If a company is insolvent, the auditors must be notified. The auditors will assess whether a balance sheet shortfall really does exist. If this is the case, then bankruptcy must be reported to the Court of Justice. Bankruptcy proceedings may also be petitioned by creditors, however. If bankruptcy proceedings are indeed opened before the Court of Justice, this will be published in Liechtenstein’s official gazette (“Amtsblatt”). In addition, a notice to creditors will be published. This will specify a deadline within which creditors may report their claims to the Court of Justice. The liquidator, who may be appointed either by the court or may be deployed independently, shall also be commissioned to draw up an inventory. This makes it possible to ascertain how many assets the company still has.

Creditors are divided into different categories. Claims are settled in the order of precedence of the categories. Claims in the first category, e.g. salaries or claims arising out of redundancy programmes, will be settled first. The second category includes inter alia social insurance contributions, while the third category is reserved for claims brought by craftsmen and suppliers from the year before the bankruptcy. All other claims are brought together in the fourth category.

Outstanding salary claims brought by employees for work they have already performed during the last three months of the employment relationship are covered by insolvency compensation. The employer must report a possible mass redundancy of more than 20 employees to the Office of Economic Affairs, and must forward a copy of this notice to the employee’s representative.

The tax obligation of companies in bankruptcy

The Liechtenstein Tax Administration assesses a company in bankruptcy for all previous years that are still outstanding, as well as for the period of the current financial year up to the date on which bankruptcy proceedings were opened. The bankruptcy judge imposes a liquidator who compiles a list of the assets and debts of the company in bankruptcy. As a rule, the liquidator will not be able to maintain proper accounts. For this reason, the Tax Administration accepts the submission of a legally-signed tax return that has been completed to the best of the knowledge and ability of the liquidator, bearing the qualifier “Subject to new facts”. It is also necessary to compile a list of the assets and debts of the company, insofar as they are known at the time of the submission of the tax return. The company in bankruptcy will be reminded and punished for failure to submit necessary documents.

Relevant laws (German only)