Assets less than capital: implications for the organization and authority of administrative bodies

05.07.2013

1. Foreign representative office in Russian Federation

2. Foreign subsidiary company in Russian Federation

3. Limited presence on the Russian Federation territory of a foreign organization

4. Forms of presence of foreign companies in Russia: a general overview/comparison

Assets less than capital: implications for the organization and authority of administrative bodies

Possible solutions:

1) The decision to reduce the share capital of the organization

2) Elimination of the organization

According to paragraph 4 of Art. 30 of the Federal Law of 08.02.1998 N 14-FZ "About Limited Liability Companies" (in the red. Federal Law of 18.07.2011 N 228-FZ "About Amendments to Certain Legislative Acts of the Russian Federation regarding the revision of the ways to protect the rights of creditors in reduction of the authorized capital, changes in requirements for companies in the case of non-capital net asset value "(hereinafter - the Law N 228-FZ)) if the net asset value will be less than its share capital at the end of the fiscal year following the fiscal year or the second each subsequent fiscal year, after which the net asset value was less than its share capital, the company no later than six months after the end of the financial year must take one of the following decisions:

1) to reduce the authorized capital of the company to a size that does not exceed the value of its net assets;

2)  the liquidation of the company.

Law N 228-FZ came into force on 1 January 2012 (published in "Rossiyskaya Gazeta", N 159, 22.07.2011), with the exception of paragraph 2 of Art. 3 and Art. 4 of the Law N 228-FZ (Section 1, Art. 6 of the Law N 228-FZ).

Dates

I. Company not later than six months after the end of the financial year must take one of the following decisions:

1) to reduce the authorized capital of the company to a size that does not exceed the value of its net assets;

2) on the liquidation of the company.

II. Following the decision to reduce the share capital of a limited liability company must notify the registration (tax) authorities within three working days. For failure or delayed message said information society leader has administrative responsibility. (Paragraph 3 of Art. 20 of the Federal Law of 08.02.1998 N 14-FZ "On Limited Liability Companies")

The powers of the regulatory authorities

The tax authorities

The tax authorities are entitled to present in court and arbitration proceedings to dissolve the organization of any organizational-legal forms on the grounds established by the legislation of the Russian Federation in accordance with paragraph 11 of Art. 7 of the Law of the Russian Federation of 21.03.1991 N 943-1 "On tax authorities of the Russian Federation" and paragraph 2 of Art. 25 of the Federal Law of 08.08.2001 N 129-FZ "On State Registration of Legal Entities and Individual Entrepreneurs".

Bodies of state registration of legal entities

In accordance with paragraph 5 of Article. 35 of the Federal Law of 26.12.1995 N 208-FZ "On Joint Stock Companies", Joint-Stock Company is obliged to make a decision on its liquidation, if at the end of the second and each subsequent fiscal year, according to the annual balance sheet submitted for approval by the shareholders of the Company, or the results of the audit check net asset value is less than the minimum capital prescribed by law.

In this case, the body responsible for state registration of legal entities or other state agencies or local governments, to which the right to file such a request granted by a federal law, the right to present to the court calls for the elimination of society.

Moscow Committee on Insolvency (Bankruptcy)

There is an administrative practice: For example, the city government at the time adopted the Resolution "On the protection of the interests of Moscow in the economy when dealing with loss-making organizations," which provides that the Committee of Moscow on Insolvency (Bankruptcy), together with Federal Tax Service of Russia will:

- Examine the reasons for loss of organizations on the subject of poor management, and for violations of tax laws and tax evasion;

- Take measures to eliminate unprofitable corporations with negative net assets (net assets below the amount of the authorized capital) for 2 years or more (the notorious loss-making committee).

For more information and consulting services, please, refer to AS-AUDIT specialists.

Ссылки по теме:

The accounting policy for 2013 in view of changes in the Russian tax and accounting legislation. 5