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Corporate law Liquidation of a joint-stock company

Taras Miroshnychenko

Head of practice

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miroshnychenko@prikhodko.com.ua

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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 of a joint-stock company

A joint-stock company (JSC) can be terminated voluntarily or involuntarily, which involves the completion of all its affairs, including the sale of assets, debt collection, and settlements with creditors. The logical conclusion of the entire process is the exclusion of the joint-stock company from the Unified State Register (USR) and obtaining an extract. In this article, we will examine in detail the issue of voluntary liquidation of this legal entity under the law.

Voluntary and compulsory liquidation of a joint-stock company: what are the differences?

Voluntary liquidation is a managed internal process initiated by the owners within the framework of the general meeting. It is important that the decision to terminate the activities of a joint-stock company is made voluntarily, most often after achieving the goal for which the company was created. In this case, forced liquidation is initiated by an external body (usually a court) due to the inability of the joint-stock company to fulfill its obligations or a systematic violation of the law. It is also worth noting that in the first case (voluntary liquidation), the liquidator is more often appointed by the chairman of the board, and in the second – an independent person.

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What are the main stages of the liquidation procedure of a joint-stock company?

The liquidation procedure requires compliance with the following procedure:

step one – preparation. A decision on liquidation is made, a liquidation commission is appointed (liquidator), and the procedure for distributing property among shareholders (after settlements with creditors) is approved;
step two – publication of an official notice of termination of activities and initial actions. The first thing to do after notifying the creditors of the company is to submit an application to the National Securities and Stock Market Commission to suspend the circulation of shares. Within the period prescribed by law, the commission begins all the necessary preparations for this;
step three – the main part of the process. At this stage, it is necessary, firstly, to collect receivables, inventory property and repay creditors’ claims (the deadline for their provision cannot be less than two months from the date of official notification of the liquidation of the legal entity), secondly, to prepare a liquidation balance sheet and obtain a decision from the National Securities and Stock Market Commission to cancel the registration of the securities issue, thirdly, to undergo an unscheduled documentary inspection from the tax authority.
step four – completion of the procedure. The last thing the liquidator needs to do is to submit long-term storage documents to the state archive, close all current bank accounts, and also submit an application to the state registrar for the termination of the joint-stock company.

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Satisfying the claims of creditors of a joint-stock company: what should you pay attention to?

If the company is solvent and has outstanding claims among creditors (shareholders), it is important to adhere to a clear order of priority. It looks like this:

creditors – compensation for damage (I), collateral security (II), related to labor relations (III), payment for the use of intellectual property and other claims (IV);
shareholders – dividends on preferred shares (I), redemption of preferred shares (II), payments of the liquidation value of preferred shares (III), redemption of common shares (IV).

How long will the liquidation of a joint-stock company take?

It is worth noting that the duration of the procedure can vary significantly, as it depends on many factors (type of liquidation, amount of assets on the balance sheet, etc.). The actual duration can range from 4 months to 1 year. Quite often, the process is delayed due to the long satisfaction of creditors’ claims (especially if litigation arises), as well as the suspension of share trading by the National Securities and Stock Market Commission. For more detailed information, we recommend that you book a consultation with one of our corporate lawyers.

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What are the main problems that a lawyer can help with when liquidating a joint-stock company?

The corporate lawyer of the company “Prikhodko & Partners” plays a critical role in the liquidation process of a joint-stock company, possessing the necessary knowledge and practical experience. The lawyer helps with resolving such issues as ensuring strict compliance with the requirements of the law during the termination of a legal entity, impeccable execution of documents, and monitoring the proper implementation of the main steps of the procedure by the liquidation commission as a whole. Therefore, his main services will include: