Company Liquidation: Steps From Making the Decision to Factual Liquidation
Liquidation of a company is not an easy step for the owners, since to liquidate a company, they have to conduct comprehensive analysis of the company’s economic activities. As owners make the difficult decision to close their business, they have to go through many important financial and legal issues.
Accountor Ukraine offers a brief overview of the main stages of the process.
- Making the Decision
The Decision must be documented: an appropriate Protocol must be issued, which shall indicate the members of the Liquidation Commission and the order of the internal liquidation procedures.
First of all, the Liquidation Commission must inform the following parties that the liquidation process has started:
- the state body in charge of state registration;
- supervisory authorities;
- creditors and debtors of the company.
Since the period when creditors can file their claims against a legal entity that ceases to operate must be at least two months, this period shall be the minimum duration of the liquidation process.
- How Do You Deal with the Employees?
Employees must be notified of their dismissal in advance: an Order thereon must be issued two months prior to the dismissal date and shown to the employees. The employees must leave their signatures as confirmation that they had been informed and that they had read the Order. It should be noted that some categories of employees might be entitled to “mandatory employment”. It is also important to make severance payment and all the relevant final payments to the employees.
- How Do You Keep Financial Records During Liquidation?
When liquidation is in progress, all tax-related and accounting-related records must be kept according to general rules, and the company must file financial and tax reports until the date when it is excluded from the Unified State Register.
- Inventory of Assets
A company must conduct inventory of all assets and liabilities in order to be liquidated. After the inventory is over, the company’s property value must be estimated for further resale.
Upon completion of settlement with debtors and creditors, the Liquidation Commission must draft an interim liquidation balance sheet, which must be approved by the members of the company. The company’s property which is left after satisfaction of creditors' claims must be distributed among the members.
- Closing Bank Accounts and Filing Liquidation Balance Sheet
After all settlements are done, the next steps are getting the company's bank accounts closed, obtaining bank statements, canceling certificates, permits, etc., and filing the liquidation balance sheet.
- Starting Tax Audit
A legal entity may be de-registered by the supervising bodies only after it passes an audit by the Audit Department of the State Fiscal Service and after it obtains from tax authorities the certificates confirming that the company has no tax arrears and no unpaid fees or contributions.
- Document Archiving and Destroying Corporate Seal
Special attention should be paid to document archiving. Different documents have different “shelf lives”. The documents which must be stored for a long time must be submitted to the National Archival Fund. Other documents must be stored until their expiration date and subsequently destroyed. The seal of the company may be disposed of independently, provided that an Act in any form is issued to document this action.
Getting De-registered by State Bodies
Depending on the company’s form of legal structure, it may be then excluded from the Unified State Register of Legal Entities, Individual Entrepreneurs and Public Associations, from the registers of the Ministries and other state bodies.
Please note that liquidation of a legal entity is a time-consuming process which needs careful approach at each stage and requires professional accounting and legal support. From the decision to liquidate a company to actual liquidation there might be a path full of pitfalls.
Accountor Ukraine has been supporting liquidation processes for years.