Ceasing the existence of any company requires the performing of certain operations meant to put an end to firm activity and breaking off of its legal person status. These operations are directly connected to company’s liquidation procedures. For the company to perform its debt payment operations, it has to convert its possessions into money. Company liquidation, as a step subsequent to its dissolution, is governed by certain principles which outline the legal status of the firm in liquidation.company dissolution, accounting law, patrimony assets

Carmen CRETU

Neculina CHEBAC

English

Research Papers in Economics

ŒCONOMICA 
 
  55
 
 
 
LEGAL AND ACCOUNTING ASPECTS OF 
THE WINDING-UP REORGANISATION 
 
 
Associate Professor Neculina CHEBAC, PhD 
Senior Lecturer Carmen CREŢU, PhD in progress
 
“Danubius” University from Galati  
 
 
Abstract: Ceasing the existence of any company requires the performing of 
certain operations meant to put an end to firm activity and breaking off of its legal 
person  status.  These  operations  are  directly  connected  to  company’s  liquidation 
procedures. 
  For the company to perform its debt payment operations, it has to convert 
its  possessions  into  money.  Company  liquidation,  as  a  step  subsequent  to  its 
dissolution, is governed by certain principles which outline the legal status of the 
firm in liquidation. 
Keywords: company dissolution, accounting law, patrimony assets 
Jel Classification: M4 - Accounting and Auditing, M41 – Accounting, M - 
Business Administration and Business Economics; Marketing; Accounting 
 
 
Ceasing the existence of any company requires the performing of certain 
operations meant to put an end to firm activity and break off its legal person status. 
These operations are directly connected to company liquidation procedures. 
  Subsequent to dissolution, the new status of the company does not allow it 
to  perform  new  trade  operations.  However,  operations  yet  unfolding  must  be 
completed that is the company has to make the most of those rights originating in the 
legal activities that are previous to the dissolution.  
  For the company to perform its debt payment operations, it has to convert its 
possessions into money, by way of public action. 
  Finally, net assets are to be divided among partners, in strict compliance 
with their own rights. ACTA UNIVERSITATIS DANUBIUS                                                       Nr. 1/2005 
 
  56 
Company liquidation, as a step subsequent to its dissolution, is governed by 
certain principles which outline the legal status of the firm in liquidation. 
The  general  principles  co-ordinating  company’s  liquidation  are  the 
following: 
1.  the legal person status of the company is a necessary step for the 
liquidation to proceed; 
2.  liquidation is to be performed in the best interest of partners; 
3.  firm’s liquidation is optional and by no means compulsory. 
The winding up the company has certain effects upon its status. Thus, its 
aims and objectives can be noticed to change according to liquidation purposes. 
Then,  company  superintendents  are  to  be  replaced  with  liquidators,  the  latter 
becoming the managing board of the company. Finally, company’s administration is 
handed over to liquidators, which are to administrate the winding-up firm. 
Liquidators  are  those  persons  changed  with  organizing  and  leading  firm 
winding-up  operations.  Considering  their  role  in  administrating  the  company  in 
clearance, it is the law that settles the conditions of their appointment, competence 
and responsibilities. 
In the absence of any legal restraint, liquidators’ may as well be partners or 
persons outside the company. Law does accept the case in which administrators 
them selves become liquidators. 
As  the  liquidation  step  does  not allow  for new  operations  to  begin,  any 
dormant  partner  may  become  a  liquidator.  Liquidators  are  appointed  by  partner 
assembly decision. They are considered as firm fiduciaries and have all competences 
deriving  from  this  position.  The  managers’  commission  is  considered  in  terms 
stipulated by law and by contract. Certain prerogatives of liquidators are granted by 
partners having the same majority as that required in their appointment. 
Besides  partnership  –  originated  prerogatives,  art.178  of  Law  31/1990 
stipulates quite a series of other puissance warrants of liquidators: 
1.  they  must  perform  and  complete  the  trade  operations  involving  the 
liquidation process; 
2.  they have to wind up as well, as they cash the company debts; 
3.  they are indebted to put up to action all company movable and fixed 
assets; 
4.  they may contract bill obligations and loans, not pertaining to mortgage, 
and sing up any other paper referring to the liquidation; 
5.  they may sue or be sued, if this is in the best interest of the liquidation. ŒCONOMICA 
 
  57
Firm  clearing  off  does  concern  the  performing  of  several  operations 
resulting in the liquidation of the company patrimony. These operations consist in 
liquidating firm’s assets and liabilities. The purpose of these assets and liability – 
winding up procedures is that of converting company’s assets into money so as to 
pay  off  firm’s  debts.  Any  contingent  net  assets  are  to  be  distributed  to  extant 
partners. 
Clearance sale operations affecting firm’s assets refer to converting firm’s 
patrimony into money and cash all debts owed by the third parties.  
Converting  company  goods  into  money  is  performed  by  public  auction. 
According to legal provisions, liquidators can sell by public auction any movable or 
real  asset  belonging  to  the  company  (art.178  letter  c).  Law  31/1990).  As  a 
precautionary step, law does not allow liquidators to sell company’s assets, that is it 
bans their selling firm’s patrimony at an overall contractual price. Consequently, 
each asset to be put up auction is to receive an individual assessment. 
Firm  liability  liquidation  stands  for  paying  off  all  company  debts  to  its 
creditors. Liability winding up is performed by liquidators in a strict compliance 
with legal provisions. Paying off the debts owed to creditors is to be worked out 
with that money resulted from the clearance sale of firm assets. As shown above, in 
order  to  pay  off  the  debts,  liquidators  may  legally  contract  bill  obligations  or 
contracts. 
As the winding up procedure does not influence the legal interdependence 
between the company and its creditors, debt paying off is to be affected completely 
as well as scheduled for a precise settling day. 
When the company ceases to exist, as a consequence of its dissolution and 
liquidation, partners must each receive a share equal to that formerly contributed to 
either founding the company or increase its registered capital; they ought as well to 
receive a share of the unearmarking benefits. However, such rights can be turned to 
account only after having paid off all debts owed to company creditors and only if a 
positive balance has been left. 
Sometimes,  firm’s  assets  do  weigh  a  lot  as  compared  to  liabilities,  so 
liquidators can pay partners certain amounts in the owed money account, before 
concluding clearing off operations. 
However, mostly, it is after having concluded winding up operations that 
liquidators  can  find  whether  there  are  net  assets  to  further  be  divided  among 
partners. In this respect, liquidators must work out the final balance and, if it is the 
case, make suitable propositions to split up the net assets and distribute them to 
partners. ACTA UNIVERSITATIS DANUBIUS                                                       Nr. 1/2005 
 
  58 
After  having  ended  the  operations  of  distributing  the  net  assets  among 
partners, company’s liquidation is concluded. Two last formalities are to be settled 
so as liquidation consequences to finally work:  
1.  the firm is to be erased from the Register of Companies; 
2.  steps  must  be  taken  to  keep  up  cash  books  and  other  company 
documents intact. 
The end of winding up operations and of company’s existence, as a legal 
person, is connected to the responsibility for any possible debt owed to creditors that 
did not receive their money all along the clearing off process. 
If the clearance sale is over and the company does no longer exist (that is it 
has been erased form the Register of the Companies), the responsibility for social 
obligations is that of the partners who, according to the law, have unlimited bondage 
for social obligations. This is the case of general partnership associates and limited 
partnership general partakers. 
Dissolution cases mentioned by Title IV Chapter 1 in the Law of Companies 
31/1990, republished, may be classified of follows: 
1.  General  cases  of  dissolution  that  may  be  applied  to  all  types  of 
company (art.222/1/): 
a)  the elapse of the time period settled for company existence; 
b)  the  impossibility  of  carrying  out  the  object  aimed  at  by  the 
company or, on the contrary, its achievement; 
c)  the company nullity resolution; 
d)  law decision, at the request of any partner, if it is based on solid 
grounds, together with serious disagreements among partners, 
which do not allow the company to operate properly; 
e)  firm bankruptcy; 
f)  other cases stipulated by the law or the company’s founding 
document. 
  2.   Special cases of company dissolution with application to certain legal 
types of company: 
      a) the dissolution of joint stock companies, in the case and terms 
stipulated  by  art.153  Law  31/1990,  republished,  when  the  registered  capital  is 
reduced  under  the  “legal  minimum”  –  as  stipulated  by  law  –  or  the  number  of 
shareholders  falls  under  the  legal  minimum  (art.223  (1)  and  (3)  Law  31/1990 
republished); 
      b) the dissolution of limited partnership with a share capital or of 
limited liability companies occurring in case of having lost its registered capital, or ŒCONOMICA 
 
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according to the case, when having reduced this capital under the legal minimum, if 
such cases are not deterred in nine months from their detection (art.233 (2) and (3) 
Law 31/1990, republished); 
      c)  the  dissolution  of  general  partnership  or  of  limited  liability 
companies in cases of bankruptcy, expulsion, incapacity, withdrawal or demise of 
any of the partners, when, subsequent to these causes, there is only one associate 
left, except for the situation in which the founding documents include an heir-co-
participating clause and for the case in which the remaining associate decides upon 
continuing company existence in the form of a one – partaker Ltd. (art.221 (1) and 
(2) Law 31/1990 republished); 
      d) provisions of art. 224 (1) and (2) Law 31/1990, republished, do 
also refer to limited partnerships and to limited partnerships with a share capital, if 
additional clauses concern the only either dormant or general partner.  
  3. Other dissolution clauses pronounced by the Court, at the request of 
Chamber of Commerce and Territorial Industry or of any other interested party (art. 
232 (1) and (2)): 
a)  the  company  has  no  left  statutory  organs  or  the  latter  cannot 
assemble; 
b)  the  firm  has  ceased  for  three  years  in  a  row  to  hand  in  the 
accounting balance sheet on other documents which, according to legal provisions, 
must be handed in at the Register of Companies’ Office; 
c)  the firm has ceased its activity or it has no known location or it 
partakers vanished or, finally, its premises are not made public, except for the case 
in which the firm activity has been declared as temporary to fiscal authorities and 
enlister at the Register of Companies, and inactivity does not go beyond three years 
from Register enlisting. 
Settlement sanctioned by Order 1223 on June 12
th  1998 of the Ministry of 
Finance refer to the following liquidation – concerned operations to be effected at 
company dissolution, in the cases stipulated by art. 222, 1
st paragraph (except for the 
dissolution  pattern  mentioned  at  letter  f)  and  by  art.  223  –  232  Law  31/1990 
republished: 
1.  inventorying and assessment of patrimony assets of winding up firms, in 
conformity with the provisions of point 19 letter b and points 127 – 132 in the 
Accounting  Law  Enforcing  Regulations  no  82/1991  and  with  the  settlements 
sanctioned by Minister for Finance Order 2388/1995; 
2.  the working out of the clearing-off company’s accounting balance sheet 
on the code 10 form, as settled in the Methodology Regulations on drawing up, ACTA UNIVERSITATIS DANUBIUS                                                       Nr. 1/2005 
 
  60 
checking out and centralizing the accounting balance sheet of economic agents, for 
the year previous to the liquidation; 
3.  general meeting or partner assembly agreement on which operations are 
to be effected by the liquidator, on behalf of the company; 
4.  turning  patrimony  asset  components  (selling  immovable  and  stock, 
cashing debts and temporary investments etc.) to the best account; 
5.  effecting budget debt remittance operations, paying off social insurance 
sums, paying all debts to third parties or employees etc.; 
6.  establishing the winding up result (profit or loss); 
7.  calculation,  retaining  or  budget  remittance  of  the  tax  on  the  profit 
resulted  from  company  clearance  sale,  of  that  on  the  dividends  obtained  by 
shareholders or partners, as a consequence of firm liquidation, or of any other tax, 
levy or contribution owed by the company at issue; 
8.  working out the partition – opening balance sheet of the form mentioned 
at point 2
nd; 
9.  operating the company net asset partition, derived from the liquidation 
and in compliance with: 
- the company status or contract provisions; 
- the  general  meeting  decision,  as  mentioned  in  the  meeting  register 
book; 
- the company capital participating quota. 
The partition consists in dividing the net assets resulted from the liquidation 
among shareholders or partners. 
The operation to proceed to in case of bankruptcy (which is to be affected in 
compliance with art.72 – 122 of Law 64/1995, with the subsequent alterations) is the 
following: 
1. the sealing of firm’s patrimony assets, which is an operation to be 
carried  out  by  the  insolvency  practitioner  or,  depending  on  the  case,  by  the 
liquidator,  who  are  to  take  all  necessary  steps  in  order  to  preserve  all  involved 
assets; 
2.  the  inventorying  and  assessment  of  firm  patrimonial  assets  with 
abiding by the provisions of point 19 letter b) and point 127 – 132 in the Accounting 
Law Enforcing Regulations no. 82/1991 and by the settlements sanctioned by Order 
23388/1995 of the Minister for Finance; 
3. working out the liquidation – opening balance sheet, on the code 10 
form, as stipulated in the Methodological Norms concerning the drawing up, the ŒCONOMICA 
 
  61
checking out and the centralizing of economic agents’ accounting balance sheets, for 
the year previous to that of the liquidation; 
4. the selling of perishable or impending debased goods; 
5.  the  selling  of  the  assets  in  which  the  debts  is  interested  (lands, 
factories,  equipment),  as  quickly  as  possible,  at  the  best  price  and  with  having 
creditors’ previous agreement; 
6. the depositing at the bank, in the debtor’s account, of all the money 
resulted from having sold the assets; 
7. the establishing of the passive mass, that is the working out of the list 
of creditors; 
8. the earmarking of liquidation – resulted sums, according to the plan 
of distribution among creditors, in that order stipulated by the law; 
9. the working out and approving of the final report; 
10. the drawing up of the liquidation – ending balance sheet. 
If liquidation goes beyond a fiscal period, liquidators must work out the 
annual accounting balance sheet and hand it in at the country General Directorate for 
Public Finances or at the Bucharest D.G. when settled by the Ministry of Public 
Finances. 
 
REFERENCES: 
 
1.  Malciu, L., Contabilitate aprofundată, Bucureşti, Editura Economică, 2000; 
2.   Sebe,  L.,  Contabilitatea  şi  fiscalitatea  operaţiunilor  privind  fuziunea  şi 
lichidarea societăţilor comerciale, Bucureşti, Editura Tribuna Economică, 1998; 
3.   Negoescu, Gh., Riscul restructurării, Galaţi, Editura Latina, 1998; 
4.   *** Legea 31/1990 privind societăţile comerciale, republicată; 
5.  ***  Reglementări  contabile  pentru  agenţi  economici,  Bucureşti,  Editura 
Economică, 2002. 

31/1990 privind societăţile comerciale, republicată;

Contabilitate aprofundată, Bucureşti, Editura Economică,

Contabilitatea şi fiscalitatea operaţiunilor privind fuziunea şi lichidarea societăţilor comerciale, Bucureşti, Editura Tribuna Economică,

Reglementări contabile pentru agenţi economici, Bucureşti, Editura Economică,

Riscul restructurării,

Legal and Accounting Aspects of the Winding-Up Reorganisation

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Legal and Accounting Aspects of the Winding-Up Reorganisation

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