For various reasons, in practice, a situation where the continued operation of the company appears to be ineffective, its elimination is seen as the best way out of this situation. The necessity of closing can occur for various reasons, such as loss of ratio, getting rid of tax claims, or the absence of an entrepreneur interested in further development. Resolution of this issue: the decision to close the company.
Liquidation of legal entities is the termination of the legal entity without transfer of rights and obligations in succession to other parties. Furthermore, it is a form of termination of legal entities, which consists of the elimination of their affairs and property. At the same time there is a termination of their production, trade, scientific, technical and social activities, satisfaction of their creditors, return of shares to members of legal entities, the sale of the property.
A legal entity may be liquidatedas a voluntary and compulsorily. The same body of registration, which allowed authorizing the creation of the same legal entity, shall make decision on the liquidation of the legal entity.
In accordance with the Civil Code of the Republic of Uzbekistan and the Actsof the Republic of Uzbekistan "On joint-stock companies and protection of shareholders' rights", "On Limited and Additional Liability Companies", enterprise may be liquidated voluntarily by the founders of the legal entity. In case of violation of the legislation, liquidation of legal entity occurs by the court: so-called compulsory liquidation.
In voluntary liquidation of legal entities, decision to liquidate is made by the general meeting of participants of limited liability companies and the general meeting of shareholders in joint stock companies. In this case, the process of elimination is that the company is removed from the register of the tax authority, the district office of the Pension Fund, the District Department of Statistics, all accounts are closed, documents of the legal entity being shelved and there is a relevant record of the legal entity’s liquidation.
Liquidation of companies of different legal forms of ownership differs by specific details of each of these forms (whether it is Ltd, JV, Inc. etc.). Moreover, the implementation of a voluntary liquidation requires a wide range of knowledge in the field of labour law, since it is necessary to carry out competently the law in compliance with the termination of the employment relationship with the employer's employees, including the manager.
Also there is a need of the correct application of the tax legislation, since the entire period of voluntary liquidation is accompanied by a permanent job with tax inspectors on deposit accounts, reporting for past periods, tax inspection and delivery of interim liquidation balance sheet.
A kind of "minus" of such form of liquidation is long-term process and complete verification of financial documents, which can often result in a recalculation of taxes, fines etc. The difficulty also lies in the fact that for the formalization of liquidation of legal entity the publication of listing on the Elimination, correspondence with creditors, preparation of the liquidation balance are required and, if necessary, to attract professionals such as auditors and evaluators.
During the company's activities, solid baggage of payables, problems in tax and accounting is accumulated. One of the hardest stages in liquidation, as a rule, is deregistration at the tax authority.
Attempts to operate independently, without the involvement of specialists often causes prolonged debilitating circulation by government agencies, large cash outlay and nervous breakdowns. If an entrepreneur value their time and health, it is recommended to hire the services of professionals, including lawyers. Specialists may help to choose the optimal path of liquidation, but before that, the businessperson must decide for himself/herself some fundamental questions as the main criterion for the choice of closing a business is the reason that led to the closure of the company. It depends on them the choice of form and scheme of the liquidation process. To date, experts offer several options for liquidation of legal entities. Letusconsidereachofthemindetail.
Liquidation of the company by owner's decision is the "cleanest" and is optimal in case of absence of accounts payable or if there are sufficient assets for its repayment. There is the obligatory passage of audits by the tax authority while liquidation by decision of business owner. Because the company is checked for the last time, the tax authorities may try to verify very "carefully" and not always such check can be objective. Experts tend to accelerategreatly the process of passing the checks completely while accompanying procedure taking into account all the nuances. Nevertheless, this procedure can take time from three to six months.
Many professionals offer services of so-called "alternative liquidation". As a rule, it is about changing of the founders, director and chief accountant. By this method, the rights and obligations of the founders of the liquidated companies are moving to new shareholders. This option has significant advantages: the short time and small cost. However, in fact, these actions are not the liquidation in the full sense of the word: the organization still exists, continuing to be in the same tax office as before, and anytime may be subjected to scrutiny by all the attendant problems for the former governance.
Usage of the mentioned above method of liquidation of the legal entity makes sense only if the business is really "no-hassle", i.e. has no payables and debts to the budget, all accounting and tax reporting were provided by applicable law, prepared and put in full and on time (or, if not on time, all required in such cases fines and penalties must be paid). In all other cases, this method of "liquidation" of the problematic organization will not solve the problem, and most likely in the near future can add new ones.
Partner, Head of Corporate Practice
Diplomat Law Firm