on the liquidation surplus is charged at 30 %.

According to the rules of accounting law, a detailed statement of assets and liabilities is first drawn up. This shows that the book value of a number of assets differs from the expected liquidation value. The expected liquidation value of tangible fixed assets is only 12 000 000,00 EUR (excluding 21 % VAT). In addition, the due date of a receivable from client Dubio of 2 750 000,00 EUR (3 327 500,00 EUR including 21 % VAT) has been exceeded for a long time. In addition, the liquidator’s fees are estimated at 75 000,00 EUR, for which a provision is made.

328

Tangible fixed assets are then finally sold for 12 500 000,00 EUR during 20X1. The stock of goods purchased for resale is sold for 6 000 000,00 EUR (all sales prices are excluding 21 % VAT). Only 6 000 000,00 EUR (including 21 % VAT) of the outstanding trade receivables is collected. The liquidator charges a fee of 100 000,00 EUR. In 20X1, the capital to be liquidated shall also be divided and the liquidation completed.

REQUIRED: Provide all journal entries needed to complete this liquidation, including calculation of any corporate income tax to be paid (at 25 %) for 20X1.

2 NV JUST NOT FACTS: The balance sheet of company in liquidation NV JUST NOT is as follows after realisation of all assets and payment of debts: Account no.

Account

100

Issued capital

131

Reserves not available for distribution

133

Reserves available for distribution

141

Loss carried forward

5500

Credit institution X – Current account

31 800 000,00

Total balance sheet accounts

31 945 000,00

667

Balances Debit

30 000 000,00 3 000 000,00 165 000,00 145 000,00

Liquidation costs

1 220 000,00

Total profit and loss accounts

1 220 000,00

General overall total

Credit

33 165 000,00

33 165 000,00

33 165 000,00

The capital consists of 8 000 preference shares with a nominal value of 1 650,00 EUR and 12 000 ordinary shares with a nominal value of 1 400,00 EUR. The articles of association provide that in the event of liquidation, the preference shares will receive their share of the capital as a priority, after which the ordinary shares will receive their contribution back. Of the liquidation bonus, if any, the preference shares should receive 70 %. The remainder will be divided among the ordinary shares.

Chapter V – The liquidation of a company

REQUIRED: Provide the journal entries for the recording(s) of the liquidation.

329

3 NV FROOM FACTS: The extraordinary meeting of NV FROOM decides in June 20X0 to liquidate the company. The balance sheet of NV FROOM at that time looks as follows: Account no.

Account

100

Issued capital

101

Uncalled capital

Balances Debit

Credit 240 000,00

48 000,00

130

Legal reserve

12 000,00

1301

Legal reserve: liquidation reserve

10 000,00

140

Profit carried forward

13 000,00

200

Formation expenses and expenses related to capital increases or increases of contributions

2300

Plant, machinery and equipment – Cost of acquisition

2309

Plant, machinery and equipment – Depreciation

340

Stock of goods purchased for resale

55 000,00

400

Trade debtors

80 000,00

440

Suppliers

20 000,00

487

Early payments

36 000,00

5500

Credit institution X – Current account Total balance sheet accounts

5 000,00 200 000,00 150 000,00

93 000,00 481 000,00

481 000,00

The subscribed capital represents 240 shares of 1 000,00 EUR and has already been called up for 80 %. Shareholders A, B and C each hold 60 shares and have paid them up in full, while share­ holder D has paid up only the called-up capital for his 60 shares. There is no interest compensation in the event of early payment.

According to the rules of accounting law, a detailed statement of assets and liabilities is first drawn up in 20X0. This statement shows that the book value of a number of assets differs from the probable liquidation value. The expected liquidation value of the equipment amounts to 40 000,00 EUR (excluding 21 % VAT). In addition, the due date of a receivable of 10 000,00 EUR (12 100,00 EUR including 21 % VAT) has been exceeded for a long time. After a thorough inventory of the goods purchased for resale, it appears that there was an error in the previous entry, as a result of which it was undervalued by 5 000,00 EUR. Furthermore, the liquidator’s fee is estimated at 3 000,00 EUR; a provision is made for that.

In 20X1, the equipment is sold at 65 000,00 EUR (excluding 21 % VAT). For the goods purchased for resale, the company still receives 65 000,00 EUR (excluding 21 % VAT). In addition, the company is able to collect 75 000,00 EUR (including VAT) from the trade debtors and pays the liquidator’s fee (3 500,00 EUR).

330

If there is a liquidation bonus, the articles of association provide that 50 % of it will be distributed among the founder certificates (shareholders A and B each have 60 units of them) and that the remaining 50 % will be distributed proportionally among all shareholders.

If withholding tax has to be paid on one of the transactions required, this will be done at a rate of 30 %. If any corporate income tax is due during the liquidation period, you can assume that the normal corporate income tax regime applies, i.e. a tax rate of 25 % or a reduced rate whereby the first tranche of 100 000,00 EUR is taxed at 20 %.

Chapter V – The liquidation of a company

REQUIRED: Provide all journal entries necessary for the settlement of this liquidation.

331