How is the liquidation of the solidarity company

Liquidation of companies, a major legal step when the activity ceases or the company disappears in general, in the case of liquidation of the solidarity company or liquidation of a joint stock company or a limited liability company. The decision to liquidate companies is issued by the partners, the General Assembly or the owner. The cancellation of the Commercial Register is the first legal step to liquidate the company and avoid falling into fines and taxes.   

In this article, we will discuss the reasons for the liquidation of solidarity companies, as well as the liquidation steps and the necessary documents to comply with the legal form of proper liquidation within the laws and regulations. 

Solidarity companies

Solidarity companies are a type of company that consists of two or more partners, where each partner is fully responsible for the debts and obligations of the company. These companies were popular in the past due to their ease of establishment and flexibility, but they were faced with challenges related to transparency and protection of the rights of partners and creditors. In solidarity companies, there is no separation between the assets of the company and the assets of the partners, which means that the partners can lose their personal assets in the event of bankruptcy of the company.

 The reasons for the liquidation of the solidarity company

There are several general reasons that lead to the liquidation of companies of various types, including Solidarity companies, among these reasons are:

• The term of the company expires, if a period of time is specified for it in the memorandum of association.
• Absence of the purpose of establishing the company.
• The impossibility of the company to carry out its activity due to loss of capital.
• Dissolution of the company by law, by issuing a court ruling for any reason.
• The consensus of the partners on the dissolution of the company.
• The death of one of the founding members of the company, but provided that this is stated in the company's founding contract.
• One last case that may occur and be the reason for the liquidation of the solidarity company (which is one of the rare cases), is that there is only one partner left from the partners, and the rest lost the partnership by death, withdrawal or bankruptcy. In this case, the remaining partner will take over the task of correcting the course within 90 days, adding a partner or changing the type of company, after this period this company will be forcefully liquidated by the system unless it corrects its course.

 Steps to liquidate solidarity companies

The liquidation process includes several steps, including general steps and executive steps:

 General steps

1. Settlement of obligations: all debts and financial obligations of the company are repaid. This is done after conducting a comprehensive audit of the financial situation of the company and identifying all creditors of the company.
2. Asset allocation: after debt settlement, the remaining assets are distributed to the partners according to their shares. This step requires the preparation of a detailed report on the company's assets and liabilities.
3. Liquidation announcement: the company's liquidation is officially announced through specific legal means, such as publication in the official gazette or on the website of the Saudi Ministry of Commerce.

 Operational steps

You can always visit the national platform for government services in Saudi Arabia and start requesting the liquidation process by following the following steps:

• Access to the partner Decision System Link (PD.MC.GOV.SA).
• Choose the desired service.
• Fill out the form and send the request.
• After the application is approved and notarized, the fee is paid.
• The contract is published.
• Write off the commercial register through the digital branch.

 Documents required for the liquidation of solidarity companies

There are some documents required to legally complete the liquidation of the company and write off the commercial register‘ and the documents are submitted in two stages:

 The first stage of liquidation

1. The decision of the partners to liquidate according to the minutes of the official meeting on the company's publications is certified by the Chamber of Commerce or an employee of the Ministry of Commerce.
2. The liquidation month is on the liquidator's publications and his signature is certified.
3. A recent financial position of the company with the date of liquidation from a certified public accountant in the kingdom of Saudi Arabia.
4. The approval of the Ministry of investment for liquidation in the event that the company is licensed by the Ministry of investment.

The second stage of liquidation

30 days after the publication of the decision submitted at the first stage, a new decision is submitted for the second stage with the following requirements:

1. A certificate from the General Authority of Zakat and income of non-objection to the cancellation of the Commercial Register of the liquidated company.
2. The month of the expiration of the liquidation is on the liquidator's publications and his signature is certified.
3. A final account from a certified public accountant in the kingdom of Saudi Arabia.

 The impact of the liquidation of solidarity companies on the Saudi economy

The matter is seen as one of the positive indicators that have an impact on increasing the strength of the Saudi economy, because the liquidation system leads to:

1. Increasing confidence in the private sector: by promoting transparency and protecting the rights of various parties, investors ' confidence in the private sector increases. This leads to increased investments and enhanced economic growth.
2. Improving the kingdom's global ranking: these reforms help improve the kingdom's ranking in international indicators related to the business environment, such as the ease of Doing Business Index issued by the World Bank.
3. Encouraging modern companies: instead of solidarity companies, the establishment of limited liability companies is encouraged (y.M.M) or joint-stock companies, which provide greater protection to partners and are more suitable for large investments.

Benefits of approving the system of liquidation of solidarity companies

1. Enhancing transparency: solidarity companies often had a lack of financial and administrative disclosure, which led to difficulties in monitoring their performance and protecting the rights of interested parties. This lack of transparency has been a hindrance to attracting foreign and domestic investments.
2. Protection of creditors ' rights: since partners in solidarity companies are personally liable for the company's debts, there were significant risks for creditors in the event of bankruptcy of the company. Liquidation of such companies helps to minimize these risks and protect the rights of creditors.
3. Keeping up with international standards: the liquidation of Tadhamon companies comes within the framework of the kingdom's keeping up with international standards in the field of corporate governance, which enhances the confidence of foreign and local investors. This step helps to improve the kingdom's ranking in international indicators related to the business environment.
4. Investment promotion: by improving the legal and financial environment, the kingdom becomes more attractive for foreign and domestic investments, which supports the achievement of the goals of Vision 2030. Modern companies, such as Limited Liability Companies (LLC.M.M) Joint-Stock Companies.

Liquidation of Tadhamon company with the help of Tarik Alamal Alalmia experts

You can always rely on our legal experts in the way of Tarik Alamal Alalmia to help you in your business, starting from the establishment of companies in the UAE and Saudi Arabia and the issuance of commercial licenses, the contract of incorporation, the choice of commercial name.

They can also help you clear government transactions, prepare all the necessary documents for all stages of liquidation of companies, and also represent you before the Saudi official authorities in the liquidation process.

The liquidation of Tadhamon in Saudi Arabia is a positive step towards enhancing transparency, protecting the rights of investors and creditors, as well as improving the business environment in general. These measures contribute to achieving the goals of Vision 2030, and make the kingdom more attractive for local and international investments. By following the right steps and hiring experts, companies can successfully shift to more sustainable and efficient business models.