Liquidating a company: voluntary dissolution

When is liquidation the right path?

Closing a company is never a decision taken lightly. But for many owners of ApS and A/S companies, voluntary liquidation is the correct and orderly way to end a business activity, whether the reason is retirement, a lack of profitability, a strategic choice or a finished project.

Voluntary liquidation is different from bankruptcy (the company cannot pay its obligations) and from compulsory dissolution (the Danish Business Authority dissolves the company administratively). Voluntary liquidation happens when the company is solvent, that is can pay all its creditors, and the owners want to cease in an orderly way.

This guide goes through the process, the requirements and the documents you need in place.

Voluntary liquidation vs. alternatives

Before you start a liquidation process, you should consider the alternatives:

Method	When relevant	Advantages	Disadvantages
Voluntary liquidation	A solvent company with assets	Orderly, tax control	Time-consuming (at least 3 months)
Sale of the company	The company has value	You get money for the business	Requires a buyer
Compulsory dissolution	Missing filings	Happens administratively	Possible liability
Bankruptcy	An insolvent company	Clears up debt	Costly, a negative signal
Dormant company	A temporary pause	Flexibility	Ongoing compliance burden

Voluntary liquidation gives you the best control over the process and the tax result.

The voluntary liquidation process step by step

Step 1: General meeting resolution

The first and most important step is a resolution at the general meeting to dissolve the company. The Companies Act requires:

• A qualified majority: at least two-thirds of the votes cast and two-thirds of the represented voting capital
• Articles requirement: check whether the articles impose stricter requirements, for example a requirement of unanimity

The general meeting appoints a liquidator, typically a lawyer, an accountant or one of the owners themselves. The liquidator takes over the management of the company and is responsible for the rest of the process.

The minutes from the general meeting are a central legal document. Keep them and file them with the Danish Business Authority.

Step 2: Notification to the Danish Business Authority

The dissolution resolution must be notified via virk.dk. From that point the company is in liquidation, and it appears in the company register.

The Business Authority publishes a notice to creditors (proklama), a notice to the company's creditors to file their claims within a deadline of at least 3 months.

Important: During the notice period, the company's assets normally cannot be distributed to the owners.

Step 3: Winding down activities

While the notice period runs, the liquidator winds down the company's activities:

• Terminating leases, subscriptions and agreements
• Terminating employees in accordance with the employment contracts and the Salaried Employees Act
• Collecting receivables
• Settling all known obligations

Employees: when the company decides on liquidation, it does not automatically trigger a dismissal. The liquidator must terminate employees with the correct notice. It is critical that this is handled correctly to avoid damages claims.

Step 4: Prepare the liquidation accounts

Liquidation accounts are prepared, showing the company's assets, liabilities and the amount available for distribution. The accounts are approved at a general meeting.

The liquidation accounts are central to the tax treatment of the liquidation proceeds.

Step 5: Distribution to the owners

Once all known and filed creditor claims are paid, the remaining funds can be distributed to the owners. The liquidation distribution is taxed:

• For individual owners: as share income (27% up to the progression limit, 42% above)
• For corporate owners (a holding structure): a distribution on subsidiary shares (an ownership share of at least 10%) is as a rule tax-free

This is where a good accountant can make a difference; planning the timing and method of the distribution can have a major tax effect.

Step 6: Final dissolution

The liquidator reports that the liquidation is completed. The Business Authority deletes the company from the register, and the company ceases finally.

The shareholders' agreement and liquidation

The shareholders' agreement should govern what happens on dissolution. Check these points:

• Priority of the liquidation proceeds: are there shares with preference rights to be paid first?
• Quotas and votes: is unanimity required (not just two-thirds) for dissolution?
• Restrictions: are there periods where an owner cannot initiate dissolution?

If there is disagreement among the owners about dissolving the company, it can become a legal dispute. A solid shareholders' agreement prevents this type of conflict.

Tax considerations in a liquidation

The company's tax

Before the company is dissolved, it must:

• File a VAT return for the remaining period
• File the company's tax return to the tax authorities
• Pay any tax owed

The liquidator must ensure that the company's taxes are paid before any distribution to the owners.

The owners' tax

The liquidation proceeds are taxed as share income for individual owners. The tax base cost of the shares is deducted, that is you pay tax on the gain.

Example:

• You owned shares for DKK 50,000
• You receive DKK 300,000 in liquidation proceeds
• Taxable gain: DKK 250,000
• The gain is taxed as share income: 27% up to the progression limit (adjusted annually) and 42% on the excess

An accountant can optimise the timing of the distribution relative to your other income for the year.

Bankruptcy disqualification and director liability

A voluntary liquidation of a solvent company carries no risk of bankruptcy disqualification. But it is useful to know the rules:

Bankruptcy disqualification can be imposed on directors and managers who, because of grossly irresponsible business conduct, are unfit to take part in the management of a business. It is not relevant in a voluntary liquidation of a solvent company.

It is, however, relevant if the company is insolvent and operations should have been stopped earlier. Here management can incur personal liability for continuing a loss-making operation to the detriment of the creditors.

Documents you will need

Document	Purpose
General meeting minutes	The resolution to dissolve
Liquidation accounts	A statement of assets and liabilities
Notice to creditors	Information to creditors
Notice letters to employees	Termination with correct notice
Updated articles of association	Any changes during the liquidation period
Notification to virk.dk	Registration of the liquidation and cessation

The alternative: put the company dormant

If you do not want to close but to pause activity temporarily, an ApS can be kept in the register without activity. You thereby avoid a new formation cost if you want to start up again. But you must still:

• File an annual report every year
• Comply with GDPR obligations
• Pay any accountant costs

For many, voluntary liquidation is the tidier solution.

Employees' rights in a voluntary liquidation

Liquidating the company is an operational decision, but for the employees it is the end of a job. The liquidator must handle the dismissals correctly to avoid damages claims.

What applies:

• Employees must be dismissed with the correct notice under their employment contract and the Salaried Employees Act (for salaried employees typically 1 to 6 months depending on seniority)
• On dismissing a larger number of employees within 30 days, the notice rules in the Act on collective redundancies can apply, including the duty to consult and inform the authorities. The specific thresholds depend on the size of the establishment
• Salaried employees are entitled to severance pay under section 2 a of the Salaried Employees Act at at least 12 years' employment (1 month's pay) and at least 17 years' employment (3 months' pay)
• Pay and holiday pay in the notice period are creditor claims

The Employees' Guarantee Fund (LG): in a bankruptcy, LG covers pay, holiday pay and compensation not paid by the company. In a voluntary liquidation the company is solvent, so LG is normally not relevant, but the liquidator must ensure that pay claims are paid in full.

What happens to ongoing contracts and agreements?

The liquidator must review and terminate all ongoing agreements. Here are the most important categories:

Leases: check the notice period in the lease. Many commercial leases have a notice period of 6 to 12 months. The company is liable for the rent for the whole notice period, a cost that must be included in the liquidation accounts.

Subscriptions and software licences: terminate all ongoing subscriptions (telephony, internet, software licences, insurance). Failing to terminate can create unexpected costs in the liquidation period.

Customer contracts with ongoing obligations: does the company have contracts committing it to future delivery? It may be necessary to inform the customers of the liquidation and clarify whether the obligations can be met, transferred to another supplier or require compensation.

Guarantees and service commitments: has the company given guarantees or service commitments to customers? These are creditor claims that must be filed in the notice period and clarified before distribution.

Timeline: a typical voluntary liquidation

Phase	Duration	Activities
Preparation	1 to 4 weeks	The decision, choosing a liquidator, advice
General meeting and notification	1 to 2 weeks	The resolution, minutes, notification
Notice period	At least 3 months	Creditors file claims, activities wound down
Liquidation accounts	2 to 6 weeks	The accounts are prepared and approved
Distribution and cessation	1 to 3 weeks	Payment to creditors, distribution, final notification
Total	about 5 to 9 months

The time horizon can be extended in complex cases, for example pending disputes, many creditors or unresolved tax matters.

Conclusion

Voluntary liquidation is the orderly way to close a solvent company. The main steps are a general meeting resolution with a two-thirds majority, choosing a liquidator, a notice period of at least 3 months, payment of creditors and a distribution taxed as share income for individual owners. Involve an accountant early, both for the correct process and for the tax planning.

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This article is informative and does not constitute legal or tax advice. Contact a lawyer or accountant for guidance on your specific situation.