Spin-off as a form of reorganization of a legal entity

What is organizational reorganization?

Reorganization is the process of ending the existence of one organization through the formation of new companies from it or its merger with other legal entities. As a result of such a process, a legal entity is excluded from the Unified State Register of Legal Entities (USRLE), but all rights and obligations are transferred to its successors.

The rules on the reorganization of commercial organizations are contained in the Civil Code of the Russian Federation, in some laws, incl. “On Limited Liability Companies” No. 14-FZ dated 02/08/1998 and “On State Registration of Legal Entities and Individual Entrepreneurs” No. 129-FZ dated 08/08/2001. These regulatory legal acts determine the methods of reorganization of a legal entity, and also regulate the implementation of each of them.

Reorganization in the form of transformation

Reorganization in the form of transformation of a legal entity is regulated by the Code:

1. Art. 68 – in relation to business partnerships.
2. Art. 92 – LLC.
3. Art. 104 – JSC.
4. Art. 106.6. – cooperatives.

For example, Part 1 of Art. 68 of the Code regulates that business partnerships can be transformed:

1. In other types of partnerships.
2. To production cooperatives.

LLC, according to Art. 92 of the Code, are converted only into:

1. JSC.
2. Household partnership.
3. Production cooperatives.

JSC, according to the law, can be transformed into:

1. OOO.
2. Zoz. partnership.
3. Prod. cooperative
4. And also into a non-profit partnership (Article 20 of the Law on JSC).

Finally, Art. 106.6. The Code establishes the possibility of transforming a production cooperative into:

1. Household partnership.
2. Household society.

Types of reorganization

According to Art. 57 of the Civil Code of the Russian Federation, reorganization of a legal entity is possible in the following options:

• Merger – several legal entities form one new legal entity; the property, rights and obligations of each of them are transferred to the newly created organization;
• Merger – a new one is joined to an existing legal entity by transferring all its assets and liabilities. In this case, the first legal entity continues to exist, and the second is excluded from the Unified State Register of Legal Entities.
• Division is the formation of several new ones from one organization.
• Spin-off is the formation of new organizations on the basis of an existing company, without terminating its registration;
• Transformation is a change in the organizational and legal form of a legal entity.

Let us note that the current legislation provides for the rights of business owners to independently choose which forms of reorganization of a legal entity are most suitable for them. In this case, it is possible to use several forms at the same time, for example, changing a joint-stock company to an LLC with a simultaneous merger with another LLC.

When determining the most optimal types of reorganization of legal entities for business, one should take into account their specific features, which can have a significant impact on the further development of the enterprise. This is especially true recently, when tax authorities strictly control any business reorganization.

The legislation provides for situations when forced reorganization of a legal entity is carried out. For example, at the request of the Federal Antimonopoly Service, the court may make a decision on reorganization (division, spin-off) in relation to a company with a dominant position in the market, provided that this company abuses it or violates other requirements of antimonopoly legislation (Article 38 of the Law “On the Protection of competition" dated July 26, 2006 No. 135-FZ). By the way, in some cases the consent of government agencies may be required, incl. FAS, to carry out the reorganization procedure (for example, during the merger of large companies with large market shares in a certain area).

Features of the extraction process

The main feature of the reorganization of a company, carried out in the form of spinning off another company from it, is that during this process there is no liquidation. In case of reorganization in all other forms, any of the reorganized entities ends its functioning.

You can find more complete information on the topic in ConsultantPlus. Full and free access to the system for 2 days.

Reorganization in the form of spin-off is also accompanied by the transfer of part of the rights and obligations of the original enterprise to the created company. As a rule, a decision on such a reorganization is made by the authorized body of the enterprise if:

• it is necessary to divide or expand areas of activity;
• it is necessary to simplify the taxation system;
• it is necessary to divide the business between the owners;
• in any other situations.

At the same time, the transfer of rights and obligations under the transfer deed should be carried out fairly; the transferred obligations must correspond to and be secured by the transferred assets (see the ruling of the RF Supreme Court dated July 2, 2015 No. 301-ES15-7649 in case No. A43-16145/2012).

Moreover, the deed of transfer must clearly identify the legal successors. These requirements are due to the protection of creditors' rights. If the above principle of distribution is not observed, then the initial organization may be held jointly and severally liable (resolution of the plenum “On some issues of application of the Federal Law “On Joint Stock Companies” of the Supreme Arbitration Court of the Russian Federation dated November 18, 2003 No. 19).

Stages of reorganization of a legal entity

Reorganization of a legal entity involves a certain procedure that lasts from two and a half months to a year, depending on the type and characteristics of the legal entities themselves. The general stages of reorganization of a legal entity are as follows:

• The owners make a decision to carry out reorganization. The document must indicate what forms of reorganization of the legal entity are planned to be carried out. In particular, specific information associated with a certain form must be indicated, for example, the organization to which it is planned to join, or the number of new organizations formed as a result of division, must be indicated;
• Notification within three days of the Federal Tax Service about the decision made (form P12003);
• Notification of creditors. They have the right to demand early fulfillment of obligations;
• Publication of the corresponding message in the State Registration Bulletin (twice with an interval of one month), aimed at informing creditors and other interested parties;
• State registration of legal entities created during the reorganization process, making an entry in the Unified State Register of Legal Entities on the termination of the affiliated legal entity.

This is the general scheme according to which the reorganization of the company is carried out, however, each of its forms has additional requirements for preparing for the procedure, including its documentation.

Stages of reorganization

Before you begin reorganizing a company, you need to understand what actions will need to be taken. In general, the reorganization operation in the form of a spin-off is similar to other types of reorganization. To complete this procedure you will need to do the following:

1. The authorized body must decide to conduct an inventory of property by creating an inventory commission. This is necessary to understand how much property, debts, rights and obligations the reorganized person has.
2. Based on the results of the inventory, a transfer act is drawn up, which should reflect what rights and obligations remain with the original enterprise, and what is transferred to the newly formed company.
3. The authorized body of the company must make an appropriate decision on the separation (depending on the organizational type of the company, this body may be a conference, members of the union, a general meeting of founders or shareholders, the owner of the property, a government body, etc.).
4. Next, you should report the reorganization to the registration authority, creditors, and publish a message in the media. According to paragraph 1 of Art. 60 of the Civil Code of the Russian Federation, publication must be made twice, the time interval between publications must be 1 month.
5. Then you need to agree on the transfer deed and register it with the authorized government agency.

The listed stages only in general terms characterize the reorganization operation in the form of separation . In practice, it may be complicated by some additional conditions.

Enterprise reorganization: consequences

Let us immediately note that all the consequences of this process directly depend on the form of reorganization, but in any case this is associated with the formation of a new legal entity with the preservation of the rights and obligations of the old one.

The negative side is the fact that companies undergoing the reorganization procedure are under the close attention of the tax authorities. Thus, after receiving notification of a decision on reorganization, tax authorities conduct a desk audit for a three-year period. The completion of the reorganization does not serve as a basis for the termination of the previously identified arrears - it is accrued to the newly created legal entity.

Succession during the reorganization of a legal entity is absolute, i.e. The new legal entity receives not only property and property rights, but also the obligations that the predecessor had. The only exception is the separation of a new legal entity, to which the debts of the main organization are not transferred, except for those related to the property transferred to it, as well as other rights.

For a long time, reorganization was considered one of the options for alternative liquidation. But at the moment, this option of “getting rid of” a problematic business is quite risky. Tax service statistics for 2020 show that every third case of reorganization by merger is suspended by decision of the registration authority. Such a suspension leads to additional business audits and, as a rule, additional assessments for tax payments, so every business owner should clearly know what reorganization in one form or another means.

Read also: 2-NDFL during reorganization and liquidation

Reorganization of legal entities - briefly about the procedure

Reorganization of the Civil Code of the Russian Federation is defined as a change in the organizational and legal form (OLF) of an organization, or as a process of separating or merging legal entities. Forms of reorganization include: division and merger, spin-off and acquisition, change in general fund. As a result of such a procedure, it is possible for an organization to be excluded from the Unified State Register of Legal Entities with the transfer of its rights and obligations to another organization, the emergence of which resulted from the reorganization. The Civil Code of the Russian Federation and a number of other laws clearly define situations when this is possible, and also contain detailed regulation of this process.

Read also: Personnel issues during reorganization

Some types of legal entities that have features of reorganization

Features of the reorganization are established for the following types of organizations: credit, insurance, clearing organizations, specialized financial companies, specialized project finance companies, professional participants in the securities market, joint-stock investment funds, investment fund management companies, mutual funds and non-state pension funds, non-state pension funds and other non-credit financial organizations, joint-stock companies of employees (national enterprises) and are determined by the laws regulating the activities of such organizations.

There are also features in the reorganization of non-profit legal entities, which are established by Articles 16 and 17 of the Federal Law of January 12, 1996 N 7-FZ “On Non-Profit Organizations”. These features are related to the procedure for making decisions on the reorganization of NPOs and the organizational and legal forms when transforming NPOs. For example, a private institution can be transformed into a foundation, an autonomous non-profit organization, a business company, and an Autonomous non-profit organization has the right to be transformed into a foundation, etc. When reorganizing an NPO, it should be taken into account that the decision on state registration (denial of state registration) of a non-profit organization is made by the Ministry of Justice of the Russian Federation.