Liquidating companies and business
Incorporating a company is indeed a difficult and multistage process confident people only may venture. Moreover, it is important to keep in mind that any business has its own life cycle and not every such cycle is the same. There are companies that operate long enough, while the others, who even have not managed to shape up their business, have almost ceased to exist.
Founders of the biggest and most successful business projects face sometimes such problems that they have to dissolve their businesses to solve them. There are times when shutting down the company is the only right option to bring the deadlock to an end. Generally speaking, there may be lots of reasons, but the outcome is the same: the business should be liquidated.
If you have made such decision, naturally, you wonder: "How to implement the procedure to shut down the company?" and "How to tackle all legislative peculiarities that are relevant?"
ALVA PRIVACY will help you to choose the most efficient way to liquidate your business, give high-quality and detail legal consultations on this matter and carry out, as soon as reasonably practicable and legally correctly, either bankruptcy or liquidation of your company of any ownership, notwithstanding the reasons why company is shut down and whether it has any indebtedness or not.
This article has been written to help you to put some clarity into certain legal aspects of legislative procedures for liquidating business entities.
Features of liquidation of a company in Ukraine
Thus, the Civil Code of Ukraine expressly defines options for dissolving companies. As the Civil Code of Ukraine provides, companies are dissolved by their reorganization (i.e., merger, acquisition, spin-off, transformation) or liquidation.
The liquidation of a company is a way to dissolve a company without its rights and obligations being assumed by other persons by way of legal succession. During the liquidation of a business entity, such entity is stricken off the Unified State Register and deregistered with the pension fund, tax service and social insurance funds.
According the Civil Code of Ukraine, a company may be liquidated either under decision of legal entity participants (owners) or under court ruling.
In addition, it is important to note that the bankruptcy procedure is one of the most wide-spread ways to liquidate a company using court judgments. The key preconditions for such procedure is that the debtor is not able to restore its solvency and satisfy creditor's financial claims. The bankruptcy procedure applicable to a company is rather complicated. There is separate Law No. 2343 –XII to implement the same.
We are going to describe in more detail the liquidation of business under decision of the founders (participants) of a company. The first thing to do is to make official decision on liquidation, which decision shall be confirmed by the relevant corporate document. Then, a liquidation commission or a liquidator should be appointed to deal directly with liquidation procedure. This procedure includes publishing notice of liquidation of the company in a specialized publication, making settlements, taking inventory, preparing a liquidation balance sheet, giving notice to the tax service and funds of the liquidation and filing necessary documents to such bodies, dismissing and making settlements with employees in accordance with the Labor Code of Ukraine, closing accounts with banks, obtaining necessary certificates, etc.
Once all of the aforementioned procedures have been completed, the chairperson of the liquidation commission or liquidator of the company applies to the registration service directly for registration of "liquidation", i.e., making in the register the relevant entry and deregistration of such company. Moreover, to liquidate a legal entity, the following documents must be submitted, among other things:
- registration card for liquidation;
- certificate issued by tax authority and confirm that there is no indebtedness;
- certificate confirming that there is no indebtedness to the pension fund and social insurance funds;
- certificate from archiving institution regarding the acceptance of documents intended for long-term storage.
Sometimes, an auditor's opinion is additionally required to confirm that the liquidation balance sheet is true and full.
The liquidation procedure is a very complicated stage-by-stage process requiring being careful to details, otherwise such procedure may be protracted substantially and, sometime, even take years. To dissolve a company in an expedient and proper manner, the situation with the company's assets and liabilities is not the only crucial issue, but the right choice of the manner of liquidation, which depends on the reason for which the company is dissolved.
Truly yours, ALVA PRIVACY team