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Updated: 2014-09-09 10:50

Business reorganization

Reorganisation is one of the ways to terminate a legal entity, but during reorganisation a legal entity is not liquidated. In other words, a legal entity under reorganisation stops to exist once the reorganisation is completed - because it is either merged with the other legal entity or divided among other legal entities already in operation or newly established.

The following types of business consolidation are possible:

1. Affiliation takes place when one or several legal entities are affiliated to the other legal entity already in operation, with all the rights and duties of the legal entity under reorganisation passing to the latter;

2. Merger - is combining two or more legal entities into a new legal entity, to which all the rights and duties of the reorganised legal entities are transferred.

The following types of business division are possible:

1. Distribution means distributing the rights and duties of the legal entity under reorganisation to other legal entities in operation;

2. Division means establishment of two or more new legal entities on the basis of one legal entity under reorganisation, to which the rights and duties of the reorganised legal entity pass in certain proportions.

 

Reorganisation procedure 

  1. Reorganisation terms and conditions, new articles of association for companies continuing their activities and newly-established companies and sets of yearly financial statements of the last 3 years for companies under reorganisation and participating in reorganisation are prepared; documents scrupulously describe the process of reorganisation, distribution of the assets, rights and duties of the companies participating in the reorganisation, the procedure of stakeholders of one legal entity becoming stakeholders of the other legal entity, etc.
  2. Reorganisation terms and conditions are assessed by an auditing company, which issues an assessment report. The latter clause does not apply if all the shareholders of each company under reorganisation and participating in reorganisation agree.
  3. Governing bodies prepare written reports on the planned reorganisation. The latter clause does not apply in case of a division of a joint stock company, provided that all the shareholders of each company divided through reorganisation and participating in reorganisation agree. For private limited company the latter clause applies only when requested by shareholders holding minimum 1/10 of all votes.
  4. Not later than on the first day of public announcement, reorganisation terms and conditions and their assessment report must be submitted to the Register of Legal Entities (RoLE);
  5. Prepared reorganisation terms and conditions must be published;
  6. Shareholders and creditors familiarise themselves with the above-mentioned reorganisation documents;
  7. Creditors submit their claims regarding additional security of fulfilment of liabilities to them;
  8. General meetings of shareholders (GMS) adopt resolutions on reorganising companies, approve reorganisation terms and conditions, articles of association of the companies continuing their activities are amended and articles of association of newly-established companies are adopted;
  9. Reorganisation documents must be certified by a notary;
  10. New companies established after the reorganisation, amended articles of association of the companies continuing their activities are registered in the Register of Legal Entities, companies ceasing their activities are removed from the Register;
    All assets, rights and duties of reorganised companies are assigned to the companies operating after the reorganisation.

Reorganisation can be completed in 2-3 months. But it depends on how quickly reorganisation terms and conditions are prepared and approved, audit company's report is issued, whether creditors make claims or not, etc.