Liquidation of the company through sale. What advantages does this method of closing an LLC provide?
- The legislation of the Russian Federation provides for two types of liquidation of the company
- Features of liquidation of a company by sale to another owner
- The procedure for closing a company through a purchase and sale transaction
- The procedure for closing a company through the transfer of the company to a new owner
- Advantages of closing a company through sale
The liquidation of a company is a procedure for the termination of the activity of a legal entity, which can be achieved in various ways.
The legislation of the Russian Federation provides for two types of liquidation of the company:
In this case, the owner of the company or the founders’ meeting makes an independent decision to close the company. As a rule, the voluntary method of business liquidation takes at least 4 months. During this period, a desk tax audit of the interim and liquidation balance sheets is initiated with respect to the legal entity, reconciliation of all calculations with the budget is carried out, including for previous periods, possible debts to counterparties or creditors are analyzed. The process of voluntary liquidation also includes publication in the media, filling out forms and payment of state fees. As a rule, such a procedure requires seeking help from qualified lawyers, since independent closure can take a long time.
The process is the closure of the company by a court decision or tax inspection. As a rule, the judicial authorities liquidate those companies whose activities are recognized as criminal or undesirable by the decision of the Ministry of Justice.
As for the Federal Tax Service, it relies on other grounds for closing firms. As a rule, they are related to the fact that:
- A legal entity is not engaged in real entrepreneurial activity, that is, it does not settle accounts with counterparties and does not submit reports.
- A note has been made for the company about the unreliability of the data contained in the Unified State Register of Legal Entities. Unreliability may be introduced in terms of information about the head or participants of the LLC, if they do not appear for questioning on the inspector’s summons or after checking the location of the business. As a rule, after making an entry, the company has the right to eliminate deficiencies in the data contained in the Unified State Register within 6 months.
It is important to take into account that the tax inspectorate excludes thousands of companies from the register every year. This indicates the scale of violations and the smoothness of the liquidation procedure on the part of the Federal Tax Service.
It is undesirable to bring the company to compulsory liquidation, since such a procedure has negative consequences. First of all, this concerns the disqualification of the CEO for up to three years. This means that he will not be able to become a founder of a new legal entity and participate in the board of directors of another company. The rule also applies to participants who have more than 50% of the votes in the organization.
However, if an entrepreneur intends to retire from business relatively quickly and without major problems, then he has an alternative option – closing the company through a sale.
Features of liquidation of a company by sale to another owner
At its core, the closure of a company through a sale is a process of changing the founder/group of founders and the management of a Limited Liability Company. This form of legal transfer of rights can be carried out on the basis of Article 132 of the Civil Code of the Russian Federation, which equates LLC to real estate with all property and assets that are listed on the balance sheet of the company. This, by the way, includes cash, buildings, equipment, materials, products, trademarks, debts and obligations.
The legal framework governing the closure of an LLC through the sale to another entity assumes the following grounds:
- Clause 2 of Article 434 of the Civil Code of the Russian Federation prescribes to have a purchase and sale agreement drawn up in writing with a list of all assets and liabilities, as well as the value of the company based on the results of the inventory.
- Article 561 of the Civil Code of the Russian Federation prescribes to have an inventory report, an accounting balance sheet, a list of existing debts of the enterprise and the conclusion of the audit company.
- Article 34 of the Civil Code of the Russian Federation prescribes to obtain the written consent of the spouse to conduct a transaction for the sale of the company, in cases where the company is considered jointly acquired property.
Technically speaking, the liquidation of an LLC through sale is possible by two methods:
- Through the signing and notarization of the contract of sale.
- Through the transfer of the company to new owners and the change of data in the Unified State Register.
It is important to note that both methods do not require a long amount of time and significant investment of resources, however, entrepreneurs prefer to transfer a company to another person through a purchase and sale agreement.
The procedure for closing a company through a purchase and sale transaction
To carry out such a procedure, the following procedure must be performed:
- Organize a general meeting of owners, where a decision will be made on the sale of the company.
- It is advisable to send a notification to creditors about the intentions to sell the company to another owner, since together with the company, the founder will receive its debts.
- Draw up an agreement on the alienation of a share in the authorized capital of each participant.
- Make a proposal to conclude a transaction (offer) from the owner.
- Prepare an application for the Federal Tax Service on the form P14001 for making subsequent changes to the Unified State Register of Legal Entities.
- Sign a contract of sale with the acquirer of assets and notarize it. At the same time, put signatures on the act of acceptance and transfer.
- No later than three working days after signing the contract, send to the Federal Tax Service a copy of the contract and the decision of the founders on the alienation of shares in the company.
It is important to take into account that when certifying an agreement in the notary’s office, all participants in the transaction must be present – former owners and new owners. They must have with them a purchase and sale agreement and an agreement on the alienation of shares from each founder, an application, statutory documents, a “fresh” extract from the Unified State Register of Legal Entities, passports of the company’s participants, marriage certificates and consents from spouses, as well as payment orders to deposit a share into the company’s authorized capital account.
It should be noted that after completion of all procedures, information about changes is submitted to the state register and to the bank where the settlement account is opened.
The procedure for closing a company through the transfer of the company to a new owner
In legal practice, there are situations when it is unprofitable for the owner of a company to re-register a company under a contract of sale. In this case, an option with the exit from the share of the old owners and the introduction of new ones may be relevant. To implement this process, the future owners of the company need to prepare the following package of business papers:
- A statement on Form P13001 reflecting future changes.
- A statement from each of the company’s participants.
- Minutes of the owners’ meeting with the decision on the redistribution of shares in the authorized capital.
- Amendments to the company’s articles of association.
- A copy of the payment order for the payment of the state fee.
- A document confirming the payment of shares in the authorized capital of the company.
Owners who are going to withdraw from the founders must prepare an application in the form P14001, certified by a notary.
The process of redistribution of shares in the authorized capital takes place during the introduction of changes to the register of the Unified State Register of Legal Entities after submitting the relevant documents to the Federal Tax Service.
Advantages of closing a company through sale
- The procedure is simple and clear and does not take much time. As a rule, voluntary liquidation of a company is a process with aggravating circumstances in the form of drawing up an interim and final liquidation balance sheet, as well as preparing for a desk or on–site tax audit. It takes several months. In the case of a sale, you can avoid preparing a large number of documents and save time on bureaucratic procedures.
- It is almost impossible to voluntarily close a company with debts. In the event of a sale, creditors and counterparties may agree to transfer the debt to new owners, who, in turn, may assume debt obligations.
- Material benefit. The former owners of the company receive a profit corresponding to their investments in shares of the authorized capital or exceeding them.
The transaction will also have certain advantages for the purchasers of the LLC. They consist in:
- Buying a ready-made business. In this case, the new owners save time and investments for the opening and “promotion” of their business. The sale process does not affect the operation of the enterprise and the profit it brings.
- Established business processes and sales market. One of the advantages of buying a ready–made company is a ready-made base for the sale of products, a list of suppliers and a logistics system.
- No need to issue certificates and licenses. In the case of engaging in licensed activities, the buyer of the finished company gets rid of the need to undergo the process of accreditation and modernization of production under the requirements of the licensing commission.
Question and answer
In what cases will the liquidation of the company through sale be particularly relevant?
In essence, it is possible to sell the company to another owner with different business conditions, if there is the consent of creditors to sell in case of debts. However, this order will be most relevant in the following cases:
- For companies submitting zero reports.
- For companies with small turnover.
- For companies that have problems with filing reports. In this case, difficulties may arise with the voluntary liquidation of the company.
Note that in the case of an open bankruptcy case, this method will not work. In this case, there are great risks for the buyer that the property may be withdrawn into the bankruptcy estate without guarantees of return of the invested funds.