Doing business involves many nuances: from bookkeeping to reports to regulatory authorities. But what if the ownership must be transferred to another person? What is the succession procedure in the reorganization of a legal entity? This may be needed in a variety of situations: selling a finished business or transferring a business to heirs, for example. In any case, you need to know the basic rules of succession during the reorganization of legal entities, correctly draw up the documentation so that after no problems any of the participants in the transaction should arise and the business continues to work like clockwork. The article shows the main provisions on which you need to act when you need to change the owner of the company.
What is a reorganization?
To begin with, we will analyze what constitutes the process of reorganization, what its varieties exist and how to reproduce it.
Reorganization is the liquidation procedure of a legal entity, as a result of which the main production assets of the enterprise are retained, but the rights and obligations (excluding those that are prohibited by law from transferring) go to them by another legally registered enterprise by means of succession. The process explains the end of the existence of one legal entity by the creation of another.
What types of reorganization are there?
There are five ways to reorganize:
- Merge. Instead of the first and second organizations, a third appears - it receives all the rights and obligations of the liquidated enterprises.
- Joining. One firm ceases to operate independently and becomes part of the second. That is, the process will include the expansion of the second organization and the liquidation of the first.
- Separation. One enterprise is divided into two separate, and they continue to operate independently. This procedure is completely the opposite of merging.
- Selection. Within the framework of one firm, a second one appears (it may be a separate structure, for example, an organization engaged in the sale of furniture has a cargo transportation service), the rights and obligations of both remain those that were originally.
- Conversion. Instead of one legal entity, another appears, all rights and debt obligations of the company being liquidated pass to it, that is, the subjects are replaced.
It is noteworthy that any method, except for the allocation, necessarily occurs through the liquidation of the previous enterprise and is carried out only with the consent of all its founders, based on the general decision of the meeting of participants. A distinctive feature of the reorganization will be the transfer of rights from one enterprise to another (excluding those that are prohibited by law from transferring).
The concept of succession
Succession in the reorganization of legal entities is a procedure that results in the transfer of rights and obligations from one company to another, their content as a result is not modified, only the subject of law changes. The procedure for carrying out the procedure is regulated in the Civil Code and is implemented by issuing relevant documentation and submitting applications to regulatory authorities. Based on the selected type of reorganization, the methods of succession will vary. Designate 2 primary types of succession: universal and singular. The basics of the first and second will be the same, but there are significant differences.
Universal Succession in the Reorganization of a Legal Entity
Universal succession implies the complete replacement of one owner by another. There is another definition in the legislation - the transfer of rights. The heir receives all the obligations and rights of the predecessor in full. An exception is only those rights that are prohibited by law from transferring. These include any type of license, the right to store and use weapons, the production of drugs and alcohol, and so on. Universal succession in the reorganization of a legal entity is the predominant type of implementation of the process, characteristic of mergers, acquisitions, transformations, divisions.
Singular Succession
A feature of the singular type is the receipt of only certain powers, in other words, partial succession. This type can be used when selecting a separate structure in an organization. Parts are divided proportionally, that is, giving a large amount of rights is combined with the awarding of large duties and vice versa. This type is used in practice much less often.
Are obligations removed upon transfer of rights?
The obligations of the liquidated company, debt costs in no case cease. Together with the rights to organize, they fully transfer to the successor. Moreover, creditors must be notified of the reorganization in writing (established by article 60 of the Civil Code), and they may require early repayment of debts. To satisfy such requests, however, the law does not oblige. However, none of the creditors and other interested parties can challenge the right to reorganize and transfer debts to the new owner in any way. But we must not forget that until the supervisory authorities provide confirmation that all creditors are notified of the replacement of the debtor, it will not be possible to submit documents for the transfer of rights. Moreover, everyone needs to be informed about this personally, only after that they should give announcements to newspapers and state publications.
Of course, they try to use the transfer of rights procedure not for decent purposes. Businessmen often try to get away from debts in the calculation of the budget by changing the legal form, but such actions lead only to criminal proceedings. Regulators will definitely check the accounting and financial statements and will certainly reveal the fact of fraud, so such attempts are futile.
It must be added that the new owner is awarded and that set of duties and rights that were not taken into account in the succession procedure, were disputed by the parties or appeared afterwards.
Reorganization and liquidation of legal entities, succession
The procedure is performed sequentially and in the following order:
- It all starts with the general meeting of the company’s participants, where the regulation on the closure of the organization is unanimously adopted, and the relevant documents are signed by the head. A decision must also be made about the future of the property - which company to open for replacement, which organizational system to choose, and so on.
- The next step will be the creation of a new enterprise, the preparation of constituent documentation, the election of the head (if the existing third-party company does not become the successor).
- The liquidation process of the previous organization is being completed, documents are being submitted to the regulatory authorities for inclusion in the state databases of a new legal entity. At this point, it is necessary to notify all creditors and other interested parties of the changes, draw up a balance sheet of the enterprise, evaluate all the property that needs to be transferred.
- Succession during the reorganization of a legal entity is carried out in this order. It is also mandatory to submit an announcement to specialized media about the transformation of the organization, creditors and all interested persons and enterprises are notified in writing. As a result of non-fulfillment of this obligation, regulatory authorities will write a considerable fine, or they may even refuse to issue a transfer.
Succession Laws
Succession in the reorganization of legal entities is carried out on the basis of the 58th article of the Civil Code. Other words of the law giving recommendations regarding the procedure can be found in the 57th, 59th, 60th, 129th and 387th articles of the same code.
Documents required for registration
Succession during the reorganization of a legal entity is made out by the relevant documentation. The main paper during the implementation of the procedure will be the deed of transfer. It is filled in by the liquidated organization and approved by its general director. The act is an integral part of the process and is submitted together with all other documents when registering a new company that arose through reorganization; without it, registration will be refused.
When separation or separation takes place, managers must also draw up a separation balance sheet. This sheet will show finances, debt costs, movable and immovable property, intangible reserves distributed between new firms according to their shares. This document must be drawn up together with the deed of transfer. That is, when splitting and highlighting the document will be two.
In both papers, the data are approximate, but contracts must be attached, checks, on the basis of which the sums are taken, so that you can see where the property prices come from, what depreciation and other things are taken into account. Naturally, to determine the value of the property, it is necessary to invite independent appraisers.
The deed of transfer can be downloaded from the Internet. There is no special form for the separation balance sheet ; instead, the balance sheet is used, where you can add the necessary columns. The date of drawing up the act, as of which the calculation was made, is mandatory. If desired, a clause is indicated indicating that the act is transferred to regulatory authorities taking into account modifications that could occur (for example, depreciation).
When will the procedure be considered completed?
Succession in the reorganization of legal entities is carried out from the date of the appearance of the record of the creation of the legal entity in the Unified State Register of Legal Entities or the appearance of the record of the liquidation of the organization. This step marks the complete transfer of all rights and obligations to the successor and the completion of the reorganization. Until the entry in the registry appears, the ownership of the organization belongs to the predecessor.
What problems can arise?
In addition to incorrect documentation, during the legal succession process during the reorganization of legal entities, other difficulties may also arise. Mostly they relate to deficiencies in existing laws, which are aimed more at liquidation, and not at resolving disputes on debts and obligations. So, for example, there is still no uniform and obligatory form for all to fill out documents and requirements for their content, there are no papers that can be submitted to regulatory authorities in support of notifications on the reorganization of creditors and interested parties. The problems of succession in the reorganization of legal entities should be minimized after the implementation of relevant reforms.
Problems naturally occur if the main conditions for the execution of the procedure are not met: written notification of all interested parties about upcoming changes, a competently drawn up deed of transfer, the value of the property being transferred is confirmed by independent appraisers and attached checks.
Conclusion
Succession in the reorganization of legal entities means that the entire owner of the organization passes to the new owner of the organization with all the costs. This process can be reproduced independently or contacted by lawyers, however, given the deficiencies in the legislation, it will be much easier to solve this issue with a specialist. In any case, we must not forget the key rules for notifying interested parties; it is important to correctly compose the transfer documents.