Reorganization of the Legal Entity

Reorganization of a legal entity is a process of its transformation into one or several enterprises.

Reorganization of a legal entity can be expressed in the forms of merger, division, merger, transformation or separation.

Consider the types of reorganization of a legal entity:

  1. Merging.

With this transformation process, the organizationcompletely ceases to exist and transfers its own rights and obligations to the legal entity being created. This is due to the need to reduce management costs, concentrate (consolidate) capital, save economies of scale, increase competitiveness, and so on. When merged at a general meeting, the founders of organizations decide on reorganization. After this, a transfer certificate is prepared and then a reorganization agreement is signed. Further, the charter of the organization is created and the authorized capital is determined.

  1. Accession.

The organization (organization) thatjoins, transfers its rights and obligations to another, operating enterprise and ceases to function as a subject of law. At the same time, this person accepts the rights and duties that are available to the affiliated organization. The decision on the reorganization of the enterprise, the procedure and conditions for accession, shall be adopted at the general meeting of the founders and reflected in the approved contract, and the constituent documents of the enterprise shall be amended.

  1. Allocation.

One or more organizations are created whichsome part of the rights is transferred, as well as the responsibilities of the enterprise, which is reorganized, without the termination of the latter. Rights and duties are defined in the separation balance sheet.

  1. Separation.

The legal entity ceases operations,transferring rights and responsibilities to newly created organizations. Separation and separation can be carried out forcibly by decision of the court and other authorized bodies.

  1. Transformation

With this form, there is a replacementorganizational and legal form of the company. So commercial organizations can be transformed into other commercial and non-commercial entities, and vice versa, noncommercial in commercial.

The reorganization of a legal entity involves several stages:

1) At a general meeting of participants, a decision is made to reorganize the enterprise,

2) A transfer act, a separation balance sheet, an agreement on merger, division, merger or spin-off, etc., depending on the form,

3) State bodies and creditors are notified,

4) Information on reorganization in mass media is published,

5) The registration authority is notified of the completion of reorganization procedures.

When reorganizing an enterprise, it is necessary to conductcomplete inventory of property, agree on settlements with tax authorities, off-budget funds, pay off all available debts, including wages.

The reorganization of the legal entity is formalizedtransfer act (balance sheet) upon accession, merger, transformation, or - upon separation and division - by the separation balance sheet. They should contain provisions on succession, rights and obligations of the reorganized organization. After state registration, the enterprise is considered reorganized.

Under a separate subdivision of the organizationunderstand a geographically separate economic unit, at the location of which are specially equipped for stationary (that is, for more than a month) jobs.

Registration of a separate subdivision of a legal entity is conducted at a different address than the organization itself. A separate division can have its own balance and settlement account.

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