What is liquidation of business?
Liquidation of business is a very complicated procedure, both from a legal and organizational point of view, it requires a lot of time and experience. This procedure is regulated by the Civil Code of the Russian Federation. It describes in detail the definition and types of liquidation, how to start a liquidation of business, the roles and duties of responsible persons, and the procedure for conducting and satisfying the claims of creditors of the liquidated organization. In short, it details how to liquidate your business step by step.
To liquidate your company means to remove it from the list in the Uniform State Register of Legal Entities with the simultaneous elimination of all its obligations and rights. After the process is finished, the former managers of a company and its stakeholders are completely exempted from any claims from creditors and tax authorities.
The easiest way to liquidate your business is voluntary liquidation by the decision of the founders. Besides, there also exists liquidation by court order. State authorities, or creditors, who intend to collect their funds in this way through declaring the company bankrupt, can apply to a court with a request on liquidating a company. Concerning the voluntary liquidation of a business, a company owner makes such a decision for various purposes, for example, due to the expiration of the term and/or with the achievement of the goal this legal entity was established for, or due to the unprofitability of continuing its activity.
Liquidation of business (voluntary)
Now let’s take a quick look at the procedure of a company liquidation. Here it is step by step:
- Adoption of a liquidation decision. After that they appoint a liquidator, and notify the local registration authority. To start liquidation of business, they hold a meeting of all the participants and make a decision on liquidating a company there, it is documented and signed by all founders. Also at this step, they formulate a notice about the liquidation procedure and submit it to the Inspectorate of the Federal Tax Service.
- After that they publish the liquidation announcement in the official media. The weekly journal “State Registration Bulletin” is considered to be the official media for that purposes.
- The next step to liquidate your company is the notification of the employees of a company, its creditors, and the employment service about the liquidation procedure. Employees of a company and the employment service are informed about the layoff for at least two months in advance. Creditors must also be additionally notified of liquidation no later than two months in advance.
- Passing a tax audit. The Tax Code provides for an on-site inspection of a company that is being liquidated. Such a tax audit is carried out regardless of when and for what reasons the previous one was carried out. The correctness of the calculation and the timeliness of payment of taxes are checked.
- The next step is Inventory and preparation of the ILB sheet (interim liquidation balance), notification of the registering authority about its preparation. When the period specified for the filing of creditors’ claims comes to an end, those in charge of liquidation draw up an ILB sheet.
- Dealing with creditors. At this stage, a company settles all the issues with creditors (those who presented their claims within the time limit specified in the Law). If the funds available to the company being liquidated are insufficient to satisfy the claims of creditors, those in charge of liquidation sell the property at auction.
- The assets that remain after all the above mentioned procedures are split among shareholders and the company bank account is closed. It is carried out after the final settlements with creditors. The property remaining after the satisfaction of creditors’ claims is transferred to the founders who have rights to it.
- Final liquidation balance sheet is created. This is the final stage of state liquidation. The liquidation balance sheet is formed when all the issues with creditors and an inventory are settled. At the meeting of the founders is made a decision to approve the liquidation balance sheet. After that, an application is prepared for registering the fact of a company liquidation and the state duty is paid.
That’s all – the liquidation of business procedure is complete.
Features of voluntary liquidation of business
It is worth noting that although this process is rather bureaucratic, there are still several significant benefits of voluntary liquidation:
- The procedure is not too long compared to the bankruptcy procedure.
- All obligations of the liquidated organization to the Federal Tax Service Inspectorate and third parties are terminated.
- Excludes the possibility of subsequent checks.
- After liquidation, creditors and authorized bodies are not entitled to insist on the fulfillment of their claims, if they did not manage to declare them during the liquidation process within the period established by law.
- The claims of consumers on the liquidated enterprise are also not applied.
The business-to-business liquidation procedure will be easy and fast only if it is carried out by a professional with relevant experience and knowledge from start to finish. Otherwise, everything can be very delayed, and you may face such unpleasant consequences as fines and penalties.
Valen helps you liquidate your business
If you don’t have anyone in your staff who could take on the duties of the chief liquidation specialist, it’s not a problem, our specialists will help you to deal with this as soon as possible and without any difficulties. Contact us by phone, through the feedback form on the website, or by e-mail, or by visiting our office in Moscow
Who can initiate liquidation?
Liquidation can be voluntary or compulsory. Voluntary liquidation is initiated by business owners, while compulsory liquidation is initiated by third parties and organizations.
Who is a liquidator and how is this person appointed?
This person will take over the management of the company during the liquidation period. Such a person can be a previous head of the company or any third party. The powers of the previous management are terminated from the moment a decision is made on his dismissal and the appointment of a liquidator.
What to take into account when liquidating a company?
First of all, it is important to decide who is appointed to the position of a liquidator and who will manage the process, since any mistakes and delays can lead to fines and penalties. If such a specialist is not available, it is worth contacting third parties and ordering liquidation of business as a service.