Administrative liquidation of a legal entity

Mar, 27 2020

Administrative liquidation of a legal entity is a multi-stage procedure that is performed by decision of a tax authority. It is regulated by the legislation of the Russian Federation, violation of which may lead to refusal on company’s termination.

There is a large number of companies that have actually stopped working, but de jure continued to exist. This is primarily because if the record of the company’s termination does not appear in the unified state register, it officially continues to function.

The best way to liquidate an enterprise is a voluntary liquidation, when its members make a decision and submit an application to state authorities. However, the administrative way also has some merits:

  • Owners and managers of the company do not have to participate in the procedure.
  • In comparison with liquidation of a company through court, its members spend less time and funds, and their business reputation does not suffer much.

Conditions for the procedure

In order for the tax authorities to initiate the process, the situation must meet several criteria described in the law “On state registration of legal entities and individual entrepreneurs”. To begin with, the company must be declared inactive, it means it must actually have not operated for a year, does not submit financial statements on taxes and fees, and does not conduct financial transactions on at least one of the open bank accounts.

If the tax authority detects such an inactive enterprise, it starts the procedure for its official cancellation. This is pretty common in Russian state practice.

Procedure for administrative liquidation of a legal entity

A company can be excluded from the unified state register extrajudicially if it has de facto ceased to work. However, there are situations when officials do not have the right to make such a decision. These cases include:

  • Insolvency – the company cannot pay off its debts and pay salaries to its employees.
  • The observation procedure is one of the first steps taken when declaring bankruptcy.
  • Financial recovery is a work aimed at helping the company.
  • External management is a form of assistance to a company that is unable to fulfill its obligations.
  • The opening of bankruptcy proceedings is a possible outcome of the insolvency proceedings.

If there are no obstacles to start dissolving the company by tax authority, a notice is placed in the “State Registration Bulletin” within three days. It contains the information necessary for the creditors of the company to file their claims on time (within three months after the above-mentioned notice is published). In addition, the owners themselves can challenge the decision of the tax authorities or report violations of the procedure, if necessary.

VALEN will help you avoid the adverse consequences of administrative liquidation of a legal entity, to challenge the decision of state body to exclude the company from the unified state register of legal entities, and properly send applications to contractors. We work closely not only with Russian companies, but also with foreign businesses having partners and representative offices in Russia.

To consult with our lawyers or order services, leave a request on the website or dial: +7 (495) 7-888-096! We are also waiting for you at the VALEN office in Moscow by previous appointment.

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