Changing an organisation’s activity type is an important strategic move that can unlock new growth opportunities. This shift enables companies to adapt to changing market dynamics, drive innovation, and enhance their competitive edge. This article examines the key stages of the transformation to enhance its effectiveness and success. Embrace the opportunity to redefine your organization’s future.
The Organization’s Primary Activity and its Description.
In Belarus, “the main activity of an organisation” refers to the primary activity that creates the most added value, as opposed to secondary activities, which contribute less.
The main type of activity does not have to be specified in the company’s charter, which is submitted for state registration, but it must be specified in the organisation’s application for state registration and in statistical reports. An organizational unit may have a main activity that differs from the organisation’s main activity. The main type of activity is indicated in all the organisation’s statistical reports.
Thus, an organisation’s main activity is officially (in relation to the state) important only for statistical reporting. An organisation can change its main activity to achieve its business goals if necessary.
Where to Find a List of Activities
The name of the type of activity does not need to be invented independently. There is a list approved at the state level for this purpose. The types of economic activity in Belarus are listed in the National Classifier “Types of Economic Activity”. Each type of activity has a description, subspecies and exceptions, and its own individual code.
How to Determine the Main Type of Activity
To effectively determine the primary type of activity within an organization, a robust methodology has been established. This process involves a comprehensive listing of all activities based on the National Classifier. For trading organizations, it emphasizes capturing the gross income generated from each type of activity. In contrast, for non-trading activities, the focus shifts to documenting the volume of production. The type of activity for which the gross income (production volume) will be 50% or more will be the organisation’s main activity. Next, you need to select the correct code from the National Classifier for the main type of activity.
For organisations that are preparing documents for state registration, our experienced lawyer can determine the main type of activity and its code according to the National Classifier.
If you have difficulty identifying an organisation’s activities and choosing the main type of activity for statistical reporting, we recommend that you contact our experienced statistical accountant for advice.
Changing the Main Activity of an Organisation for Statistical Reporting Purposes
Generally, an organization’s primary activity for statistical reporting remains constant throughout the year. However, you can update this activity at any time if the organization has stopped a specific activity or if there was a reporting error. Accurate reporting is crucial for compliance and enhances stakeholder trust.
When Can an Organisation Consider Changing its Type of Activity
Changing the type of activity of an organisation can be beneficial in several cases:
1. Reduced demand for current products or services
If the market has changed and the company’s products or services are no longer in demand, changing the type and direction of activity can be a way out of a crisis.
2. Search for new growth opportunities
Expansion into new sectors or industries can open up new markets for a company and increase profits.
3. Technological changes
The introduction of new technologies can make some types of activities obsolete, while others, on the contrary, become more promising.
4. Changing the legislative framework
New Belarusian and international laws may make the company’s current activities less profitable or even prohibited.
5. Risk diversification
Changing or expanding the type of activity can help reduce the risks associated with dependence on a single market or product.
What Steps Should an Organization Take to Change Its Activities
Explore the steps an organization should take to transform its activities for improved effectiveness and impact:
Step 1. Analyse the current situation and prospects
A thorough analysis of the market, the competitive environment, and the company’s internal resources is carried out.
Step 2. Select a new activity
A new direction is being determined by analyzing current and potential activities alongside market trends. We recommend conducting business consultations with experienced business lawyers and accountants to correctly identify possible types of activities.
Step 3. Develop a business plan
Create a detailed plan for the transition to a new activity. The transition plan includes a marketing strategy, a financial plan, and a risk management plan.
Step 4. Obtaining the necessary permissions
Depending on the jurisdiction, obtaining new licenses or permits for the selected type of activity may be necessary.
Step 5. Business process reorganisation
Changes are made to the company’s operational processes, structure and employees are trained in new skills if necessary. Employees, customers, suppliers, and other interested parties are notified of upcoming changes and their consequences.
Step 6. The transition period
An organization is gradually moving to a new type of activity to minimise possible risks and losses. At the same time, the previous type of activity may remain auxiliary or be terminated.
Step 7. Monitoring and adjustment
Financial and structural results are constantly monitored and necessary adjustments are made to the strategy and operational processes.
Step 8. Adapting the corporate culture
An organization is working on changing the corporate culture and values in accordance with the new direction of the company’s activities.
Step 9. Changes in statistical reporting
After the organisation’s main activity has changed, statistical reports are submitted indicating the new main type of economic activity and its new code.
What is Needed to Update Data on the Main Type of Activity in Statistical Reporting
To update the information in the statistical reports, the following is necessary:
Option 1. Revenue (production volume) from a secondary activity is 25% or more higher at the end of the year than revenue (production volume) for the type of activity previously considered the main one.
Option 2. Revenue from the secondary type of activity is higher than revenue from the main type of activity by less than 25%, but based on the results of two years: the reporting year and the previous one.
A number of activities have specifics for changing the main type of activity for statistical reporting, so we recommend that you consult with our experienced accountant and lawyer.
What Happens When an Organization Changes Its Activities
Changing an organisation’s type of activity has consequences. Each organisation’s consequences are individual, but we will present the possible consequences: positive and negative.
Positive consequences:
- Market expansion
New activities can open access to new markets and customers, increasing revenue.
- Risk diversification
Changing the type of activity can reduce dependence on one market or product, making the business more sustainable.
- Increasing competitiveness
Providing new products or services can help an organisation stand out from competitors.
Negative consequences:
- Financial costs
Changing the type of activity may require significant investments in new equipment, staff training, and marketing.
- Legal difficulties
Depending on the jurisdiction, the constituent documents may need to be updated, and new licenses or permits may need to be obtained.
- Loss of experience
When switching to a new type of activity, an organisation may lose its accumulated knowledge and experience in the previous field.
- Staff resistance
Employees may experience stress and resistance to change, especially if a new activity requires new skills.
- The risks of failure
New activities may not meet expectations, resulting in losses.
The activity change should be carefully justified and planned to minimise risks and maximise the use of new opportunities.
Conclusion
Changing an organisation’s activity type is a difficult and responsible step that requires careful analysis and preparation. It can be caused by external factors, such as changes in market conditions or the economic environment, and the company’s internal needs, including the desire to expand or diversify the business. Proper strategic planning and compliance with all legal procedures when changing business lines can significantly increase the chances of successful adaptation and prosperity in the new environment. Each organisation should approach this process considering its unique circumstances and goals to maximise opportunities for growth and development. For competent planning of business processes related to changing the type of activity (including financial planning) and registration of these processes, we recommend using the services of our experienced lawyers and accountants.
Contact us
If you have any questions or disputes related to changing the type of activity and registration of these processes in Belarus, we will be happy to help! Our long-term experience in changing an organisation’s activity type will help you resolve any disputes in this area.
- +37529366-44-77 (WhatsApp, Viber, Telegram);
- info@ambylegal.by.
