Compulsory liquidation of a legal entity by tax authority

Feb, 25 2020


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.

However, in addition to voluntary suspension of activity, there is also a compulsory liquidation of a legal entity by a decision of tax authority or local government. In fact, such a procedure requires a court decision, which is preceded by a lawsuit by one of the public services.

The reasons for the compulsory liquidation of legal entities by the tax authority are indicated in art. 61 of the Civil Code of the Russian Federation. This is the main law governing the termination of business.

Thus, a court decision can be made on the basis of a request of tax body or local government. The law provides for the following reasons for the termination of the LLC:

  • violation of law upon registration of the organization, if the violation cannot be eliminated;
  • the organization carries out its activities without a license or permission to work;
  • business conducts prohibited activities or has repeatedly broken the law.

Recently, the most common reason for the liquidation of a legal entity by the tax authority is an unreliable address specified during registration. To solve this problem, the company is required to provide the tax authority with information about the current address, and if this does not happen, the authorities may demand the liquidation of business for breaking the law.

State authorities have the right to initiate verification of the LLC location at the address indicated in the Unified State Register of Legal Entities (USRLE). If the accuracy of the information is not confirmed, a request is sent to the business requesting to provide correct information about its location.

LLC must provide information about a reliable address within 30 days. If after one month the violation has not been eliminated, information on the inaccuracy of the data on the location of the organization is entered into USRLE. Further, the authorities apply to the court with a statement of claim on the compulsory liquidation of the legal entity by decision of the tax authority.

Moreover, in accordance with the judicial practice, in case if the court makes the appropriate decision, the costs of termination of LLC are borne by its members. In situations where the court obliges the members to officially terminate the existence of business and they do not fulfill this requirement within the scheduled time, a liquidator shall be appointed.

Another common reason for the liquidation of a legal entity by a tax authority may be a discrepancy between the net assets of the LLC and the minimum authorized capital. So, if the amount of capital of a company for two or more years is more than net assets, and the organization does not decide on the voluntary termination of activity, the authorities have the right to file a lawsuit.

At the same time, judicial practice does not consider such violations as an unconditional reason for the liquidation of a legal entity by a tax authority. The members can take measures on LLC recovery, remedy the situation and then state authorities will not have any complaints to the LLC.

  • The registration authority enters into the register information on the termination of the company.
  • The authorities appoint a liquidation commission, which may include members and business owners. After that, the commission transfers the right to manage all the affairs of the organization.
  • Information about the procedure is published in an official print publication with the name of the company, the date of the decision on liquidation, TIN.
  • Labor relations with employees are terminated.
  • An enterprise is isolated from other organizations.
  • Draw up and approve the final balance.
  • A list of documents confirming the legal procedure for conducting a compulsory termination of a business and a receipt for payment of a state fee are submitted to the authorized structure.

Russian law imposes responsibility on members for the failure to enforce court decision. So, when owners try to evade the execution of a court decision, appointed liquidators help to bring it into effect.

In such legal forms of legal entities as LLC and joint-stock company, the members are not liable for the obligations of the organization. Therefore, in case of insufficient property to repay debts to creditors or the budget, they only lose the value of the contributions made to the authorized capital of the organization but are not liable for their debts with personal property. There are less risks than in situations when personal finances and property of business members are seized to pay off debts.

VALEN company will help your company to avoid claims from state authorities and prevent serious consequences of the liquidation of a legal entity by tax decision, if it has already been passed. We will make sure that the necessary and correct information is entered into Unified State Register of Legal Entities and also help you to handle tax inspections.

You can contact our lawyers by any of the available methods of communication. We also invite you to the VALEN office by making an appointment in advance: +7 (495) 7-888-096!

Author of the article
Compulsory liquidation of a legal entity by tax authority
Valentina Khlavich
Managing Partner
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