Blog Liquidation of company

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.

The procedure for the termination of the company is regulated by law at each stage. Not only the owners of the company can dissolve a company: this process can also be initiated through a judicial proceeding. However, for any company, non-judicial liquidation of a legal entity is the best outcome, since it does not involve additional risks for the reputation and finances of an enterprise.

There are many reasons for liquidating a commercial organization including decision of tax authority. Also, it can be referred to the voluntary liquidation of the company by decision of its members or management. The decision to terminate a business can be made because it has achieved its goal or the deadline for which it was founded has passed.

A particular case of terminating company’s activity is to declare insolvency – situation when the company is unable to pay its credit debts, dismissal compensations and other compulsory payments. Grounds for liquidation of a legal entity due to the bankruptcy and its procedure are stated in the law on “Insolvency (bankruptcy)”. This is the essential law regulating situation when a company is not able to fulfill its obligations.

Russian law provides for several types of companies’ activity termination. A legal entity may be wound up by decision of its participants or the court. In the first case, company ceases to exist in connection with the expiration of the period for which the enterprise was created, or in connection with the achievement of the purpose of its operation. For example, if a company was created to implement a construction project, after putting the facility into operation, the company may officially cease to exist.

A company may be deemed to have been dissolved and ceased to exist only after it has been recorded in the registry. Thus, the final stage of liquidation of any enterprise is the state registration of the liquidation of the legal entity. Without an entry in the register, the company cannot cease to exist, relevant changes are made by the Federal Tax Service or the Registration Centre.

The official winding up of a legal entity is a difficult procedure which takes time and requires concerted actions of a huge number of professionals. First of all, executive bodies inform about the beginning of the procedure through the media, then they appoint a commission and draw up an interim balance. Once the debts are settled, the companies approve the final balance. It is also necessary to fire the employees, pay salaries and compensation to employees – and this is not the complete list of actions.