Liquidation of a foreign legal entity is a multistage procedure introduced by the state and resulting in cessation of operations by companies. After a company officially closes, these data are recorded in the corresponding register and the company is registered as liquidated. At the same time, all its subsidiary offices abroad should also commence the liquidation procedure according to the legislation.
- liquidation of a foreign company;
- decision of its parent organisation on closure;
- decision of a competent tax authority on liquidation of a foreign branch/representative office.
In the first two cases the procedure consists of several stages: signing of the resolution on liquidation, approval by the head, review of the documents by the tax service and deregistration of the entity. In the latter case the decision on closure is adopted by the tax authorities. The reason can involve the foreign company’s breach of the Constitution, refusal to submit financial statements to the Federal Tax Service or lack of any transactions within one year.
Signing of a foreign company’s resolution on closure abroad
In order to commence the liquidation process, it is necessary to issue a resolution on closure signed by an authorised person. It should include a provision about cessation of operations in the territory of the Russian Federation through a branch/representative office, even if the reason is liquidation of a foreign legal entity.
Sometimes the situation arises where a foreign company has already been liquidated but its entities in Russia have not been closed. In such cases, it is necessary to obtain an extract from the companies register of the country of origin and supplement it with a resolution of the head of the division on termination of accreditation due to liquidation of the foreign legal entity.
Documents issued and certified by the competent authorities of foreign states are submitted to Interdistrict Inspectorate of the Federal Tax Service No. 47 for Moscow, with an apostille or consular legalisation of the said documents, unless otherwise set forth in an international treaty of the Russian Federation.
Application for termination of accreditation of a branch/representative office
In order to close a division in Russia, it will be also necessary to draw up an application of 15ПФП form for termination of accreditation of a branch/representative office of a foreign legal entity. Since there are still no fixed requirements for completion of this application, the established practice for preparation of documents should be followed. The application for liquidation must be signed by the head of the division of a foreign company and presented to Interdistrict Inspectorate of the Federal Tax Service No. 47 for Moscow along with other documents required for closure of the division.
Deregistration of a foreign organisation with the tax authorities
The documents must be filed with the Interdistrict Inspectorate of the Federal Tax Service within fifteen calendar days of adoption of the resolution on closure of a branch in the territory of Russia. This can be done both personally by the head of the liquidated division and by an authorised person acting under a power of attorney.
Then officials of Interdistrict Inspectorate of the Federal Tax Service No. 47 for Moscow examine the documents for compliance with the current legislation within 10 working days. Subject to successful examination, a request is sent to the tax authority with which the liquidated representative office of a foreign company is registered. If there are no debts to the budget or creditors, the tax authority will approve the resolution on liquidation. The Federal Tax Service may initiate an on-site tax audit at this stage.
The mandatory requirement is that the labour relations with employees of a division of a foreign organisation are to be terminated before its closure.
After completion of the audit and approval of the resolution on cessation of operations, the Interdistrict Inspectorate of the Federal Tax Service issues the following documents within 5 working days:
- information sheet confirming introduction of the record of termination of accreditation in the State Register of Accredited Branches and Representative Offices of Foreign Legal Entities (RAFP).
- notice of deregistration of a foreign organisation with a tax authority (if only one division was accredited).
Deregistration with other state authorities
Subsequent to introduction of data about closure in the RAFP, it is necessary to deregister a foreign branch/representative office with the Pension Fund, the Fund of Social Insurance, and the Federal State Statistics Service. Documents confirming deregistration of a division are issued after applications from a foreign company are filed and as a result of possible reconciliation of settlements with the said authorities.
Liquidation of a representative office of a foreign company can be also carried out at the initiative of the Interdistrict Inspectorate of the Federal Tax Service. The law stipulates the following cases where the decision on liquidation is adopted in administrative proceedings:
- A branch of a foreign legal entity fails to submit tax returns within twelve months, it is impossible to contact it at the location stated in the RAFP, and the division has not made any transactions using at least one Russian bank account within a year.
- Operations of a foreign division are contrary to the Constitution of the Russian Federation, international treaties, legislation, pose a threat to the sovereignty, political independence, territorial integrity and national interests of the Russian Federation.
- advising on all issues associated with liquidation;
- development of required documents;
- organisation of translation into Russian and other languages;
- submission of documents to and their obtaining from competent authorities;
- accounting services in case of closure;
- termination of labour relations with employees in case of liquidation.