Head of practice
Head of Corporate Law and Fintech Practice. Expert in the creation and reorganization of companies, support of M&A transactions, as well as legal support for opening and running a business in the EU, Asia, and North America.
Liquidation by merger
Reorganization of a legal entity is allowed in various ways, including through its primary liquidation and merger with another legal entity (hereinafter referred to as liquidation by merger). In this case, all property, rights and obligations of the primary entity are transferred to the successor. The main difference from ordinary liquidation is that the termination of all previous obligations (including those related to satisfying creditors’ claims) does not occur, since they will now be handled by another legal entity, as stated in the transfer deed. You can learn more about this by reading the article below.
Liquidation of a legal entity by merger: what are the features?
The choice of this path for the termination of a company is often due to the desire to simplify the procedure and shift the burden of responsibility for paying debts to creditors to a more solvent entity (of course, by agreement). In addition, this path creates legal conditions for increasing the assets of the company to which the entity is being merged. At the same time, it is worth emphasizing that the current national legislation requires mandatory notification of all creditors of the intention to merge, since in case of improper information, the reorganization may be declared invalid by the court.
What is the procedure for liquidating an enterprise by merger?
The specified procedure requires synchronization of actions with the successor enterprise. The main procedure can be described as follows:
- first, a decision (protocol) on reorganization. The management bodies of both enterprises must hold meetings and resolve the issue of liquidating the enterprise by merger. In this case, it is also necessary to create a liquidation commission;
- second, notification of the state registrar. At this stage, it is necessary to submit documents for entering information on termination into the Unified State Register;
- third, transfer of assets to the successor. The commission conducts a complete inventory of assets and debts. Based on the results, it draws up a transfer act (certifies succession);
- finally, archiving documents and final entry of information into the Unified State Register on liquidation.
Important to know! Authorized persons from two companies must contact the state registrar to form a complete list of documents. Therefore, the merging company must submit a standard application for termination, an approved transfer deed; the successor company – a standard application for amendments, a new approved version of the charter. To learn more, we recommend that you book a consultation with one of our corporate lawyers.
What documents will need to be prepared for liquidation by merger (as opposed to regular liquidation)?
The mandatory documents for liquidation by merger are as follows:
- transfer deed;
- certificate of the successor on acceptance of documents;
- a set of documents required to make changes to the legal entity-successor;
- decisions of the higher bodies of the companies on termination and merger, respectively;
- certificate of absence of debt to the local and state budgets;
- power of attorney for an authorized person (if the documents are submitted not by the director, but by his representative or corporate lawyer).
Transfer deed: what is it?
The transfer deed is a key document in the reorganization process. This document is drawn up by the liquidation commission after satisfying the creditors’ claims and must contain clear provisions on the succession to all obligations of the legal entity being terminated. The transfer deed is based on financial reporting data, supported by a transfer balance sheet (with an indication of all assets and liabilities). This allows the successor to correctly continue depreciation and accounting.
How can a corporate lawyer help you liquidate a legal entity through merger?
A corporate lawyer will ensure legal clarity and prompt compliance with all procedures. Given his experience and qualifications, a lawyer at Prikhodko & Partners provides the following services:
- conducting a comprehensive legal audit of the company before merger;
- developing an optimal merger scheme;
- drawing up a decision (protocol) of the management bodies for both companies;
- preparing the necessary documents for reorganization;
- duly notifying the state registrar and the civil service;
- monitoring compliance with the deadlines for all due settlements with creditors (if necessary);
- supporting the preparation of the transfer deed and transfer reporting;
- supporting tax documentary audits;
- obtaining the necessary extracts, certificates and other documents for the state registrar;
- appealing against unlawful actions and decisions of the state registrar (if necessary).
To find out the cost of supporting the liquidation of an enterprise by merging with another enterprise and to receive proper legal advice, please fill out the form below.
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