Liquidating an Iraqi company and striking it off: the steps after the liquidation decision
Partner disputes and liquidation explains when a company is wound up. This page picks up from the next point: the liquidation decision has been made, so what happens before the company's name is struck off? The Law Office of Ali Barakat, in Baghdad, al-Yarmouk, sets out the stages as Part Six of Companies Law No. 21 of 1997 arranges them.
Stage one: the decision and the liquidator
When the general assembly decides on liquidation, or recommends it because a ground in article 147 has arisen, it appoints one or more liquidators, sets their powers and pay, and sends the decision to the registrar, under article 158. The decision must give reasons and reach the registrar within fourteen days; the registrar may ask for more information or confer with the general assembly, under article 159. Once satisfied there is no fraud or illegality behind it, the registrar issues the liquidation decision and names the liquidator within ten days, and the company publishes this in the bulletin and a daily newspaper, under article 160.
If the general assembly has not named a liquidator within thirty days, or the registrar itself ordered liquidation of a dormant company, the registrar appoints the liquidator and sets the powers and pay, at the company's expense, under article 167.
What changes in the company at once
From notification of the decision the company stops changing its membership and stops taking on new obligations; it carries on only as far as needed to meet what it already owes, under article 163. It keeps its legal personality, with "in liquidation" added wherever its name appears; the general assembly continues, the board is treated as dissolved, and the managing director's role ends, under article 164. Liquidation does not release founders, members or managers from liability incurred while they were running the company, under article 165.
Stage two: inventory and calling creditors
On appointment, the liquidator takes control of the company's assets, records and documents, makes an inventory, prepares a full report on what the company is owed and owes, and sends a copy to the registrar, under article 168. Within ten days of appointment, the liquidator calls creditors and anyone with a claim, through a notice in two daily newspapers, to a meeting at a set time and place, without stopping anyone using other legal routes, under article 170. The liquidator reports to the registrar at least every three months (article 171) and calls the general assembly in the first two months of each financial year to approve the accounts (article 173). Whoever appointed the liquidator can remove one who falls short, or add another, under article 172.
Protecting creditors: dealings that fall away
For the purpose of protecting creditors, the law treats the liquidation application and decision as an application to declare the debtor insolvent, under article 175. As a result:
- Any transfer, assignment or disposal of company assets that fraudulently favours one creditor over others is void.
- Mortgages and security rights granted over company assets in the three months before liquidation began are void, unless the company proves solvent once liquidation ends, and only to the extent they exceed what the company received for them.
- An attachment of company assets made after liquidation has begun is not effective, except within the limits the text sets.
Anyone with an interest can also challenge in court any financial obligation the company took on in the six months before the liquidation decision, under article 166.
Stage three: the order of payment
After deducting the costs of liquidation, the liquidator pays debts in the order article 174 sets:
- Amounts owed to the company's workers.
- Amounts owed to the state.
- All other debts, by their statutory rank.
Tax and social security before closing
Article 16 of Income Tax Law No. 113 of 1982 treats dissolution or liquidation as a distribution of profits: whatever a shareholder receives above the paid-up value of the shares is taxable, except reserves already taxed, and the liquidator and founders must pay that tax. Liquidation is not complete without the financial authority's approval. Article 20 of Workers' Pension and Social Security Law No. 18 of 2023 bars selling, distributing or liquidating the assets of any employer of workers until the Workers' Pension and Social Security Department has been notified.
Final stage: closing report and striking off
When the work is done, the liquidator prepares a final report and final accounts with the auditor's report, puts them to the general assembly for approval, and sends the minutes and report to the registrar, under article 176. The registrar issues a decision striking the company's name from the register and publishes it in the bulletin and a daily newspaper within ten days, either when satisfied that liquidation was carried out lawfully or when it has dragged on more than five years from the liquidation decision and cannot be completed. Legal personality ends on the date of the striking-off decision, under article 177.
After striking off
The liquidator distributes what is left to members by their shares within thirty days of being notified of the striking off, under article 178. No claim can be brought against the company once struck off, but a creditor who was not paid, and whose claim the liquidator did not know of, can pursue the members up to what each received, within three years of striking off; after that the claim lapses, under article 179. The liquidator keeps the company records for five years from striking off, under article 180.
The office follows these provisions from Baghdad, al-Yarmouk.
Legal basis and sources
- Companies Law No. 21 of 1997, articles 147 and 158–180
- First Amendment to the Companies Law, Law No. 17 of 2019 (Iraqi Official Gazette, issue 4554 of 9/9/2019)
- Income Tax Law No. 113 of 1982, article 16
- Workers' Pension and Social Security Law No. 18 of 2023, article 20
Frequently asked questions
Who gets paid first in a liquidation?
After liquidation costs: the company's workers, then the state, then other creditors by rank, under article 174.
The company mortgaged assets to one creditor two months before liquidation. Does the mortgage stand?
A mortgage granted in the three months before liquidation began is void in principle, unless the company proves solvent after liquidation, under article 175.
I found a debt owed by a company after it was struck off. Is it lost?
If the liquidator did not know of your claim, you can pursue the members up to what each received, within three years of striking off, under article 179.
Does a company cease to exist as soon as liquidation is decided?
No. It keeps its legal personality through liquidation, which ends on the date it is struck off.
Related topics and articles
- 01Partner disputes, a request for liquidation, and a challenge to general-assembly decisionsPartner disputes: causes of liquidation, and a 5% objection to general-assembly decisions before the Registrar and then the Court of First Instance.
- 02What did Law No. 17 of 2019 change in forming an Iraqi company?The first amendment to Companies Law No. 21 of 1997, Law No. 17 of 2019: incorporation documents, minimum capital, the Iraqi share in a company with a foreign partner, holding companies, liquidation by the registrar, and electronic dealings.
- 03Bankruptcy and protective composition under the Commercial LawBankruptcy and protective composition: Commercial Law 30 of 1984 kept Book Five of Law 149 of 1970 until insolvency is regulated.
- 04The employer's duties in workers' social securityEmployer duties under Law No. 18 of 2023: yearly particulars, payment time limits, clearance, contractors and work injury.
- 05Obligations that recur after a company is recordedFinal accounts, the audit, the general-assembly meeting and copies sent to the Registrar, distinct from post-incorporation steps and from branch duties.