Liquidation of a legal entity. Methods, consequences, purpose. Consistency and general characteristics.

Jan, 15 2024


Liquidation of a legal entity is a procedure provided for by law in order to terminate activities without transferring rights and obligations to other persons. Termination of the operation of an enterprise that is registered as a legal entity is a process, each stage of which is regulated by the legislation of the state. In case of its violation, the procedure may be delayed for a long time or come to a standstill, which is not beneficial for the owner of the company, and also threatens with various fines.

Methods of liquidation of a legal entity

Liquidation of a legal entity can be carried out in two forms:

  • voluntary;
  • forced.

Voluntary liquidation is a procedure that is initiated on the basis of a decision of the participants of a legal entity. The reason may be the inexpediency of the company’s further activities, the fulfillment of the goals for which it was created, or the expiration of the period of activity.

Unlike voluntary, compulsory termination of work occurs only in court. A company may be forcibly liquidated if it is engaged in activities prohibited by Russian law or it does not have a license. This procedure is also resorted to if irreparable violations were committed in the process of its registration. The relevant lawsuits are sent to the court by state or local authorities.

Consequences of liquidation of a legal entity

The liquidation of a legal entity entails, first of all, making an entry in the Unified State Register of Legal Entities (USRLE) on the termination of the company’s activities. From that moment on, the company no longer exists as a subject of any legal relationship. In some cases, its rights and obligations may be transferred to other legal entities.

Based on the decision on liquidation, a legal entity may terminate employment contracts with all employees. At the same time, all employees must be personally notified of the upcoming dismissal no later than two months in advance. Employees are entitled to severance pay in the form of average earnings per month. In addition, they retain the average monthly salary for the period of employment, which is paid no more than two months from the date of dismissal.

When a legal entity is liquidated, the legislation prescribes notifying not only its employees, but also creditors about the upcoming termination of the company’s work. To do this, the liquidation commission must prepare and send documents to each creditor with a notification, which must specify the time within which they can declare their claims. This period cannot be less than two months.

The sequence and general characteristics of the liquidation of a legal entity

Termination of any company registered as a legal entity is a process that usually takes about a year. If for some reason the liquidation period needs to be extended, this can be done by a court decision. It all starts with the decision to terminate work – it happens at a general meeting. After that, the document confirming the decision is sent to the tax service. Then the next stage of the liquidation process begins.

Appointment of a liquidator or liquidation commission

After the decision is made, it is necessary to determine the person (liquidator) or a group of persons (liquidation commission) who will be responsible for the procedure. In addition, they will have all the powers to manage a legal entity. The commission usually includes the head of the company and several of his employees, for example, an accountant, a staff lawyer, etc.

Notification of State bodies

After the decision on liquidation is approved, it is necessary to notify the tax service within three working days. This is done only at the place of registration of the legal entity. To do this, a document is submitted in the appropriate form and a decision on liquidation is provided. On the basis of these documents, within five working days, a record is made in the Unified State Register of Legal Entities that the legal entity is in the process of liquidation.

Publication of liquidation information

After notifying the Federal Tax Service, it is necessary to publish a notice on the liquidation of the company in the journal “Bulletin of State Registration” and on the Fedresurs service, which also specifies the terms and procedure for filing creditors’ claims.

Tax audit

During the liquidation, the territorial tax authority may appoint an on-site tax audit. At the same time, the time of the previous audit is not taken into account. At the same time, the period not exceeding three years, which preceded the year of the decision on the audit, is checked.

Preparation and delivery of the interim liquidation balance sheet

The liquidation commission must draw up an interim liquidation balance sheet. It contains information about the composition of the organization’s property, the list of claims submitted by creditors, as well as the results of their consideration. This is done after the company has published information about the termination of work, notified creditors about it and they have stated their claims.

After drawing up the interim liquidation balance sheet, the commission notifies the registering authority. At this stage, liquidation reports are submitted to off-budget funds and tax reports are submitted ahead of schedule.

Repayment of creditors’ claims

After the delivery of the interim liquidation balance sheet, it is possible to proceed with the repayment of creditors’ claims. It is necessary to settle with creditors in the order of the queue established in the legislation. If the company does not have enough property to satisfy all creditors’ claims, further liquidation of the legal entity can only be carried out in bankruptcy.

Liquidation balance sheet and distribution of the company’s assets

After satisfying the creditors’ claims, the final liquidation balance sheet is drawn up, where the remaining property of the company is indicated. It can be distributed among the participants after the approval of the liquidation balance sheet. Based on the results of the distribution, a document is drawn up indicating the property transferred to each participant. The act must be signed by all participants of the legal entity.

Closing of bank accounts

The liquidation of a legal entity is the termination of its activities, therefore, the established commission closes the company’s bank accounts. They can be closed earlier – by the time the liquidation balance sheet is handed over. However, in practice, it is not recommended to close a bank account until a reconciliation with the tax authority has been made and all documents and reports have been submitted.

The following documents are required for the state liquidation of a legal entity:

  1. form;
  2. statement of the liquidation balance sheet;
  3. receipt of payment of state duty;
  4. documents specified in the Federal Law “On Individual Registration in the compulsory pension Insurance system”.

If there are no grounds for refusal of registration, then the tax service enters information into the Unified State Register of Legal Entities that the company has ceased its activities. This date is considered the date of the official liquidation of the company, after which it is possible to obtain the relevant documents confirming this fact.

State authorities may refuse for several reasons. For example, if the company’s debts have not been repaid, the deadlines for filing creditors’ claims have not been met, or there are other violations in the liquidation procedure established by the state.

Purpose of liquidation of a legal entity

The main purpose of the liquidation is to exclude a company whose activities were terminated by the decision of the participants or on the basis of a court decision from the Unified State Register of Legal Entities. After that, the company officially ceases to exist and cannot conduct any activity.

The liquidation period may not exceed twelve months. If it is not completed within a year, this period may be extended in court, but not for more than six months. If the process is not completed within this time, it will be necessary to re-make a decision on liquidation and perform the entire procedure from the beginning with the registration of new documents.

VALEN will help with the organization and liquidation of a legal entity efficiently and in a short time. We offer comprehensive support for legal entities planning to terminate their activities, help with the preparation of documents and their submission to official authorities. Please contact us and we will advise you in detail on any issues that arise during the liquidation process.

Frequently Asked Questions:

Who can decide that a legal entity will be liquidated?

A legal entity can make such a decision on any grounds, or a court.

Who manages all the affairs of the legal entity after the decision to terminate the activity was made?

After the decision on liquidation is made, a liquidator is appointed or a liquidation commission is formed, which manages the affairs of the legal entity and represents the interests of the company in court.

Which court decides on the liquidation of an LLC?

The decision on compulsory liquidation is made by the arbitration court.

Who controls the liquidation procedure of an LLC?

The registering body is notified by the head of the liquidation commission about its creation, as well as about the preparation of the liquidation balance sheet.

Who carries out the liquidation procedure of the LLC?

The tax (registering) body enters information about the appointment of a liquidator or the creation of a liquidation commission in the Unified State Register of Legal Entities, the head of the LLC has a record sheet about it.

Who signs the application for liquidation of the LLC?

The legal entity is represented by the liquidator or the head of the liquidation commission throughout the liquidation procedure and signs all documents.

Where are the notices of liquidation of the organization sent?

The notification is sent to the tax service within 3 days after the decision is made that the LLC will be liquidated.

Is information about the liquidation of an LLC published somewhere?

It is necessary to submit information to two sources — the journal “Bulletin of State Registration” and the Unified Federal Register of Legally Significant Information about the facts of the activities of Legal Entities, Sole Proprietors and Other Economic Entities (Fedresurs).

What payments are due to employees during the liquidation of an LLC?

As a rule, all employees are dismissed and receive a salary for the days worked, money for unused vacation and compensation in the amount of 1 salary.

If the LLC is in liquidation, how to recover the debt from it?

State your requirements after the start of the liquidation process.

If the debtor is in liquidation, where to send the writ of execution?

The executive document is sent to the liquidator or the head of the liquidation commission.
How quickly will the LLC be excluded from the Unified State Register of Legal Entities?
The term varies from 4 to 12 months.

Author of the article
Liquidation of a legal entity. Methods, consequences, purpose. Consistency and general characteristics.
Valentina Khlavich
Managing Partner
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