Liquidation of a Limited Liability Company with Foreign Unfriendly Participation
In light of sanctions imposed by unfriendly countries, numerous companies with foreign involvement registered in Russia have chosen to undergo liquidation. This decision is due to a number of challenges and intricacies arising from sanctions measures, including the following:
1. Restrictions on funds transfer – only a limited number of banks can facilitate currency transfers to jurisdictions deemed unfriendly.
2. Limitations on dividend payments and fulfillment of financial obligations. Under the presidential decree, residents of Russia are prohibited from transferring more than 10 million rubles monthly to repay debts to lenders from unfriendly nations. If the transfer exceeds the specified limit, transactions must be conducted through a designated “C” account, on which funds from lenders from unfriendly jurisdictions are effectively blocked.
The process of liquidating an LLC with a “unfriendly” partner involves the following stages:
- The process of liquidation begins with the resolution of the participant/general meeting of participants to liquidate a company and the appointment of a liquidator. In such cases, documents must be submitted to the relevant tax authority through a notary.
The decrees imposing sanctions requiring permission from a government commission of the Ministry of Finance for transactions involving the transfer of shares/stocks with a “unfriendly” element have also led to an ambiguous situation, as notaries have begun to require permission for liquidation from the government commission.
Therefore, at present, many notaries are refusing to perform actions related to liquidations involving participants from “hostile countries” without permission from the government commission, due to a lack of clear guidance.
Obtaining permission from the government commission can be a time-consuming and lengthy process, consisting of the following stages:
1. Submission of documents to the relevant ministry for review
2. Consideration of documents by the Sub-Commission of the Ministry of Finance and decision on granting or denial of a permit
At present, there are no specific regulations or timeframes for the decision-making process of the governmental commission, which adds complexity to the permit application process.
- However, if it were possible to initiate liquidation proceedings through a notarial procedure without obtaining permission, it would be necessary to comply with the legal procedures in the future, such as publishing a notice of liquidation in the Federal Register and the State Registration Bulletin.
- Two months after the publication of the notice in the State Register and after creditors’ claims have been satisfied, it would then be possible to submit an interim balance sheet to the tax authority and notify the relevant tax office.
- Prior to the final stage, it will be necessary to obtain certificates from the tax and social funds confirming the absence of any outstanding debts in order to ensure that there are no unpaid claims and that all reports have been filed.
- Upon registering the final step of liquidation, in addition to the resolution and application for liquidation, a governmental permission may also be required, especially if liquidation payments are to be made to shareholders from “unfriendly” countries (i.e., after all creditors’ claims have been satisfied).
In this case, permission will need to be obtained, payments made to the shareholders, and only then will the final liquidation balance be submitted.
If there are no payments, a company with an “unfriendly” shareholder is typically liquidated and removed from the tax registry.