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Essential procedures to be followed when a legal entity is separated from the structure of another legal entity
Essential procedures to be followed when a legal entity is separated from the structure of another legal entity
I would like to receive information regarding the process of the reorganization of a legal entity. What documents are required to formalize the separation of another legal entity from the composition of a legal entity, and when there are changes in the founder or director? How should the necessary procedures be carried out in this regard?
The State Tax Service under the Ministry of Economy has stated that any changes made to the founding documents of a legal entity, as well as any subsequent changes to the registered facts, must be recorded, and an application must be submitted to the registration authority within 40 days from the moment the change occurs for the registration of that change. The application should specify the changes that have occurred, and the documents confirming the changes should be submitted. To register a change of founder, the decision of the new founder(s), a copy of the document confirming the identity of the new founder, and the document confirming the change (purchase-sale, donation, exchange contracts) should be submitted along with the relevant application form to the tax authority where the legal entity is registered.
It should be noted that a change of founder in a resident legal entity means the transfer (sale) of shares from one founder to another founder(s).
According to Articles 96.5 and 104.6 of the Tax Code, when a share in the charter capital or shares are transferred at a price higher than the proportional value of the net assets' share or shares, the difference between the actual transfer price and the nominal value of the share or share in the charter capital is subject to taxation. When shares are transferred at a lower price (at a discounted price), the difference between the nominal value of the share or shares and the proportional value of the net assets at the time of the purchase-sale contract is considered taxable income. If the shares or participation rights are purchased above the nominal value, the expenses deducted from the income at the time of the transfer will be considered at the actual purchase price of these assets.
When the founder is a physical person, the tax rate is 14% according to Article 101.2 of the Tax Code, and when the founder is a legal entity, the tax rate is 20% according to Article 105.1 of the same Code. Additionally, it is stated that based on the tax exemptions provided in the Tax Code, 50% of the income from the transfer of a participation share or share owned by the taxpayer for at least 3 years is exempt from income and profit tax.
According to Article 55 of the Civil Code, the reorganization of a legal entity (merger, joining, division, separation, transformation) may be carried out by the decision of its founders (participants) or the authorized body of the legal entity as specified in the charter. According to Article 55.2 of the same Code, in cases specified by law, the reorganization of a legal entity by its division or the separation of one or more legal entities from its composition is carried out by a court decision.
According to Article 55.3 of the Civil Code, the court appoints an external administrator and instructs them to reorganize the legal entity. From the moment the external administrator is appointed, the authority to manage the legal entity passes to them. The external administrator acts on behalf of the legal entity in court, prepares the division balance and submits it to the court together with the charters of the newly formed legal entities resulting from the reorganization. The court's decision, once it becomes legally binding, serves as the basis for the state registration of the newly established legal entities, subject to compliance with legal requirements. According to Article 93.2 of the Civil Code, a participant in a company may transfer their share (or part of it) to third parties. According to Article 93.3 of the same Code, participants in the company have a preferential right to purchase the share (or part of it) in proportion to the size of their own shares. If a participant intends to transfer their share (or part of it), they must first offer it to the other participants for purchase. If the participants do not exercise their preferential right within one month from the date of notification or within another period specified in the charter of the company or the agreement of its participants, the share may be transferred to a third party.
I would like to receive information regarding the process of the reorganization of a legal entity. What documents are required to formalize the separation of another legal entity from the composition of a legal entity, and when there are changes in the founder or director? How should the necessary procedures be carried out in this regard?
The State Tax Service under the Ministry of Economy has stated that any changes made to the founding documents of a legal entity, as well as any subsequent changes to the registered facts, must be recorded, and an application must be submitted to the registration authority within 40 days from the moment the change occurs for the registration of that change. The application should specify the changes that have occurred, and the documents confirming the changes should be submitted. To register a change of founder, the decision of the new founder(s), a copy of the document confirming the identity of the new founder, and the document confirming the change (purchase-sale, donation, exchange contracts) should be submitted along with the relevant application form to the tax authority where the legal entity is registered.
It should be noted that a change of founder in a resident legal entity means the transfer (sale) of shares from one founder to another founder(s).
According to Articles 96.5 and 104.6 of the Tax Code, when a share in the charter capital or shares are transferred at a price higher than the proportional value of the net assets' share or shares, the difference between the actual transfer price and the nominal value of the share or share in the charter capital is subject to taxation. When shares are transferred at a lower price (at a discounted price), the difference between the nominal value of the share or shares and the proportional value of the net assets at the time of the purchase-sale contract is considered taxable income. If the shares or participation rights are purchased above the nominal value, the expenses deducted from the income at the time of the transfer will be considered at the actual purchase price of these assets.
When the founder is a physical person, the tax rate is 14% according to Article 101.2 of the Tax Code, and when the founder is a legal entity, the tax rate is 20% according to Article 105.1 of the same Code. Additionally, it is stated that based on the tax exemptions provided in the Tax Code, 50% of the income from the transfer of a participation share or share owned by the taxpayer for at least 3 years is exempt from income and profit tax.
According to Article 55 of the Civil Code, the reorganization of a legal entity (merger, joining, division, separation, transformation) may be carried out by the decision of its founders (participants) or the authorized body of the legal entity as specified in the charter. According to Article 55.2 of the same Code, in cases specified by law, the reorganization of a legal entity by its division or the separation of one or more legal entities from its composition is carried out by a court decision.
According to Article 55.3 of the Civil Code, the court appoints an external administrator and instructs them to reorganize the legal entity. From the moment the external administrator is appointed, the authority to manage the legal entity passes to them. The external administrator acts on behalf of the legal entity in court, prepares the division balance and submits it to the court together with the charters of the newly formed legal entities resulting from the reorganization. The court's decision, once it becomes legally binding, serves as the basis for the state registration of the newly established legal entities, subject to compliance with legal requirements. According to Article 93.2 of the Civil Code, a participant in a company may transfer their share (or part of it) to third parties. According to Article 93.3 of the same Code, participants in the company have a preferential right to purchase the share (or part of it) in proportion to the size of their own shares. If a participant intends to transfer their share (or part of it), they must first offer it to the other participants for purchase. If the participants do not exercise their preferential right within one month from the date of notification or within another period specified in the charter of the company or the agreement of its participants, the share may be transferred to a third party.