Liquidation in Germany: How to dissolve a company

If you want to dissolve your limited liability company like a GmbH or UG in Germany, you must officially start the liquidation (winding up) process. Only after the company has been wound up can the company be removed from the commercial register 💬Handelsregister. There, of course, are exemptions to this rule but in most cases, this is the order the closing down process follows.

Stage 1: Initiate liquidation proceedings

The first step in dissolving a GmbH or UG is a purely formal one. The shareholders decide to cease the company’s business activities. This is also the beginning of the end for the company’s existence as a legal entity.

Requirements to dissolve a company

The cases in which you may dissolve your GmbH or UG are defined by law (§§ 60 ff. GmbHG):

• Expiry of the period of business operations specified in the articles of association (i.e., the shareholders agreed in the founding documentation that the business was a temporary project)
• Shareholders with 75% of the voting rights agree to the dissolution by way of a shareholder resolution (exception: a different majority rule can be stipulated in the articles of association)
• Dissolution by judicial judgement (i.e., an administrative court or authority decision)
• Opening of insolvency proceedings (if insolvency proceedings are discontinued/cancelled, continuity is possible by company resolution)
• Rejection of insolvency proceedings due to lack of assets 
• Legally binding order of the registry court on the discovery of a defect in the articles of association
• Cancellation of the company due to a lack of assets
• Individually agreed reasons in the GmbH’s articles of association (e.g. business purpose of the non-profit UG is fulfilled)

 

Resolution to dissolve the company

Generally, the shareholders of a GmbH or UG decide to dissolve the company themselves. For this purpose, a dissolution resolution 💬Auflösungsbeschluss is passed at the shareholder meeting 💬Gesellschafterversammlung. Unless the articles of association say otherwise, the resolution requires a majority of 3/4 of the votes (§ 60 Paragraph 1 No. 2 GmbHG).

The resolution should also cover the following points:

• Appointment of the liquidators
• Who keeps the records (books) until the statutory periods have expired
• Revocation of the authorised representatives (powers of attorney), if applicable

When does the resolution come into effect?

If no future effective date is agreed, the resolution takes effect immediately. This date is of particular importance as it is also the balance sheet date for the preparation of the opening liquidation balance sheet and the determination of taxable profits.

When is notarisation necessary?

If the articles of association set a specific duration for the company, you’ll need a notary to notarise the resolution to dissolve the company. If you want to do this earlier than this date, you’ll need to change the articles of association. The notary also has to certify this change and send it to the commercial register. The dissolution of the company only takes effect once the change in the articles of association is registered in this way.

Changing the company suffix

After the resolution has come into effect, the company must use the suffix i. L. (in Liquidation) or i. Abw. (in Abwicklung) in business transactions such as invoices, emails, legal disclosure, etc.

 

Dissolution vs. liquidation vs. removal

When closing down a GmbH or UG there are three distinct stages to get clear on:

• Dissolution 💬Auflösung
• Liquidation / winding-up 💬Liquidation 
• Deletion 💬Löschung

The liquidation phase begins only after the commercial register entry has been updated. The company remains in existence during the winding-up phase in which the company is liquidated—lasting until it’s removed from the register. This has the following implications for the company

• Contractual capacity, i.e. it can continue to carry out transactions that serve the purpose of settlement
• Legal capacity, i.e. it is still considered a legal entity and can act as a creditor or debtor
• Capable of being a party, i.e. it may appear as a party in court proceedings
• Ongoing accounting and balance sheet obligations

Stage 2: Liquidation

Liquidation is the process of winding up a company by converting its capital into liquid assets, i.e. cash or assets that can be easily converted into cash. Both the liquidation and the liquidators must be submitted to the commercial register.

Appointing liquidators

The GmbH Law says all company closures must be supervised by people called liquidators. Usually, the company’s managing directors take on this role, unless it’s already decided that someone else will.

A court or the company’s shareholders can also choose an alternative as a liquidator. If that happens, the manager’s power to act on behalf of the company ends. All liquidators must be able to prove to the registry court that there are no grounds under commercial, criminal or professional law that would make them unfit for the job.

In theory, the managing director can reject the role of liquidator by quitting. But this doesn’t mean there won’t be consequences. Usually this doesn’t count as a good enough reason for a manager to end their contract. And, if the contract has specific clauses about resignation, these might affect whether the manager director can quit without issues or penalties.

Entering the dissolution resolution in the commercial register

Initially, the resolution to dissolve the company has to be submitted to the commercial register. A notary certifies this dissolution resolution and forwards it to the register court (§ 65, Subsection 1, GmbHG). The responsibility for this task falls either on the managing director or a liquidator, depending on when the resolution takes effect. If it’s effective immediately, the managing director handles it. On the other hand, if the resolution becomes effective only when the dissolution is entered, the liquidators assume the responsibility.

This process updates the company’s commercial register entry by adding information that the company is in liquidation. This makes the company’s status publicly visible.

Registering the liquidators

After deciding who will act as the liquidators of the LLC, their names must be registered with the commercial register. Usually, the dissolution resolution and the names of the liquidators are registered together, but it’s not mandatory.

Responsibilities of the liquidators

When a UG or GmbH is being liquidated, the liquidators take over the management of the company and represent it externally. They assume the same rights and responsibilities as the previous management and must handle the remaining business during the liquidation process.

It’s important to note that the purpose of the company during liquidation is solely to liquidate, not to continue its normal operations. This means that the liquidators are liable for any mistakes they make while carrying out their duties, just like the previous management. Generally, the liquidators are responsible for the following tasks:

• Prepare a opening liquidation balance sheet to determine the asset situation
• Publish a notice to creditors in the federal gazette 💬Bundesanzeiger
• Terminate current transactions
• Collect receivables
• Servicing liabilities
• Repay debts
• Convert remaining company assets into cash
• File for insolvency in good time, if necessary

 

Blocking year for the liquidation of GmbHs and UGs

When a company is dissolved, its creditors must be notified through an official notice 💬Gläubigeraufruf. The notice must also invite creditors to contact the company. It is important to publish the notice ASAP because blocking year 💬Sperrjahr starts only after publication.

This period serves to protect the company’s creditors and prevents any distribution of assets to shareholders during this time. However, other creditors can still be paid. In other words, the distribution of assets can’t take place until the company’s debts are repaid or secured, and not before one year from the date the notice to creditors was published in the gazette.

During the blocking year all creditors have the opportunity to register with the company in liquidation and to collect their outstanding claims. This phase is not only prescribed by law but also has very strict rules:

1. Prohibition of distribution: Shareholders may not receive any assets of the dissolved company. That is, if a resolution to dissolve the company has been passed, the shareholders can’t strip it of its money or valuables.
2. Claims: Only third-party creditors may be satisfied and not the claims of participating companies, shareholders, directors or their relatives. In other words, only people or companies outside the company can be paid. So if you did business with the company or are part of it, you can’t claim the money.
3. Liabilities:
   • The maturity and amount of other liabilities remain unchanged
   • The Sperrjahr (blocking year) is not a limitation period for claims
   • Claims of known creditors who haven’t registered within the blocking year don’t expire
   • Claims of unknown* creditors lapse when the blocking year has expired and the company’s assets have been used

*Unknown creditors are those who make claims (e.g. warranty claims or claims for damages) during or after blocking year. That is, unknown creditors are people or groups who claim that the company owes them money after the blocking year has begun. Heirs or assignees of known creditors are also included in this definition.

The deadline for making a claim is not limited to a specific year. If you’re a known creditor who didn’t register your claim within the blocking year, it doesn’t automatically expire. After the blocking year, the remaining assets will be distributed.

Distribution of remaining assets: Sharing what’s left over

Once the blocking year is over, the remaining property and money of the GmbH or UG can be divided between the shareholders. This includes the money they have put into the company in the form of share capital.

If, at this point, there are still liabilities to known creditors who have not registered during the blocking year, security must be provided (§ 73 GmbHG). In other words, if there are still debts to people we know who haven’t asked for their money during the waiting period, the company must put money aside to cover them. Security can be provided via:

• Securities or money
• Pledges of tangible assets or receivables in the federal/state debt register
• Mortgages on domestic properties
• Pledging of receivables secured by mortgages
• Guarantees
• …

 

Can a company be dissolved without liquidation and blocking year?

If certain conditions are met, a company can forego the usual steps of closing down:

• No assets or liabilities
• Insolvency proceedings have been initiated (if over-indebted)
• All business operations are fully completed
• No pending legal proceedings
• No real estate or entries in the land register
• Assets have been used to satisfy creditors
• Residual assets have been distributed to shareholders
• Tax matters are fully concluded

If all conditions are met, the company can be deleted from the commercial register immediately, without a blocking year or formal liquidation. The liquidator simply applies to the district court for deregistration. The court usually requires a brief confirmation of the company’s financial status and a declaration that no assets remain. Only if the figures appear inconsistent does the court investigate further.

This shortcut is popular because it avoids the costs of bookkeeping, annual accounts, and maintaining a registered office during the blocking year. However, mistakes can trigger a supplementary liquidation, which is both time-consuming and expensive.

📌Another way to bypass liquidation entirely is to dissolve the GmbH or UG and merge it into another company.

Note: The process can also be started ex officio if the tax office, registry court, or relevant professional chamber considers it necessary.

 

Stage 3: Removal of the company from the commercial register

Once the liquidation process is done, the final step is to create liquidation account and liquidation balance sheet.

After this, the liquidators can request to remove the company from the commercial register. This marks the end of the company as a legal entity. However, retention obligations still apply, i.e. financial records still need to be kept for another ten years.

Liquidation account

This final financial statement shows how the company’s assets were managed, how debts were settled and how any remaining assets were distributed. This statement is required to formally complete the closure of the company.

Liquidation balance sheet

This is the final set of accounts drawn up during the winding-up process. It documents and reconciles the company’s assets, liabilities and financial transactions up to the date of dissolution.

📌Even after a company is deleted from the commercial register, its entry remains in its archive. Historical information remains accessible in the register database, marked as removed.

 

What happens when the German authorities close down a GmbH or UG?

As noted above, a company can also be removed from the commercial register ex officio. In this case, the authorities initiate the closure themselves. Before doing so, they must notify the shareholders or their authorised representatives.

The company is then given a reasonable period to object to the proposed deletion, in accordance with § 394(2) FamFG. If no objection is raised within that timeframe, the authorities may proceed with the removal.

 

FAQ

How much does it cost to close down a company?

Figuring out the exact cost of shutting down a company depends on each situation. But, if there’s a blocking year/waiting period involved, it’s realistic to expect it to be a few thousand euros.

What is supplementary liquidation?

A supplementary liquidation 💬Nachtragsliquidation, is a procedure that may become necessary after a company has already been deleted from the commercial register. Even once a company is officially dissolved, unresolved matters can still surface—for example, previously undiscovered assets, outstanding debts or property issues.

This situation often arises when the authorities perform a direct removal due to lack of assets, bypassing the usual liquidation process and blocking year, or when the original liquidators missed or overlooked certain steps. To deal with these leftover matters, the court appoints supplementary liquidators.

An application for a supplementary liquidation can be submitted by any affected party—including shareholders, creditors, authorities or even family members with a legitimate interest.

Typical tasks for supplementary liquidation

• Cancelling mortgages
• Selling real estate
• Distributing assets to creditors or shareholders

 

My company is insolvent. Do I still need to file for insolvency during liquidation?

Yes. Filing an insolvency application remains the responsibility of the liquidators, even after the company has entered liquidation. Registering the dissolution with the commercial register does not remove the obligation to file for insolvency on time. Failure to do so may expose the liquidators to legal liability for delaying insolvency proceedings.