Reorganization of an LLC in the form of a spin-off, step-by-step instructions in 2020

In what cases is reorganization carried out?

Spin-off is a form of reorganization that involves the emergence of a new entity. Part of the rights of the main subject is transferred to this subject. Several organizations may appear at once. The company from which the new entities were spun off continues to operate. Reorganization in the form of separation is relevant in the presence of these circumstances:

• The company specializes in several areas of activity. For example, she is engaged in the construction of houses and the sale of furniture. Combining areas of work is not very effective. Therefore, it makes sense to divide the subject into a construction company and a company that sells furniture. Selection in this case will help optimize activities. In addition, accounting will be significantly simplified.
• It is necessary to restructure debts. Part of the debts is transferred to the new entity. This will optimize debt.
• Significant contradictions arose between the founders of the organization. Allocation in the case under consideration will help both to preserve the business and ensure that the interests of managers are respected.
• There is a need to expand a fast-growing business. Expansion is easier to accomplish through the transfer of assets to another company.
• The company needs to be liquidated quickly.
• The need for financial recovery of the company.

Reorganization in the form of a spin-off may raise suspicions on the part of tax authorities. This is due to the fact that the division of an entity can be carried out for the purpose of tax evasion.

The essence of the reorganization in the form of separation

One form of reorganization is the spin-off of a company from an existing company. In this case, part of the assets and obligations of the reorganized company is transferred to the newly created company without cessation of the latter’s activities (Clause 1, Article 55 of the Law of 02/08/1998 No. 14-FZ).

Often, reorganization is carried out in order to avoid liquidation (bankruptcy) of the entire company. However, when carrying out reorganization through spin-off, a number of features must be taken into account.

REORGANIZATION BY SEPARATION OF A NEW LEGAL ENTITY: STAGES

Step-by-step instructions for selection

Reorganization in the form of spin-off is the formation of one or more new entities. It is carried out in several stages. Let's consider the procedure algorithm:

1. Meeting of participants. During the process, a resolution on holding the event is approved. Additional provisions are also established: distribution of responsibilities, terms of the procedure, division of capital. The decisions taken are recorded in the Protocol.
2. Inventory. Needed to establish the total value of the company.
3. Formation of separation balance. This balance sheet is a document necessary for the division of assets, finances and rights between entities arising during the event.
4. Notification of the Federal Tax Service. It must be sent within 3 days from the date of the decision on reorganization.
5. Notification of creditors. Creditors are interested parties and therefore need to be notified of the reorganization. This must be done no later than 5 days from the date of sending the notification to the Federal Tax Service.
6. Posting an ad. It is published in the State Registration Bulletin within 60 days from the date of the relevant decision.
7. Creation of a charter for each emerging entity. This charter needs to be approved. In addition, at this stage, control and management bodies of new entities are appointed.
8. Registration of subjects. It is also necessary to include all adjustments in the statutory documents.
9. Organization of activities of a new entity. You need to get statistics codes for the new company, order a seal and open a bank account at the bank.

The procedure is considered completed from the date of state registration of the new entity. It usually takes 2-3 months. However, this period may be extended if difficulties arise. The most common problems: disputes over the division of property or the division of debts to creditors.

FOR YOUR INFORMATION! Sometimes the allocation is made by court decision. The latter is usually related to antitrust laws.

What papers are needed for reorganization

The following documents are provided to the Federal Tax Service:

• Application.
• Changes in the constituent papers, charter.
• Allocation protocol.
• A paper confirming that creditors have been notified of the reorganization.
• Separation balance.

To register a legal entity you will need these papers:

• Application.
• Charter
• Separation balance.
• Confirmation that the event was advertised in the media.
• Confirmation that creditors have been notified of the reorganization.

Sometimes other documents may be required.

Features of the reorganization

The procedure for reorganizing an enterprise in the spin-off format is spelled out in detail in the Civil Code of Russia (Article 58, clause 4). Spin-off is the formation of one or several LLCs with the transfer of part of the rights and obligations of the parent company without ceasing the functioning of the latter. That is, the reorganized organization is not liquidated and retains some rights and obligations. But there are important points in this procedure that are not paid much attention at first. The mechanism is not clearly stated in legislative documents, which causes some difficulties, in particular for those who have not previously dealt with such procedures. Let's consider the main features of the reorganization.

Reorganization, for example, of a joint-stock company provides for the creation of a new joint-stock company in accordance with the Law “On Joint-Stock Companies” dated December 26, 1995 No. 208-FZ. Similarly, the reorganization of an LLC allows for the creation of a new one only in the legal form of a limited liability company. Reorganization can be voluntary or forced. If a company becomes a monopolist, the state, through court proceedings, forces it to carry out the procedure of separating part of the business into a separate legal entity. But more often the company carries out reorganization through spin-off voluntarily. There are several reasons:

• creating a branch;
• structure optimization;
• more convenient taxation;
• transfer of assets to a new organization, leaving debts in the parent company.

The procedure for voluntary allocation is regulated by law. Article 55 of Federal Law No. 14-FZ stipulates the list of issues that are discussed at the general meeting of members of the organization and documented in the decision. The newly formed spun-off organization is subject to state registration. And the parent company makes changes to its charter and submits it for re-registration in the prescribed manner. Like other reorganization options, the spin-off format provides for a step-by-step procedure for carrying out the entire process. Each stage is characterized by nuances of both legislation and the actions of persons who participate in the reorganization procedure.

Balance Features

The separation balance sheet is the main document on the basis of which reorganization in the form of spin-off is carried out. It records the distribution of assets and their transfer to the new company. The law does not establish the form of this document. That is, she can be free. But the balance sheet must contain these essential conditions:

• The name of the main and emerging entity, their organizational forms.
• Date of reorganization.
• The size of assets, liabilities and other elements of the financial structure.
• The procedure for distributing assets and liabilities between entities.
• Appendix to the balance sheet for the period preceding the reorganization.

Before drawing up the separation balance sheet, an inventory is carried out. It is needed for accounting and assessing the value of property.

Features of the reorganization of a legal entity. Advice from professionals from IPM-Consult

Reorganization of a legal entity can be caused by various goals, for example, increasing the efficiency of using assets and competitiveness in the market, diversifying the business, improving the organizational and production structure, and reducing production costs. Often, the motive for reorganization in the form of a voluntary division can be insurmountable disagreements between the participants (shareholders) of a business company regarding the ways of its further development.

Reorganization in any of the forms provided for by law is a complex and insufficiently regulated process at the legislative level. The article will discuss the reorganization of a business company.

Differences between separation of legal entities and separation

During reorganization in the form of division, a legal entity ceases to operate and, as a result, two or more legal entities arise. During reorganization in the form of spin-off, the activities of the reorganized legal entity continue and one or more legal entities additionally arise.

Important!

According to clause 19 of the Instruction on the procedure for maintaining the Unified State Register of Legal Entities and Individual Entrepreneurs (hereinafter referred to as the USR), approved by Resolution of the Ministry of Justice of the Republic of Belarus dated March 10, 2009 No. 25:

• upon division, newly created legal entities are assigned new registration numbers. In this case, the activities of the reorganized entity are terminated from the date of entry into the Unified State Register of records on state registration of newly created legal entities;
• upon separation, newly created legal entities are assigned new registration numbers, and the reorganized legal entity retains the registration number assigned earlier.

Let us consider certain aspects of reorganization in the form of separation, which in practice raise the most questions.

Making a decision on reorganization in the form of division

According to Art. 18 of the Law of the Republic of Belarus dated December 9, 1992 No. 2020-XII “On Business Companies” (hereinafter referred to as the Law), the general meeting of participants of a business company makes a decision on the procedure and conditions for its division, on the creation of new legal entities, on the composition of their participants. The general meeting of participants of each of the newly emerging business entities as a result of the division and (or) the founders (participants) of each of the newly emerging legal entities approve their constituent documents and form their bodies.

The decision on reorganization must provide for:

1. the procedure for division, including the date of the inventory of assets and liabilities, instructions to the head of the reorganized legal entity to notify in writing about the reorganization of employees, creditors, the inspection of the Ministry of Taxes, the Social Protection Fund of the Ministry of Labor and Social Protection of the Republic of Belarus, BRUSP "Belgosstrakh", as well as statistical authorities (not mandatory, but firmly established in practice);

2. the procedure for creating new legal entities, including determining their organizational and legal form and the composition of participants (owners of property);

3. conditions of separation;

4. the procedure for converting (transforming) shares (stakes) of a dividing business company into shares, shares, units of new legal entities;

5. the procedure for preparing, based on the results of the inventory, the separation balance sheet for all obligations, assets and liabilities of the divided legal entity, transferred to newly created legal entities; determination of persons who are authorized to sign the separation balance sheet;

6. the price of repurchase of shares at the request of shareholders, if the joint-stock company is reorganized (Article 78 of the Law);

7. the procedure for convening and holding general meetings of shareholders (participants) of each of the newly created legal entities (the procedure for making a decision by the owner of the property in the event of a unitary enterprise being created as a result of reorganization) to make major decisions in relation to the new legal entity:

• about its creation;
• approval of the charter;
• selection of controls;
• state registration.

On a note

Unlike the legislation of the Russian Federation, which does not provide for the possibility of reorganizing joint stock companies by creating legal entities of other organizational and legal forms on their basis, the legislation of the Republic of Belarus has no restrictions on the choice of organizational and legal forms of newly created legal entities. This follows from the norm of Art. 18 of the Law.

The legislation does not determine the legal nature of the meeting of participants of each of the newly created legal entities, and therefore the quorum for decision-making. We recommend that all issues regarding the convening and holding of the meeting be spelled out in the decision on its convening and holding.

Rights of creditors during reorganization

According to part one of Art. 23 of the Law, participants in a business company or the body that made the decision on reorganization are required to notify the company’s creditors in writing. Let us pay attention to the construction of the norm. So, if the decision on reorganization was made by the general meeting of shareholders, then it must notify creditors. In practice, this may raise the question of who should directly sign the notices to each creditor. In this case, we recommend that in the decision on reorganization you instruct a specific person (for example, a manager) to sign the notifications.

The legislation does not specify the requirements for the content of notices to creditors. However, if we are talking about protecting their rights, then the creditor who received the notification must draw conclusions about the consequences of the reorganization for him. In this regard, we recommend indicating in the notification to whom and to what extent the obligations of the reorganized legal entity will be transferred.

Another important point is the choice of the date on which the persons who are creditors are determined. Article 23 of the Law provides that persons who are creditors on the date of the decision on reorganization are notified of the reorganization no later than 30 days from this date. Consequently, a reorganized business company needs to identify creditors on the date of the decision on reorganization, for which purpose reconcile settlements with creditors, and then reconcile again when taking an inventory of assets and liabilities.

All other persons, for example, counterparties who are not creditors of the reorganized business company on the date of the decision on reorganization, are notified of such a decision when concluding agreements with them.

Important!

In order to avoid controversial situations in contracts concluded after a decision on reorganization has been made, we recommend indicating that the party to the contract is in the process of reorganization in the form of division and that all rights and obligations will pass to the newly emerged legal entities in accordance with the separation balance sheet.

The legislation does not clearly indicate the consequences of failure to notify creditors of the reorganization. According to the Supreme Economic Court of the Republic of Belarus (letter dated June 30, 2008 No. 03-29/1397 “On the procedure for notifying creditors about the reorganization of a legal entity”), creditors who were not notified about the reorganization of a legal entity can challenge it in court and demand to be declared invalid. This right follows from Art. 11 of the Civil Code, which provides for the restoration of the situation that existed before the violation of the right as one of the ways to protect civil rights.

In accordance with Art. 56 of the Civil Code, the creditor has the right to demand termination or early fulfillment of an obligation for which the reorganized legal entity is the debtor, and compensation for losses. At the same time, the criteria for submitting claims are not established for the creditor and there is no need to justify them. It is enough just to state that the creditor wants to exercise the right granted to him to demand early termination of obligations.

The Civil Code does not contain a deadline for filing claims of creditors, as well as the moment from which it begins to run. However, in Art. 23 of the Law states that the creditor’s claims are presented to the business company in writing within 30 days from the date of sending the notice of reorganization. We recommend sending it by registered mail with return receipt requested so that you can determine whether the claim was made within the established time frame.

Based on the analysis of legal norms, the lack of consent of creditors to the reorganization is not a reason to stop it. If a legal entity has already been reorganized, and the creditor makes a demand for early termination of obligations, he must forward this demand to the legal successor of the reorganized legal entity.

Separation balance

According to Art. 55 of the Civil Code, the separation balance sheet, which is approved by the owner of the property (founders, participants) of the legal entity or the body that made the decision on the reorganization, must contain provisions on the succession of all obligations of the reorganized legal entity in relation to all its creditors and debtors, including the obligations disputed by the parties.

The legislation does not contain requirements for the content and form of the separation balance sheet. Most often, the balance sheet is taken as a basis and columns are placed in it for the predecessor and for each of the successors. It is recommended to indicate the value of each asset and the size of each liability with a detailed list of all debtors, creditors, and taxes. The transferred obligation is transferred to each of the newly emerged legal entities in full, unless otherwise expressly provided in the separation balance sheet. In this case, it must indicate to whom and to what extent the rights and obligations from the specific obligation are transferred.

Participants in a business company independently decide how its obligations, assets and liabilities will be distributed among the legal entities being created. When dividing, the principle of proportionality in the distribution of rights and obligations may not be observed, i.e. the number of transferred assets may not correspond to liabilities and vice versa, the legislation does not regulate these issues. However, we are of the opinion that the number of transferred assets should be balanced by the number of liabilities, since the essence of balance is that the active and passive parts are equal.

Since the date of approval of the separation balance sheet does not coincide with the date of state registration of legal entities created as a result of the reorganization, it cannot coincide with the date of the actual transfer of property and liabilities. At the same time, changes related to the implementation of economic activities occur in the composition of the assets and liabilities of the reorganized legal entity from the date of approval of the separation balance sheet to the date of their actual transfer. In what document and how to reflect such changes? The legislation placed these issues at the mercy of the body making the decision on reorganization. Changes may be reflected in the preparation of opening balance sheets arising as a result of the reorganization of legal entities, or the separation balance sheet may be additionally approved based on the results of the reorganization by analogy with the preparation of an interim liquidation balance sheet and a liquidation balance sheet upon liquidation of an organization.

On a note

In the separation balance sheet, it is advisable to indicate the procedure for the transfer to the newly created legal entities of the acquired (retired) property or the arising (terminated) obligation specified in the separation balance sheet, during the period from the moment of its approval until the moment of state registration of the newly created legal entities as a result of the reorganization.

It is recommended that the separation balance sheet be signed by the head and chief accountant of the reorganized legal entity.

Formation of the authorized capital

The authorized capital of legal entities arising as a result of separation can be formed through:

• parts of the authorized capital of the reorganized company;
• property (retained earnings, equity) of the reorganized entity;
• own funds of the participants (founders) (for example, money deposited into a temporary bank account).

Important!

If the legal entity created as a result of reorganization includes, for example, two persons, then the size of the authorized capital should not exceed the value of their shares in the authorized capital of the reorganized legal entity. Otherwise, the tax authorities may see this as a gratuitous transfer of assets secured by this source.

Succession during reorganization in the form of division

Norm Art. 56 of the Civil Code, which allows joint liability of legal entities arising as a result of reorganization for the obligations of the reorganized legal entity, applies only to cases where the separation balance does not allow determining the legal successor. However, if the separation balance sheet clearly indicates succession, then even if there is a clear disproportionality of rights and obligations, the imposition of joint and several liability is not allowed.

Succession is not allowed when the rights and obligations are of a personal nature or a direct prohibition is established.

As a general rule, during reorganization, administrative permissions are not transferred; succession occurs only in relation to property rights and obligations.

Actions after reorganization

Invoices, invoices and certificates of work performed are issued before the day of reorganization on behalf of the predecessor, from the date of reorganization - on behalf of the successor, since the reorganized legal entity ceases its activities from the date of making an entry on the state registration of newly created legal entities. Thus, during reorganization in the form of division, a period arises when economic activity cannot be carried out: the seals of the newly created legal entities are not yet available, bank accounts have not been opened, strict reporting forms have not been reissued, and other issues have not been resolved.

According to clause 69 of the Regulations on licensing certain types of activities, approved by Decree of the President of the Republic of Belarus of September 1, 2010 No. 450, a newly created legal entity, if it intends to carry out a licensed type of activity of a legal entity reorganized in the form of division, is obliged within a month from the date of its state registration apply for a new license.

The legal entities arising as a result of the division inherit, among other things, contractual relations with counterparties, who must be aware of the replacement of parties to the transaction. You can notify them in two ways: by concluding additional agreements to each contract or by notifying the counterparty in a letter. The first method is more reliable.

On a note

A legal entity that ceases operations must prepare final financial statements. It must be dated on the day preceding the date of entry into the Unified State Register of the division.

In accordance with Art. 39 of the Tax Code of the Republic of Belarus, the tax obligation of the reorganized organization is fulfilled and the penalties due are paid by its legal successor. If the separation balance sheet does not allow determining the share of the legal successor or excludes the possibility of him fulfilling his tax obligation in full (payment of penalties), the newly established organizations bear joint liability .

The moment of completion of the reorganization is the date of termination of the activities of the reorganized legal entity. There is no answer at the legislative level to questions related to the existence and activities of a legal entity terminated as a result of reorganization: who closes bank accounts, removes them from tax registration, cancels shares, etc. The ideal option would be if the reorganized legal entity could, by the time it is entered into The Unified State Register of data on the termination of activities resolves all these issues, however, this entails the cessation of business activities.

The material was published in the journal “Industrial and Trade Law”. №4 (126)_2013

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Accounting for reorganization

In paragraph 7 of paragraph of the Instructions established by Order of the Ministry of Finance No. 44n dated May 20, 2003, it is stated that reorganization in the form of a spin-off does not involve making entries in accounting. However, in practice, entries are made. This is needed to compare accounting data before and after allocation. A subsidiary account is used for accounting. Usually this is account 00. DT00 records the transfer of assets, and CT records the transfer of liabilities. The new entity that accepts the property and obligations records reverse entries in its accounting. The accuracy of the accounting can be verified. For this purpose, the DT and CT revolutions are correlated. They must match each other.

There is no rule in the laws that the total price of the transferred assets must be equal to the total value of the transferred liabilities. In paragraph 4-5 of paragraph 39 of the Directives it is stated that if the value of the net assets of the entity that appeared in the process of separation is lower or higher than the size of the authorized capital, the difference is regulated in the opening balance sheet.

Example

There is an organization with a capital of 10 thousand rubles. The founders decided that an organization with a capital of 10 thousand rubles would be spun off from it. It is formed from the retained earnings of the first entity. According to the balance sheet of the second organization, raw materials worth 20 thousand rubles, a receivable in the amount of a million rubles, and a liability in the amount of half a million rubles are transferred. These transactions are recorded in accounting:

• DT00 KT10. Transfer of raw materials in the amount of 20 thousand rubles.
• DT00 KT62. Transfer of accounts receivable.
• DT67 KT00. The obligation to cover the debt in the amount of 500 thousand rubles was transferred.
• DT84 KT00. Writing off profits to create capital.

That is, accounting reflects the transfer of assets and liabilities of the reorganized company.

Calculation of the cost of services for the reorganization of an LLC by dividing: