Liquidation of company is procedure prescribed by law for final cessation of its activity without transfer of rights and obligations to other entities. Termination of legal entity’s activity is a process, each stage of which is regulated by state legislation. In case of its violation, the process may be delayed for a long time or come to the deadlock, that is not profitable for company’s owner, and faces fines.
Ways of company’s liquidation
Liquidation of legal entity may be carried out in two forms:
Voluntary liquidation is procedure initiated on decision of company’s members. The reason may be inexpediency of further activity of the company, fulfillment of goals for which it was created, or expiration of activity’s term.
Opposite to voluntary one, compulsory liquidation occurs only on court decision. Company may be forcibly liquidated if it engages activities prohibited by Russian law or does not have a license. This procedure is also applied if irreparable violations were admitted in process of company’s registering. Relevant claims are filed by state authorities.
Consequences of company’s liquidation
Company’s liquidation entails entry into the Unified State Register of Legal Entities (USRLE) information about termination of the legal entity. From this moment, company no longer exists as subject of any legal relationships. In some cases, its rights and obligations may be transferred to other legal entities.
Based on decision on liquidation, company can terminate employment contracts with all employees. All employees should be notified personally of the upcoming dismissal no later than two months in advance. Employees should be provided with severance payment equal to their average monthly earnings. In addition, they retain average monthly salary for the period of employment, which is paid during two months after the day of dismissal.
Upon company’s liquidation, legislation requires to notify not only the employees, but also creditors on forthcoming termination. For this purpose, liquidator (liquidation commission) should prepare and send to every creditor letters of notification, which must indicate the time period for submitting their claims. This period cannot be less than two months.
Sequence and general characteristics of company’s liquidation
Liquidation of company is a process that cannot exceed one year. If liquidation is not completed within a year, this period may be extended by court, but not more than for six months. If company’s liquidation does not complete within the above period, it will be necessary to re-take decision on liquidation and carry out entire procedure from the beginning.
The procedure begins with taking a decision on liquidation by general meeting of members.
Appointment of liquidator or liquidation commission
After taking the decision, it is necessary to determine the person (liquidator) or group of persons (liquidation commission) who will be responsible for the procedure. In addition, they will gain authority for company’s management. The liquidation commission usually includes general manager of the company and its several employees, for example, accountant, lawyer, etc.
Notification of state authorities
After approval of decision on liquidation, it is necessary to notify tax authorities at the company’s location within three business days. For this, application form P15001 and decision on liquidation should be submitted. Based on these documents, within five working days, information that legal entity is in the process of liquidation will be entered into USRLE.
Publication of information on liquidation
After notification of tax authorities, it is necessary to publish a message about liquidation in the State Registration Bulletin, where timeframe and procedure for creditors to initiate claims are indicated.
During liquidation, territorial tax authorities may schedule an on-site tax audit. In this case, time of previous audit is not taken into account. At the same time, period not exceeding three years before date of decision to conduct the audit is checked.
Preparing and submitting interim liquidation balance sheet
The liquidation commission should prepare interim liquidation balance sheet. It contains information about composition of company’s property, list of claims submitted by creditors, as well as results of their consideration. This procedure is provided after the company publishes information about liquidation, notifies creditors about it and they declare their requests.
After preparing of interim liquidation balance sheet, liquidation commission should notify the registration authority. At this stage, liquidation reports are submitted to extrabudgetary funds and tax reports are submitted ahead of schedule.
Repayment of creditors’ claims
After submitting of interim liquidation balance sheet, company may start repayment of creditors’ claim. Repayment with creditors should be provided in accordance with priority established by law. If the company does not have enough property to satisfy all the requirements of creditors, further liquidation can be carried out only via bankruptcy procedure.
Liquidation balance sheet and distribution of company assets
After satisfying the creditors’ claims, a liquidation balance sheet must be drawn up that lists the remaining company property. It may be distributed among the members after approval of the liquidation balance sheet. Upon distribution, an act is drawn up which indicates the property transferred to each member. The act must be signed by all company members.
Closing of bank accounts
Company’s liquidation is the termination of its activity, so the liquidation commission closes bank accounts of the company. They can be closed earlier – by the time of submitting of liquidation balance. However, in practice, it is not recommended to close bank accounts until it has been reconciled with the tax authorities and all reports have been submitted.
State registration of liquidation and deregistration from tax authorities
Final stage of the procedure is submitting documents for registration of company’s liquidation, as well as its deregistration from tax authorities. To do this the required documents must be submitted to the tax office. Within 5 business days after submission of documents, entry into the Unified State Register of Legal Entities and notification of deregistration from the tax authorities can be obtained.
For state registration of company’s liquidation, the following documents are needed:
- application form No. Р16001;
- liquidation balance sheet;
- receipt on payment of state duty;
- documents indicated in the Federal Law “On Individual Registration in the Compulsory Pension Insurance System”.
If there are no grounds for refusal of registration, tax office will enter the USRLE information that company has ceased its activity. This date is considered as official date of company’s liquidation, after which it is possible to obtain relevant papers confirming this fact.
State authorities are entitled to refuse in registration for several reasons. For example, if company has unpaid debts, time deadlines for submitting creditors’ claims are failed, or there are other violations of liquidation procedure.
Purpose of company’s liquidation
The main purpose of liquidation is to exclude company whose activity was terminated by decision of members or based on a court decision from the Unified State Register of Legal Entities. After that, the company officially ceases to exist and cannot conduct any activity.
Term of liquidation should not exceed 12 months. If liquidation is not completed within a year, this period may be extended by court, but not more than for six months. If company’s liquidation does not complete within the above period, it will be necessary to re-take decision on liquidation and carry out entire procedure from the beginning.