Generally, a Russian entity can be liquidated in the following ways: voluntarily by resolution of the shareholders, or compulsorily on the initiative of the authorized state or local Russian authorities on the basis of a court order.

The reasons for a compulsory liquidation can be: gross or irreversible violations of the law, carrying out an activity without a corresponding license or if the activity is prohibited by law or the constitution of the Russian Federation, rarely but principally also other repeated or gross violations of the law can also lead to compulsory liquidation.

Voluntary liquidation, on the other hand, is a relatively long and formalized procedure, which, according to current practice, can usually be completed in up to 12 months time, if there are no pending legal proceedings that have not been clarified, as then the liquidation process can be delayed until these have been clarified.

How does the liquidation process work and which steps must be observed?

With the resolution on the liquidation by the shareholder, a liquidator or the liquidation commission is appointed, it is important to mention that a physical person must be appointed as the liquidator, who can be either a Russian citizen or a foreigner with a residence permit.

As a rule, specialized law firms are commissioned to liquidate a company, which can often also provide a liquidator or the liquidation commission.

When notifying the authorities about the decision, it is important to note that this takes place within 3 working days. And the liquidation commission is obliged to publish a notification about the liquidation of the company in a Russian print medium recognized for this purpose, as well as a written notification to the creditors and the employment agency. After publication in the Russian print medium, you must wait at least two months for the interim balance sheet of the liquidation to be submitted to the responsible tax authority.

In the next step, the creditors’ claims can be served through repayments, i.e. also the liquidation balance sheet and the distribution of assets may take place. However, it is important to state that as long as a company is not properly liquidated and deregistered, it is obliged to have a liquidator or liquidation commission, it needs to submit tax returns and to keep accounts – only after the liquidation is entered in the Unified State Register of Legal Entities (EGRJL / ЕГРЮЛ) and the de-registration with the tax authorities took place, the company may be considered liquidated.