Company liquidation is a process that various circumstances can cause: financial difficulties, a change in business strategy, the wish of the founders to end the company’s activities. In this article, you can find the main aspects of company liquidation, including legal procedures, stages of the process, and potential pitfalls that owners may face. A detailed analysis of these factors will help business owners make reasonable decisions and minimise possible risks.
What is Company Liquidation?
All companies in Belarus are registered in the Unified State Register of Legal Entities and Individual Entrepreneurs (USR) since their establishment. Anyone can check the company’s status: it is working, is in the process of liquidation or has already been liquidated. The verification is available on the Unified State Register website. Formally, the liquidation of a company is the exclusion of a company from the Unified State Register. However, the liquidation procedure begins before a record of liquidation is made in the Unified State Register.
Who Can Start Company Liquidation
The state body or the company’s owners can begin the company’s liquidation procedure.
By the decision of the state body, companies are liquidated in certain cases. For example, a company is liquidated by a decision of a state body when it has not been operating for 24 consecutive months unless the owners have decided to liquidate.
By the decision of the company’s owners, it can be liquidated without explaining the reasons. To complete the liquidation procedure quickly and correctly, we recommend contacting our experienced lawyers in corporate law. However, there are several cases when the owners are obliged to liquidate the company:
1. When the company is not working for 24 months.
2. When a company that is the business’s sole owner is liquidated.
3. When the company’s authorised capital is less than the minimum possible size established by the state according to the second and subsequent financial year results.
When Impossible to Liquidate
The owners cannot start liquidation in the following cases:
1. If the company has been included in the audit plan, it is impossible to liquidate it until the end of the audit. The inspection plan can be checked for free on the State Control Committee of Belarus’s website. Therefore, we recommend checking the audit plan before making a decision to liquidate a company.
2. If a company has unpaid debts to business partners and staff, it must file for bankruptcy rather than liquidation. For all questions related to the company’s bankruptcy, you can consult our experienced lawyer.
What the Term of Liquidation
The state regulates the liquidation procedures of companies. Therefore, participants in the liquidation process must comply with certain deadlines and obligations.
The term of liquidation is set by the company’s owner or management body when the company’s charter prescribes the powers of this body related to the liquidation of the company. This period should be up to 9 months from the date the decision on liquidation was made. By the decision of the owner or the company’s management body, the liquidation period can be extended to no more than 12 months.
Why is it Important to Know
Both business owners, employees, and business partners need to know the company liquidation procedure. Here’s what can be important when you liquidate a business:
1. Legal Consequences
The company’s liquidation takes place per certain state requirements and procedures. Improper fulfilment of these requirements can lead to legal consequences, such as fines and liability for company debts.
2. Protection of the Founders’ Interests
Understanding the liquidation process, including asset allocation and debt repayment, will help founders protect their interests. Knowing your rights and responsibilities in this process prevents conflicts and misunderstandings.
3. Minimising Financial Risks
Liquidation should be carried out properly to eliminate financial risks, such as debts to creditors. The correct procedure helps to avoid claims for damages.
4. Preservation of Reputation
Improper liquidation of a business can damage the reputation of the former owners and complicate further business activities.
5. Taking into Account the Employees’ Rights
Liquidation also affects the employees’ rights. Knowing the procedure for dismissing employees concerning a company’s liquidation will allow you to organise compensation payments and correctly fulfil employee obligations.
6. Future Planning
If the business is not profitable or has no prospects, understanding the liquidation procedure can help founders move faster to new opportunities and projects without wasting time on unprofitable operations.
Thus, knowledge of the procedure for liquidating companies in Belarus is an important tool for entrepreneurs, allowing them to avoid legal problems and manage their business more effectively.
What are the Consequences
The consequences of the company’s liquidation come both for the business and its owners.
Consequences of Company Liquidation for Owners
As a general rule, the founders of a company in liquidation cannot open new companies until the liquidation of the business is completed—until the company is excluded from the Unified State Register. This rule does not apply to companies and individual entrepreneurs who are residents of the Belarusian Hi-Tech Park. These business entities can open new companies until the liquidation of the companies they are the founders is completed.
Consequences of Company Liquidation for Business
After excluding a company from the Unified State Register, you cannot use the company’s letterheads or seal if the company has a seal. The company ceases to exist as a business entity and cannot conclude and execute transactions, hire staff, issue power of attorney, or apply to various bodies and organisations.
Steps to Liquidate the Company
To close a company correctly, you need to take several mandatory steps. You can do these steps with our lawyers and business closure specialists or entrust us with issues related to company liquidation.
Step 1. Deciding on Company Liquidation
The decision on liquidation is made by the business owners or the company’s management body, which has such powers under the company’s charter. In the decision on liquidation, a liquidation commission or a liquidator is appointed, and the terms and procedures for liquidation are established. If it is decided to create a liquidation commission, then the decision distributes the responsibilities for company liquidation among the members of the liquidation commission.
When a company has accounts payable, the commission’s chairman is not appointed by the owner or the head.
From the day the liquidation commission (liquidator) is appointed, all powers to manage the company, including the right to represent the company’s interests in government agencies and court, are transferred to him. After the decision to liquidate, the company cannot make transactions unrelated to liquidation.
Step 2. Conclusion of an Agreement with the Auditor
In most cases, a voluntary audit of a liquidated company can replace the mandatory inspections carried out by tax authorities, customs services and Belgosstrakh during liquidation. In this case, the government authorities consider the audit report’s results and only analyse the company’s activities. However, this is not a universal rule. In some situations, inspections by government agencies may occur even after the completion of the audit. You should consult with our lawyer for a deeper understanding of these features.
Step 3. Notification of the Registration Authority on Liquidation
The liquidator or the chairman of the liquidation commission notifies the registration authority that a decision has been made to liquidate the company. It must be done within ten working days after the decision is made. The following documents must be submitted to the registration authority in person or electronically (with an electronic digital signature):
1. Application for liquidation of the established form.
2. The decision on liquidation.
3. Foreign owners of a liquidated company must obtain and submit to the registration authority proof of their legal status. It is usually a legalised extract from the state’s commercial register in which the company is registered.
4. Proof of payment for the publication of the company’s liquidation. In Belarus, there is a practice for the registration authority to post information about the company’s decision to liquidate on the Justice of Belarus magazine website. This notification specifies the procedure and deadline for filing creditors’ claims against the liquidated company – at least 2 months from publication. The publication is paid: first, the liquidator makes the payment, and then the registration authority sends the information for publication on the journal’s website. After the online publication, the printed version of the liquidation notice appears later in the physical attachment to the magazine.
Step 4. Notification of Creditors and Establishment of their Claims
The fact that the owners have decided to liquidate the company must be notified in writing to creditors and set the size of their claims against the company. The Liquidation Commission reviews and enters creditors’ claims into the claims register.
Step 5. Notification of Employees about Company Liquidation
The company’s liquidation means that employees must be notified no later than two months in advance. Usually, employees are warned in writing under their signature. Employees are entitled to severance pay upon dismissal in connection with the company’s liquidation. Employees can quit before the end of two months of warning or on their initiative.
Step 6. Drawing up an Interim Liquidation Balance Sheet
The interim liquidation balance sheet is drawn up after the deadline for creditors to submit their claims has expired. The interim balance sheet includes information about the company’s assets, the list and amounts of creditors’ claims and the results of consideration of these claims. By the liquidation balance sheet, the liquidator pays debts to creditors by the established order. To understand the repayment order of creditors’ claims, you can consult our experienced lawyer. If the company does not have enough money to repay creditors’ claims, the liquidator will arrange the sale of the company’s property.
Step 7. Drawing up the Liquidation Balance Sheet
The liquidation balance sheet is drawn up after the company has settled with creditors. Our experienced accountant will explain the specifics of this process.
The company’s property, which remains after settlements with creditors, is transferred to its owners.
Step 8. Archiving Company Documents
When a company is liquidated, internal documents must be archived, particularly those confirming the length of service and remuneration of employees. Our experienced lawyer, a document management specialist, can advise on the specifics of processing documents for transfer to the archive.
Step 9. Transfer of Documents to the Registration Authority
The liquidator or the liquidation commission submits the liquidation balance sheet and the company’s original Certificate of State Registration to the registration authority.
After the transfer of the documents, the registration authority decides on the company’s liquidation. The company is considered liquidated from the date on which the registration authority decided to make an entry in the Unified State Register of the Company’s exclusion from the Unified State Register.
What does the Registration Authority Do
The registration authority communicates with government authorities on the company’s liquidation. In particular, the registration authority:
- Makes an entry in the Unified State Register stating that the company is in the process of liquidation.
- The archive, tax and customs authorities, the department of the Social Protection Fund, and Belgosstrakh are notified about the beginning of liquidation. These state bodies and Belgosstrakh send documents to the registration authority regarding the company’s debt or absence.
- The company sends information about its liquidation and acceptance of creditors’ claims to the journal “Justice of Belarus.”
- Requests information in the archive about the transfer of documents to the company.
When does the Registration Authority Decide to Exclude a Company from the Unified State Register
The registration authority decides to exclude a company from USR after it is convinced of the following circumstances:
- The company has no debts on mandatory payments.
- The company has no debts to creditors.
- Liquidation documents are prepared in accordance with state requirements.
Many features and nuances in the liquidation procedure of companies may arise both during the liquidation process and may not be obvious at the time the owners decide to liquidate. Our experienced lawyers and accountants can help you deal with all the subtleties of a company’s liquidation. They can take over the paperwork related to the liquidation and represent your company’s interests in government agencies.
Contact us
If you have any questions or disputes regarding company liquidation in Belarus, we will be happy to help! Our long-term experience in divident payment will help you resolve any disputes in this area.
- +37529366-44-77 (WhatsApp, Viber, Telegram);
- info@ambylegal.by.
