The sale of a company in the Republic of Belarus is a process that requires careful planning and consideration of many legal, tax and procedural points. Over the recent years, the legislation in this area has undergone significant changes aimed at increasing the transparency of transactions and protecting the interests of all participants. This is especially true for companies with foreign participation and transactions with counterparties from so-called “unfriendly countries”.
In this article we will take a closer look at the key stages and nuances of the process of selling a company in Belarus, paying special attention to:
- Legal requirements and restrictions, including the need to obtain permits from state authorities and the observance of the pre-emptive right of purchase by other participants.
- Tax consequences of the transaction related to the determination of the fair value of the share and possible tax liabilities. Practical advice on the preparation and execution of the transaction, including company valuation, counterparty due diligence and documentary support.
Legal aspects of selling a company
When selling a company in Belarus, it is necessary to take into account a number of legal aspects, especially in relation to transactions with foreign participants, and to respect the pre-emptive right of purchase by other participants.
The need to obtain permits for transactions with foreign purchasers of a company (company shares, stakes) and participants from “unfriendly countries”
According to the Decree of the President of the Republic of Belarus No. 326 of October 19, 2023, transactions related to the alienation of stakes, shares or immovable property owned by persons from “unfriendly states” require a permit from the Council of Ministers of the Republic of Belarus. The “unfriendly states” include states that commit unfriendly actions against Belarusian legal entities and individuals. In order to obtain such permission, the seller must transfer to the local budget a contribution of at least 25% of the market value of the alienated shares (stocks) and real estate.
The procedure for obtaining authorization includes submitting an application to the relevant regional executive committee or Minsk city executive committee at the place of the company’s registration. The application must be accompanied by a number of documents, including information on the company’s activities, copies of constituent documents, information on the buyer and a conclusion on the assessment of the market value of the alienated asset. The draft decision is prepared within 30 working days and then sent to the Council of Ministers for approval. The authorization is valid for one year from the date of issue.
Preemptive right of purchase: procedure for notification and observance of the rights of other participants
In accordance with the legal provisions on business entities, participants in a limited liability company have a pre-emptive right to purchase a share (part of a share) of another participant who intends to sell it. The seller is obliged to notify the other participants and the company itself in writing of the intention to sell its share, indicating the price and other terms of sale. Participants have the right to use their pre-emptive right within the period established by the charter of the company, but not more than 30 days from the moment of notification. If the share is sold in violation of this right, any participant or the company itself may, within three months from the moment they became aware of the violation, demand that the rights and obligations of the purchaser be transferred to them through a judicial procedure.
Thus, when selling a company in Belarus, the statutory procedures should be carefully followed, especially with regard to transactions with foreign participants and respect for the rights of other participants in the company.
Verifying the buyer of a share
When selling a company or a share in a company in Belarus, special attention should be paid to verifying the buyer in order to minimize risks and ensure the legality of the transaction. This process involves several key steps:
1. Analyze the financial condition of the buyer
It is necessary to assess the buyer’s solvency, credit history and current financial position. This will help ensure that the buyer is able to meet the financial obligations of the transaction.
2. Checking the legal status
It should be ensured that the buyer has no legal restrictions on acquiring a stake in the company. According to government requirements, the new founder (participant) must not have outstanding civil liabilities, including outstanding loans, and meet certain other requirements. You can sort them out during a consultation with our experienced lawyer.
3. Business reputation assessment
It is recommended to collect information about the buyer’s previous business activities, its involvement in other companies, the presence of litigation or debts. This will allow you to assess the reliability and integrity of a potential partner.
4. Checking sources of financing
It is important to make sure that the funds used for the purchase are of legal origin. This will help avoid possible claims from law enforcement and tax authorities in the future.
5. Antitrust compliance
In some cases, a transaction may require antitrust approval, especially if the buyer already owns a significant market share in the relevant sector.
Conducting a comprehensive due diligence of the buyer not only reduces risks, but also contributes to the successful completion of the transaction, ensuring the protection of the seller’s interests and compliance with the legal requirements of the Republic of Belarus.
Issues of formalizing the sale of a company
When selling a company in the Republic of Belarus, it is necessary to take a careful approach to formalizing the transaction and take into account all legal and procedural nuances. The formalization process can be divided into several key stages:
Step 1. Making the decision to sell
The decision to sell a share in a limited liability company (LLC) is adopted at a general meeting of participants, the results of which are recorded in the report of proceedings. If there is only one participant in the company, he makes the decision alone.
Step 2. Assessing the value of the share
To determine a fair sale price, it is recommended that the share value is assessed. This may include analyzing the company’s net assets and other financial indicators.
Step 3. Observing the pre-emptive right of purchase
The seller must notify the other members of the company of its intention to sell its share, giving them the opportunity to exercise the pre-emptive right of purchase. The procedure and terms of such notification are regulated by law and the company’s charter.
Step 4. Preparing documents for the transaction
Key documents required to formalize the sale of a share include:
- The contract of sale and purchase of the share: it is made in writing and notarized.
- Consent of the spouse of the seller: if the share was acquired during marriage, it is necessary to notarize the consent of the spouse for its sale.
- Documents confirming the ownership of the share: for example, founding documents, the report of proceedings and others.
- Certificate of absence of debts: confirms that the share is fully paid and not encumbered with obligations.
Step 5. Notarization of the transaction, if this is provided for in the Charter or by agreement of the parties
A transaction for the sale of a share may be notarized, but it is not obligatory.
Step 6. State registration of amendments to the Articles of Association
In the event of the sale of a share (company) it is necessary to make appropriate amendments to the Articles of Association in respect of the new owner(s) and the distribution of shares between them. Documents for registration of amendments to the registration authority should be submitted by the head of the company or another representative by power of attorney.
When the new owners are foreign companies or individuals, they must provide proof of legal capacity:
- A foreign company submits a legalized extract from the commercial register of the state in which it is established. The extract must be no older than one year, with a notarized translation into Russian or Belarusian.
- A foreign individual shall submit a notarized translation of their passport into Russian or Belarusian.
The head of the company and the new owner or his representative should come to the registration authority.
It may be difficult to understand the peculiarities of selling a company on your own. Therefore, we recommend you to contact our experienced lawyer, who will competently draw up all the necessary documents and accompany you at all stages of the sale of a share (company).
Tax consequences of the sale of a share
When selling a share in the authorized capital of a limited liability company (LLC) in the Republic of Belarus, it is necessary to take into account the tax consequences that are related to the determination of the fair value of the share and possible tax risks.
Determining the fair value of a share and its impact on taxation
The fair value of a share is a part of the net asset value of a company proportional to the size of a participant’s share. The value can be determined using different methods: income, comparative or cost approach.
Regarding taxation, it is important to take into account that income received from the sale of a share may be subject to income tax. In accordance with tax requirements, the founder’s income from the sale of a share in the authorized capital is not subject to income tax in the amount not exceeding the amount of the contribution of this founder or the amount of expenses actually incurred by him to acquire the share. Thus, if the sale price of a share exceeds the initial investment, tax should be paid on the difference.
We recommend that you consult our experienced accountant on the valuation of the company or shares in the company for sale.
Possible tax risks and ways of minimizing them
1. Sale of a share at a price below market value
The sale of a share at an undervalue may give rise to suspicion of deliberate tax evasion with the tax authorities. To minimize this risk, we recommend:
- Carry out an independent valuation of the value of the share before the sale.
- Documentally justify the established transaction price.
2. Incorrect calculation of the tax base
Errors in determining the amount of income subject to taxation may result in additional taxes and penalties. To prevent this you should:
- Carefully account for all expenses connected with the acquisition and ownership of a share.
- If necessary, seek advice from tax professionals.
3. Failure to comply with tax legislation
Violation of the established procedures and deadlines for declaring income may entail legal consequences. It is recommended to:
- Submit tax returns in a timely manner.
- Keep accurate records of all transactions related to the sale of a share.
Overall, in order to complete a safe and successful sale of a share in LLC in the Republic of Belarus, it is necessary to carefully approach the issues of share valuation, accurate calculation of tax liabilities and compliance with all requirements of tax legislation. To avoid negative consequences, we recommend using legal and accounting support for the sale of a company (share in the company).
Conclusion
The sale of a company or a share in a company in the Republic of Belarus is a complex process that requires a careful approach to each stage of the transaction. Taking into account legal, tax and financial aspects, the seller should prepare all necessary documents in advance, assess the fair value of the share and make sure that the rights of other participants are respected.
Particular attention should be paid to verifying the buyer, its solvency and business reputation, as well as the sources of financing of the transaction. This will help avoid possible legal risks and claims from state authorities.
In addition, if foreign persons from “unfriendly” states participate in the transaction, it is necessary to obtain the relevant authorization from the Council of Ministers of the Republic of Belarus. Failure to comply with this requirement may result in the transaction being recognized as invalid.
In order to minimize risks and ensure successful completion of the transaction, it is recommended to engage qualified lawyers and tax consultants. Their assistance will help to properly formalize the sale of the company, protect the interests of the parties and comply with all legal requirements.
A competent approach to the sale of a business is the key to its successful transfer to a new owner without legal and financial complications.
Contact us
If you have any questions or disputes regarding the process of selling a company in Belarus, we will be happy to help! Our lawyers are ready to provide comprehensive advice and support when opening a bank account and resolving any related issues.
- +37529142-27-19 (WhatsApp, Viber, Telegram);
- info@ambylegal.by.
