General vs. simplified liquidation: what is the difference and which one to choose?

Simplified liquidation involves removing a company from the Unified State Register of Legal Entities (EGRUL) based on a decision by its participants to cease operations (Article 21.3 of Federal Law No. 129-FZ of August 8, 2001). This "closing" option is available only to small and medium-sized enterprises (legal entities and individual entrepreneurs included in the special registry based on their income and headcount) provided that the following conditions are met simultaneously:

1. The company is not a VAT payer or is exempt from calculating and paying VAT;
2. The Federal Tax Service has no record of outstanding settlements with creditors;
3. The EGRUL does not contain a note regarding the inaccuracy of information;
4. The company has no outstanding obligations for taxes, fees, or other mandatory payments;
5. The company does not own any real estate or vehicles;
6. The company is not currently in the process of liquidation, reorganization, or removal from the EGRUL by decision of the Federal Tax Service;
7. No bankruptcy proceedings have been initiated against the company.

For this procedure, you must submit an application using form R19001 and wait for the period for interested parties to file objections to expire (3 months from the date the decision on the upcoming removal is published). After this, the company will be removed from the EGRUL. All interested parties can learn about the planned cessation of the company's operations through the Federal Tax Service's publication of this information in the "Bulletin of State Registration" journal.

From a practical standpoint, simplified liquidation is advisable when operations have effectively ceased, there are no assets, and the company's corporate and tax history is unlikely to raise questions from the Federal Tax Service during an audit. The main advantage of this option is the relatively short timeframe—3 months and 5 business days—as well as minimal costs, which may be avoided entirely if documents are submitted directly to the Federal Tax Service or filed electronically.

Note that the form R19001 application must be signed by all company participants; in other words, the decision must be unanimous. If one or more participants are located outside the Russian Federation, signing such an application can be difficult, which means this method of "closing" a business is not always feasible.

Standard liquidation is the most transparent way to terminate a company's operations, as it involves identifying creditors and settling accounts with them. This option is preferred if the conditions for simplified liquidation are not met or if other circumstances make simplified liquidation impossible.

This method of terminating operations is carried out through a sequential procedure involving a liquidator or liquidation commission. Many stages of the process may require interaction with a notary. To implement the procedure, the following steps must be taken:

1. Adopt a decision to liquidate;
2. Appoint a liquidator or liquidation commission;
3. Submit form R15016 to the Federal Tax Service, which must be signed by the company's head and filed with the Federal Tax Service at several stages of the procedure: when the decision to liquidate is made, when the interim liquidation balance sheet is prepared, and when the liquidation procedure is completed;
4. Publish notices in the Unified Federal Register of Legally Significant Information and the Vestnik Gosudarstvennoy Registratsii journal;
5. Prepare interim and final liquidation balance sheets.

As a result, the procedure typically takes between 3 and 12 months, with mandatory costs starting from 30,000 rubles, depending on the number of creditors, the volume of corporate work, and other circumstances.

Simplified liquidation is a fast and cost-effective way to terminate a company's operations. It is only possible if the legal entity meets all statutory criteria simultaneously and is effective when the company has no debts, no inaccuracies in the Unified State Register of Legal Entities (EGRUL), and no other factors that might raise questions from the Federal Tax Service of Russia. It also requires that all participants are able to sign the application before a notary or at the Federal Tax Service, or, if they are outside the Russian Federation, have their signature certified at a consulate.

Standard liquidation is a longer and more costly procedure, but it is the correct way to wind down a company that has creditors, assets, or other obligations. Therefore, the choice between the two mechanisms should be based not only on the desired speed of closing the business but also on the actual state of the company's accounts, assets, and corporate documentation.

Risks of simplified liquidation:

• refusal to remove the company from the Unified State Register of Legal Entities if even one of the mandatory legal conditions is not met;
• inability to complete the procedure due to objections filed by creditors within 3 months of the publication of the notice of impending removal;
• loss of time and financial resources resulting from choosing the simplified procedure when circumstances objectively require standard liquidation.

Risks of standard liquidation:

• initiation of a tax audit or an in-depth analysis of the company's activities during the liquidation process;
• discovery of outstanding settlements with creditors, additional tax liabilities, penalties, and fines;
• refusal to complete the liquidation due to violations of deadlines, improper filing of Form R15016 applications, or the existence of unresolved obligations;
• transformation of the liquidation procedure into bankruptcy in the event of significant debt, potentially leading to liability for controlling persons.

The C Cases team recommends:

1. conduct an express audit of the company before starting the procedure: check for any outstanding debts to the budget and creditors, the status of a small or medium-sized enterprise, Unified State Register of Legal Entities (EGRUL) records, and the presence of real estate or vehicles on the balance sheet;
2. choose simplified liquidation only if all legal requirements are met and there is no risk of creditors filing objections;
3. use the general liquidation procedure if the company has disputed liabilities, assets, or expects claims from counterparties;
4. plan timelines and budget in advance: while simplified liquidation is technically cheaper and faster, any discrepancies discovered can lead to a rejection and wasted time;
5. clear any records of inaccurate information, settle mandatory payments, and resolve issues with creditors before submitting liquidation documents.

If you have decided to cease your company's operations and are choosing the best way to do so, the C Cases team is ready to assess your situation and suggest the safest possible way to close your business.

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Sources

1. Federal Law No. 129-FZ of August 8, 2001, "On State Registration of Legal Entities and Individual Entrepreneurs";
2. Federal Law No. 14-FZ of February 8, 1998, "On Limited Liability Companies";
3. Federal Law No. 208-FZ of December 26, 1995, "On Joint-Stock Companies."