In the Analysis section we were using examples of the recent legal practice. Based on those one general conclusion can be made — every time a wrong method of liquidation was used. But this is obvious now and the decision on liquidation had been taken earlier — a year or two before the sad final. Then it was based on past experience and seemed adequate. Accordingly, you can’t rely on the assumption: everybody did it and we should do the same. Recent experience confirms that we cannot look into the past. While the official certificate of the company’s liquidation hasn’t been obtained there is a three years when the dire consequences might ensue when nobody’s expecting them anymore. It’s impossible to foresee what legal practice might oprevail by then, it’s a “Russian roulette” but the trend is obvious. Approaches to tax administration and legal practice constantly change, and those changes are never intended for the benefit of a taxpayer; the crisis has activated once dormant articles of the law and now we have new precedents that become tendencies. The mass conscience is inert and still appeals to the past and previous experience. For example, many still believe that liquidation of the company just means the change of the founders and managers for nominal ones, they still know nothing about subsidiary liability and believe that the owner of a small limited liability company shall only be held liable only to the extent of the shares of the authorized capital; they still hope that the tax authorities will have problems identifying their contractors and believe that bankruptcy is a prerogative of mega-corporations only, etc. Our position is that three years is too long a period to afford self-deceit.

Subsidiary liability for “old sins” is a new tendency in legal practice
For those who don’t know it yet, subsidiary liability means a liability of a manager, founder, decision maker to the budget and other creditors in the amount of the total indebtedness of the company to the extent of their personal funds and assets, not limited to the shares in the authorized capital of the company. Considering the conditions in which small and medium-sized businesses have to operate in our country I am sure that most entrepreneurs and managers exist under this thereat without being aware of it.

There are good solutions but no optimal universal one
The basic conditions of all companies are different. Take, for example, two different companies. One is still free of any tax claims but is not sure in its contractors and apprehends a tax audit. Another one has already undergone the audit, has indebtedness to the budget but no possibility to redeem or dispute it. In the first case all conditions are present for liquidation taken, for example, in three steps: change of the founders and management, reorganization to another region, official voluntary liquidation of the legal successor. In the second case all conditions are present for bankruptcy undertaken, for example, in two steps: change of the founders and management and voluntary liquidation transiting into the procedure of simplified bankruptcy. Try swapping them around and see what happens. In the first case you’d have to declaring a company that has no indebtedness bankrupt. That can be done but it seems a bit too extreme: either we will voluntarily request the tax authorities to find indebtedness which is what we have been trying to avoid, or we can get creative and create an indebtedness to a friendly creditor — that is punished by up to 6 years of imprisonment for premeditated bankruptcy. It won’t be much better in the second case: where reorganization of the company with indebtedness to the budget can go unnoticed, the subsequent official voluntary liquidation of the legal successor with such indebtedness will constitute a direct violation of the law and can result in imprisonment and imposing of subsidiary liability onto all participants of the project though most likely the registration of the legal successor will be found illegal even before that. Accordingly it will come back to bankruptcy which will be initiated by the creditor and not the debtor, and the wrong three-step combination will result in complete failure.

The main difficulties of liquidation are organizational issues and not the “know-how” of lawyers
Unlike simple change of owners and managers of the company for nominal ones, a full-fledged liquidation of a company is not a “packaged” product of legal firms but a venture project. Usually this is a long-term project that involves a large number of actions and documents, official contractors, suppliers of “services” in your city or town, and, obviously, a possibility to quickly react to the risks. In short, no matter how highly qualified lawyers are their ideas will not be enough. As in any venture project to realize ideas a company of experts is needed that are highly organized like a good fire squad and are headed by an experienced leader. Probably this is the reason why even major holdings that have their own legal staff attract specialized companies to realization of such projects and transfer liability to such companies.

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