The Stages of Company Dissolution

Dissolution, closing down, or terminating operations – there are many phrases used to describe this event. Whatever word you choose, the goal remains the same: concluding the life of a company in an inexpensive fashion and, most importantly, without bringing any negative consequences upon the owners. Today, we will discuss how the procedure of closing down a company’s operations is performed.

Consider a case from our practice. An entrepreneur sought consultation regarding an LLC that had been in operation for over five years. The company was engaged in retail, complete with a website, employees, and a cash register. Unfortunately, due to plummeting demand and rising supplier prices, the owner could no longer sustain the business or payroll. He needed to close the company as painlessly as possible.

Upon analyzing the situation, our lawyer proposed a voluntary dissolution of the LLC procedure, as prescribed by the Civil Code of the Russian Federation. If performed properly, voluntary dissolution allows a company to be closed without incurring negative consequences for its owners and president.

Required Documents and Information

To ensure the dissolution procedure is successful, it is vital to engage professional lawyers. The following information is required to prepare the necessary documentation:

• A copy of the current edition of the Articles of Association.
• The company's bank details.
• A copy of the passport of the person to be appointed as the liquidator.
• The company's contact phone number.

Stage 1: The Decision to Liquidate

The shareholders must unanimously pass a resolution to liquidate the company, appoint a liquidator, and establish a timeline (which cannot exceed one year). The liquidator, often a company executive or shareholder, acts on the company's behalf without a power of attorney during this period.

Within three business days of the resolution, the liquidator must notify the registration authority and enter a record into the Unified Federal Register of Information on the Facts of the Activities of Legal Entities (UFRIFALE). Documents may be filed in person, via a representative, or using a digital signature through a notary.

During this stage, dismissing employees is a critical step. Staff must be notified in writing at least two months in advance, and the State Occupation Service must be informed. Each employee is entitled to a "severance package," including salary and all owed payments.

Stage 2: Notification of Creditors

Once the registration office records that the company is undergoing liquidation, the liquidator must notify all creditors. This is done via a publication in the "State Registration Bulletin." This message includes the address where creditors can send their claims.

Creditors typically have two months from the publication date to submit claims. Even if the company has no known debts, this publication is a legal requirement. Additionally, it is highly recommended to notify known creditors individually via registered mail.

Stage 3: Intermediary Dissolution Balance

After the two-month notice period expires, the liquidator drafts an intermediary dissolution balance. This document lists the company's property, the claims made by creditors, and the results of their analysis. This balance is approved by the shareholders and serves as a basis for determining company solvency.

If the company has debts, they must be settled in a specific legal order:

1. Claims for injury to life or health.
2. Employee wages and benefits.
3. Taxes and payments to the state budget.
4. All remaining creditors.

Once the intermediary balance is filed and processed, the registration office updates the Unified State Register of Legal Entities (USRLE).

Stage 4: Final Dissolution and Removal from Register

In the final stage, the company’s bank accounts are closed, and a final check is conducted with the tax office and pension fund. The liquidator then prepares the final dissolution balance, ensuring no debts remain on the books.

The dissolution balance is submitted to the registration authority along with form P15016. If filed in person or by mail, an 800-rouble state fee applies; however, filing via a digital signature is exempt from this fee. On the sixth day after submission, the registration office enters the record of voluntary dissolution. At this point, the company officially ceases to exist.

Every company faces unique circumstances. Occasionally, the tax office may initiate an inspection, or a lack of assets may force the company into a bankruptcy procedure. To navigate these complexities, it is advisable to consult the Civil Code of the Russian Federation or seek professional legal support.

Our lawyers have extensive experience and will provide comprehensive assistance to ensure your LLC dissolution is handled professionally and efficiently.