It is a thankless thing to forеcast further business development. Some earn considerable profits and some have to close. What steps should be taken in the event of liquidation of the enterprise? What to do with accounts receivable? How do you fire staff to avoid trouble? The detailed answers of the lawyers are below.
Liquidation decision
The liquidation procedure begins when the competent body of the legal entity approve a decision on its termination. Depending on the legal form of the legal entity being liquidated, such body usually is:
- the supreme body of a business entity (general meeting of participants, shareholders);
- the supreme body of the enterprise (general meeting of founders or owner).
The decision of the supreme management body to liquidate the entity is usually in the form of a protocol. The decision should also specify the authority that will carry out the liquidation procedure. If the company does not have a large number of assets and staff, a sole liquidator, which may be its manager is assigned.
In other cases, a collegial body – liquidation commission – is appointed. As a general rule, from the moment of approval of the liquidator or the liquidation commission (hereinafter – the liquidator), the authority to manage the legal person shall be transferred to this body.
The decision on the termination of the legal entity must be registered in the Unified State Register of Legal Entities, Individuals – Entrepreneurs and Public Organizations (hereinafter – USRLE). Therefore, the procedure for liquidation of a legal entity is considered to have commenced from the date of entry of the relevant record into the USRLE.
Announcement/notification of liquidation
Following the entry in the USRLE of the relevant record on state registration of the decision on the termination of the legal entity in the specialized mass media, the announcement of liquidation of the business entity shall be published, specifying the order and term of filing the claims by creditors, which may not be less than two and more than six months. In addition, in practice, each creditor receives a insured or registered letter.
The liquidator must inform the controlling bodies (State Tax Service of Ukraine (hereinafter – STSU), Pension Fund of Ukraine) of liquidation of the enterprise.
Property inventory and valuation
The termination of the enterprise is the basis for the mandatory inventory. The inventory should cover all types of liabilities and assets of the entity, regardless of their location.
At the same time it is necessary to carry out an assessment of the property of the enterprise in order to determine its value. Such assessment can be carried out either by the liquidation committee or by the involvement of professional appraisers. If the enterprise has a share of state or communal property, the services of a professional appraiser are required.
Collection of accounts receivables
Liquidation of the legal entity terminates both its duties and rights. Therefore, the liquidator is obliged, in due course, to take all possible actions related to the collection of accounts receivable, including in court, in this case notifying each of the debtors in writing about the liquidation of the legal entity – the creditor.
Dismissal of staff
The liquidator must comply with a number of requirements set out in the Labor Code of Ukraine. The workers must be warned in advance of dismissal (no later than three months).
In addition, the staff must receive full salary, compensation for unused leave, as well as severance pay of at least an average monthly wage, and the employer issues workbooks with appropriate records and certified copies of dismissal orders to employees.
Handling of organizational and permitting issues
The liquidator is obliged to take steps to close all separate units (branches, representative offices, subsidiaries), if previously opened by the liquidated entity. It must inform the participants (owners) of the entity of its participation in other legal entities in order to decide on the further fate of its corporate rights.
If the liquidated entity has licenses and permits to carry out certain types of economic activity, the liquidator shall apply to the relevant authorities for their cancellation. Having identified open enforcement proceedings with respect to the entity, the liquidator must apply to the relevant public enforcement authorities for liquidation of the debtor.
Sale of property and settlements with creditors
As a result of the inventory and valuation of the property (assets) of the liquidated enterprise, as well as consideration of the creditors' claims, an intermediate liquidation balance should be drawn up. This document must be approved by the authority that made the decision to liquidate the entity.
In practice, the content of the intermediate liquidation balance determines the further procedure of liquidation of the enterprise.
Usually, the sale of assets is carried out with the involvement of a trading organization (exchange) through an auction organized by it. In this case, most often the property is sold by lot, and the proceeds are accrued to the liquidation account and then directed, given a certain order of repayment of the debt to the creditors.
Distribution of funds and property
If, after fulfillment of obligations to the creditors some cash is left, is it subject to distribution in proportion between its participants (shareholders, owners) in the manner determined by the statute of the entity. The property of the liquidated entity, which remains after settlements with all creditors, is either distributed among its participants (shareholders, owners) or sold, and proceeds from its sale are also distributed among its participants (shareholders, owners).
Approval of the liquidation balance
After fulfilling all obligations to the creditors and distributing the rest of the funds and property among the participants (shareholders, owners), a liquidation balance is drawn up and approved by the body that made the decision on liquidation. This balance must be submitted to the controlling authority (STSU). The procedure for approval of the liquidation balance is similar to the procedure for approval of the intermediate liquidation balance.
Follow-up
In the last stage, the liquidator must take a number of technical measures to complete the liquidation procedure. In particular, this is the close of a bank liquidation account, receipt of the relevant certificate, the transfer of documents to the archive, the destruction of seals (if any). After that, a corresponding application with enclosed certificate from the archival institution on the acceptance of long-term storage documents must be submitted to the state register.
Confirmation of the completion of the legal procedure for liquidation of an entity is state registration of the termination of such legal entity as a result of its liquidation. On the basis of the documents submitted by the liquidator, an appropriate mark is made in the USRLE (on termination and exclusion of such legal entity from the USRLE).
