Liquidation of an inactive legal entity
- Liquidation of an inactive legal entity: grounds, reasons, initiators
- Procedure for liquidation by the tax authority of an inactive legal entity
- Judicial procedure for the liquidation of an inactive legal entity
- Procedure for liquidation of an inactive debtor legal entity
- Challenging the resolution of the tax authority on the liquidation of an inactive legal entity
The liquidation of an inactive legal entity by a tax authority is a multi–stage procedure that takes place in strict accordance with the requirements of the legislation. A commercial organization is not considered to be abolished, even if it has ceased to conduct actual activities, until a corresponding entry is made in the register.
Commercial firms and companies may cease their activities for various reasons. Business owners or government representatives have the right to initiate the procedure, but a court decision is necessary for this. It is more profitable for entrepreneurs when the activity stoppage occurs voluntarily, on their own initiative. This way the business reputation suffers less, the risks of fines are reduced. However, sometimes companies are liquidated judicially – at the request of state authorities.
Below we will talk about cases when a company is abolished by the tax inspectorate on the basis that the business has not been functioning for a long time. The liquidation of an inactive legal entity by the tax authority occurs due to the exclusion of the enterprise from the Unified State Register of Legal Entities (EGRUL).
Exclusion from the register does not entail the transfer of rights and obligations to the legal successors. Despite the prevalence of such a procedure, many companies have no idea on what parameters they can be declared invalid, not to mention what consequences such a decision of the registering authority entails.
Liquidation of an inactive legal entity: grounds, reasons, initiators
In order to liquidate an inactive legal entity, the tax authorities must first make sure that the company has ceased to function. To do this, it must meet the criteria established by Article 64.2 of the Civil Code of the Russian Federation. An organization that does not actually operate is considered to be inactive:
- does not provide financial reports that are required to be submitted regularly by Russian legislation on taxes and fees;
- does not conduct financial transactions on at least one of the open bank accounts.
To learn more about when it is possible to liquidate an inactive legal entity by a tax authority, it is essential to research the legislative framework, according to which an enterprise can be declared inactive only if during the last calendar year, which preceded the decision by the authorities to abolish the entry in the register, it did not submit tax reports and did not conduct any financial transactions through its own accounts. Otherwise, the authorities have no right to initiate the exclusion of a company from the register, referring to the fact that it has ceased its activities.
Also, organizations that do not have sufficient financial support for the independent liquidation of an inactive legal entity are subject to exclusion from the Unified State Register of Legal Entities. In this case, the state register must contain for more than six months an entry indicating the unreliability of information concerning the company.
Procedure for liquidation by the tax authority of an inactive legal entity
Representatives of the state may exclude an enterprise from the Unified State Register of Legal Entities extrajudicially in the event that it has actually ceased operations. At the same time, there are circumstances when the decision to liquidate an inactive legal entity cannot be taken by the tax authority:
- in case of bankruptcy of a company subject to exclusion from the register,
- during the procedures of supervision, financial rehabilitation, external management and bankruptcy proceedings.
When the tax authority decides on the upcoming exclusion of a legal entity from the register, an announcement is placed in the official sources. This takes up to three days. Together with the resolution on exclusion, information is also published on how to act for interested people and enterprises whose interests are affected by the exclusion of this organization from the register.
It is important to note that as soon as the information is published in official sources, within three months the authorities have no right to exclude the company from the Unified State Register. This is due to the fact that the law provides creditors and other interested parties with the opportunity to declare their claims and interests. Because as soon as the company officially ceases to exist, they will no longer be able to collect their debts. But the liquidation of an inactive legal entity can be carried out in the usual manner provided for in Article 61 of the Civil Code of the Russian Federation.
If no applications have been received by the tax authority within a three-month period, an entry is made in the register on the exclusion of a legal entity that has actually ceased its activities, based on a resolution of the registering authority. After the appearance of the record, the existence of the business is officially considered over, and no one can have any material claims against an organization that is no longer functioning.
Judicial procedure for the liquidation of an inactive legal entity
The authorities can settle issues related to the “frozen” company in two ways. The first of them we described above is the administrative procedure for the abolition of a company that actually stopped working a long time ago. The second way to exclude a company from the register is more difficult: through judicial procedure.
A company is a public association, and according to the law it can be excluded from the Unified State Register of Legal Entities on the basis of a lawsuit filed by the registering authority. Such measures are resorted to when a company repeatedly fails to provide information about its activities, as required by law.
In other words, the authorities can initiate legal proceedings due to the fact that the company violates the laws, hides information. The district courts are engaged in the settlement of such cases, relying on the rules of administrative proceedings.
Procedure for liquidation of an inactive debtor legal entity
The fact that the process of excluding a legal entity from the Unified State Register of Legal Entities is not a liquidation procedure deserves special mention. It does not provide for actions with the property of the enterprise, including those aimed at satisfying creditors’ claims. If an inactive company has property and outstanding obligations to partners, the bankruptcy procedure of the absent debtor is applied. This is a completely different process that requires different approaches and a legislative framework.
A prerequisite is the presence of absence criteria:
- Non-implementation of activities;
- The absence of the head of the company and the inability to determine his location.
The bankruptcy procedure of the absent debtor is initiated by the tax authority. The laws of the Russian Federation allow the case to be considered in a shortened period of one month. The legislation takes into account that in the absence of the debtor, it is impossible to apply supervision, financial recovery and external management to the company. But a simplified procedure for the liquidation of an inactive legal entity by the tax authority is provided. These issues are under the jurisdiction of the arbitration court: it decides whether to apply a simplified algorithm of actions.
To liquidate an inactive legal entity, a bankruptcy trustee is appointed, whose duties include publishing information about the bankruptcy of the company, as well as notifying creditors in written form about the bankruptcy procedure so that they can file claims.
If the property of the absent debtor is sufficient for settlements with creditors, the bankruptcy trustee has the opportunity to file a petition for the transition to the general bankruptcy procedure. However, practice shows that this condition is rarely met, therefore, with a high degree of probability, it will be needed to stick to a simplified scheme of actions.
Challenging the resolution of the tax authority on the liquidation of an inactive legal entity
In case of disagreement with the actions of the tax authority by the company, its creditors, as well as others, they have the right to challenge the resolution.
The form P38001 is established for filing objections of the Federal Tax Service. A statement of disagreement with the decision is submitted to the registration authority by which this decision was made within 3 months from the date of its publication. Upon receipt of the relevant application, the company cannot be excluded from the Unified State Register of Legal Entities. For creditors and other persons whose rights were affected by the exclusion of a legal entity from the register, the term is extended to one year from the day when creditors or other persons learned or should have learned about the violation of their rights.
The legislation establishes the possibility of filing objections in various forms:
- Postal delivery;
- Electronic document with electronic signature;
- Personal submission of an application to the tax authority;
- Sending objections through a notary.
VALEN company will help to avoid the adverse consequences of the liquidation of an inactive legal entity, file an objection to the resolutiom of the tax authority 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 enterprises, but also with foreign businesses that have partners and representative offices in the territory of the Russian Federation.
To consult with our lawyers on the liquidation of an inactive legal entity or to order services, leave a request on the website or dial the number: +7 (495) 7-888-096! We are also waiting for you at the VALEN office in Moscow by appointment.
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