How the debts of a company in dissolution or liquidation to the State and Social Security Institutions can be settled through the out-of-court mechanism by a jointly liable person.
Debts of a company that has closed: settlement through the out-of-court mechanism
What the law provides
A legal entity that has been placed into dissolution or liquidation cannot itself apply to the out-of-court mechanism. Its debts to the State and to Social Security Institutions may, however, be settled on the application of a third party who is jointly and severally liable by law with the legal entity for those debts. The same applies where the legal entity has ceased to exist at the time the application is submitted. This is subject to the applicant not being personally excluded from the out-of-court mechanism (Article 7 para. 3 point c of Law 4738/2020).
This option covers only debts owed to Social Security Institutions and to the State (primarily the Tax Administration – AADE). The company's debts to banks or credit servicing firms cannot be settled in this way.
What precedes the application
Under Joint Ministerial Decision (JMD) 13131 EX/2024 (Government Gazette B 560/26.01.2024), the jointly liable person must first confirm their capacity and the period of joint liability in the registry data held by AADE. They then request that those debts be assigned to their personal Tax Identification Number (AFM). For social security debts, the confirmation takes place at the competent office of the Electronic National Social Security Fund (e-EFKA). If this procedure is not completed, only the applicant's personal debts are retrieved on the platform.
Effects of the settlement
The effects of the settlement extend to the applicant, to the other persons who are jointly and severally liable and to the legal entity itself (Article 22 point f of Law 4738/2020). They include the suspension of enforcement measures and of criminal prosecution, the cancellation of previous settlement arrangements and the extinguishment of the debts upon completion of the settlement. The same debt may not be included in more than one restructuring agreement. If the settlement is lost, a new settlement of the same debts is permitted on the application of a third party who is jointly and severally liable for them.
Before applying
Applying for a settlement is not always the first step. If the person's liability is disputed, it should first be examined whether they can be released from it.
The above is general information and does not constitute legal advice.
Angelos Ioannis Kladis Attorney-at-law