Changes to legislation — Accelerated liquidation of a company
A new law will take effect on July 1, 2023, enabling companies to cease operations in Russia according to a simplified procedure[1].
According to this law, a company may use the simplified liquidation procedure if on the day it files an application for its liquidation:
- It appears on the Register of Small and Medium-Sized Enterprises (SMEs);
- It is not a VAT payer or exempt from calculating and paying VAT[2];
- It has no unsatisfied creditor claims;
- There is no information in the Unified State Register of Legal Entities (USRLE) about its details being inaccurate;
- It has no outstanding obligations with respect to taxes, charges, or any other compulsory payments;
- It does not own any real estate property or motor vehicles; and
- It is not going through liquidation, reorganization, bankruptcy or exclusion from the USRLE pursuant to a decision made by the registration authority.
A company will be liquidated (excluded from the USRLE), unless its creditors or other persons, whose rights or legitimate interests are affected by such exclusion, raise any objections within three (3) months aftera decision on its upcoming exclusion is published in the print media.
This procedure allows makes it possible to exclude a company from the USRLE quicker and without compliance with some formalities as compared with the voluntary liquidation procedure, which on average takes 5 to 8 months to complete.
But it is not all that easy…
One should keep in mind the special procedure for entering into transactions and conducting operations involving shares in limited liability companies that are related to persons from so-called ‘unfriendly’ countries. Such transactions and operations require prior authorization from the Russian Government Commission. This procedure also applies to certain types of transactions in shares in joint-stock companies, which we discussed here in more detail.
This special procedure applies, among other things, to transactions and operations that result, directly and/or indirectly, in terminating the rights of ownership, use, and/or disposition of interests in limited liability companies and shares in joint-stock companies. We believe that the termination of rights in interests/shares due to the liquidation of a company may be regarded by government authorities and other persons (e.g., notaries) as an ‘operation’ to terminate the rights of ownership, use and/or disposition of interests/shares, which requires authorization from the Russian Government Commission pursuant to this special procedure. For this reason, before going into simplified liquidation, companies that are related to persons from so-called ‘unfriendly’ countries will probably need authorization from the Russian Government Commission for such liquidation.
If you have any questions or you would like to discuss this further, please feel free to email Julia Talagaeva or Artem Eretenko.
Sincerely,
[1] https://sozd.duma.gov.ru/bill/164662-8 (in Russian)
[2] A company may cease to be a VAT payer if it switches to another tax regime, for example, the simplified tax system (STS) by filing notice with its tax inspectorate not later than December 31 of the calendar year preceding the calendar year, from which the company wishes to cease to be a VAT payer.