Company liquidation in Uzbekistan

For one reason or another, sometimes you have to stop your business, which raises the question "How to close your company? Where to start this procedure?". This article describes the procedure for voluntary liquidation of an existing legal entity - a limited liability company (hereinafter - the Company) in Uzbekistan, which carries out commercial activities. "Liquidation" shall mean termination of the Company's activities without transfer of its rights and obligations by succession to other persons (entities).

Procedure on voluntary liquidation of the Company (a commercial organization) is regulated by the following Uzbek laws:

- the Civil Code;

- Law "On Limited and Additional Liability Companies" dated 06.12.2001 No.310-II;

- the Tax Code;

- Regulation on voluntary liquidation of business entities and termination of their activities, approved by the Resolution of the Uzbekistan Cabinet of Ministers dated 21.08.2019. №704.

According to the acting Uzbek legislation, the powers for voluntary liquidation of the Company are vested exclusively in the general meeting of shareholders of the Company, which shall make a decision on liquidation, drawn up in the form of a protocol. If the Company consists of a single participant (shareholder), this participant alone shall make a decision on Company liquidation.

The protocol (decision) on liquidation shall approve:

1) the liquidator (an individual) or the liquidation commission and its members. The head of the Company (Director, General Director) may also be appointed as the liquidator or be a member of the liquidation commission;

2) the place and period for accepting requests from creditors of the liquidated Company;

3) the reason for liquidation and expected term for completing the liquidation procedure. The total liquidation period shall not exceed six months from the date of notification of the registering authority (the Center for State Services, hereinafter - the CSS) of the decision taken on voluntary liquidation.

From the appointment date of the liquidator, all powers to manage the Company issues are transferred to him. Within three working days after his appointment, the Company head (Director, General Director) shall transfer to the liquidator all documents related to the Company’s activities, including seals, stamps and other property of the Company.

Not later than the next business day after the shareholders’ decision on voluntary liquidation, the liquidator shall send to:

1) the registering authority (the CSS):

a) a notification letter on Company liquidation;

b) a copy of the minutes of the general meeting of shareholders (or decision of the sole shareholder) on voluntary liquidation;

2) the bank servicing the Company’s main bank account(s):

a) a notification letter on Company liquidation;

b) a copy of the minutes of the general meeting of shareholders (or decision of the sole shareholder) on voluntary liquidation;

c) two copies of cards with samples of the liquidator's signature and Company seal;

3) the banks servicing the Company’s secondary bank accounts:

a) a request on closing the bank accounts and transferring available funds to the Company’s main bank account;

Within one working day after receipt of the protocol (decision) on Company liquidation, the Center for State Services shall:

a) make a record on legal entities register regarding Company’s liquidation process and notify the following authorities accordingly:

- tax and statistics authorities;

- district (city) department of the Bureau of Compulsory Enforcement (BPI);

- cadastral office;

- registration authorities of motor vehicles, agricultural machinery and other technical means;

- the Ministry of Finance of Uzbekistan;

- public utility supplying organizations (gas, electricity, and water);

b) post an announcement on Company liquidation on CSS’s official website;

 

From the date of notification of:

1) the registering authority (the CSS):

a) financial and economic activities of the Company shall be suspended;

b) accrual of land tax, single land tax, property tax, tax for use of water resources, as well as penalties on all taxes and mandatory payments, shall be terminated. In the event of the sale of property and other assets of the Company, taxes and other mandatory payments, with the exception of those specified in this paragraph, shall be calculated (accrued) and paid in the manner prescribed by law;

c) previously adopted measures to secure creditors' claims shall be canceled;

d) it will be prohibited to make changes and additions to the shareholder documents of the Company;

d) executing transactions related to the alienation of property or entailing the transfer of property for use by third parties shall be permitted exclusively in the manner described below;

e) deadline for fulfillment of all obligations, as well as deferred mandatory payments, shall be considered as due;

2) banks servicing the Company's accounts:

a) funds shall be written off from the Company's accounts only as per instructions of the liquidator;

b) operation of card No. 2 shall be suspended.

All other bank accounts of the Company shall be closed, with the funds available on them being transferred to the main accounts of the Company.

 

FURTHER, IN ORDER TO TERMINATE THE COMPANY'S ACTIVITIES, THE LIQUIDATOR SHALL TAKE THE FOLLOWING ACTION:

FIRST, shall terminate employment contracts with the Company's employees, for which the liquidator:

a) shall send to employees written warnings about termination of employment contracts in connection with the Company liquidation;

b) if necessary, shall make agreements with employees to replace the notice period with monetary compensation;

c) shall issue orders to terminate employment contracts.

SECOND, shall conduct an inventory of the Company's assets and liabilities, for which the liquidator shall issue a corresponding order and prepare a consolidated act on the value of the Company's fixed and current assets. At the same time, based on information received from the territorial office of the bailiffs, he shall compile a register of enforcement documents in which the Company participates as a debtor.

THIRD, shall send written notices to creditors about the Company liquidation, shall receive confirmation from them:

a) with a note on the date of acceptance, in case of notification in person;

b) with a note on the postal receipt, or by written message, in case of sending a registered letter with a return receipt;

c) by electronic message by e-mail about receipt, etc.

FOURTH, shall take measures to collect the Company's accounts receivable, by sending claims to the Company's debtors with a demand to pay off the accounts receivable. If the debtors refuse to pay off the debt, the liquidator shall file lawsuit(s) to the court with a claim for its collection.

FIFTH, shall organize the "tax audit". The district state tax office shall carry out an audit of the Company. The tax audit shall begin within 3 (three) business days from the receipt date of the notice on Company liquidation. However, in practice, there is often a delay in tax audit commencement. The audit shall cover financial and economic activities of the Company for the period from the last tax audit (or from the date of company registration, if the audit has not yet been carried out) to the date of notification on Company liquidation, but not more than a 3 (three) year period. The term of this audit shall not exceed 30 (thirty) calendar days. If the audit has not been completed within 30 days, the Company's debt for taxes and fees is determined according to the submitted calculations of the liquidator.

In case of revealing violations of tax legislation during the audit, the tax authority will take measures against the Company as per the Uzbek law. It is important to note that in some cases the violations of tax legislation becomes the reason for delaying the Company’s liquidation process, as a result of which the maximum six-month liquidation period may not be observed. In case of failure to complete voluntary liquidation within the established period, the above-described tax benefits in relation to the Company shall not apply, and all relevant payments are collected in full for the period for which accruals were suspended.

The tax audit shall not be carried out in a Company with an annual turnover of up to one billion soums over the past three years, which declared voluntary liquidation by issuing a tax opinion by tax consultants (with the exception of taxpayers with a high risk level).

If a Company has not carried out financial and economic activities since it state registration and has no tax debts, this Company shall be exempt from the tax audit.

SIXTH, shall draw up an interim liquidation balance sheet of the Company, which is approved by the general meeting of the Company's participants (shareholders). This balance sheet shall contain:

a) full information on Company's assets and liabilities;

b) the value of all property owned by the Company;

c) full information on the Company's accounts receivable and accounts payable.

A list of all claims presented by creditors shall be provided separately in an appendix to the balance sheet. In this case, it is necessary to indicate the results of the liquidator's consideration of these claims.

SEVENTH, shall take measures to satisfy the claims of the Company's creditors. After approval of the interim liquidation balance sheet, the liquidator, within five days, shall send to each creditor written notices of acceptance or rejection of claims, the amount of  accepted claim.

Based on approved interim liquidation balance sheet, starting from the date of its approval, the liquidator shall make payments to the creditors of Company in the following priority order:

a) first - claims of citizens arising from labor relations, for collection of alimony and payment of remuneration under copyright agreements, as well as claims of citizens to whom the Company is liable for causing harm to life and health;

b) second - payments to the State Budget and state target funds;

c) third - claims of other creditors.

If the Company's funds are insufficient to pay off creditors, the liquidator shall take measures to sell the Company's property through public auction. However, if it is impossible to satisfy the creditors' claims in full, the liquidator shall apply to the economic court to declare the Company insolvent (bankrupt). From the date of declaring the Company insolvent (bankrupt), voluntary liquidation ceases, and the further procedure shall be carried out in accordance with the insolvency (bankruptcy) laws. In this case, the above-described tax benefits in relation to the Company will not be applied, and all relevant payments will be collected in full for the period for which accruals were suspended.

EIGHTH, shall settle with the Company's shareholders and draw up a liquidation balance sheet. After completing settlements with creditors, paying taxes and other mandatory payments, financial sanctions, the property that remains with the Company shall be distributed among its shareholders who have rights to this property or mandatory rights in relation to this Company, and a liquidation balance shall be drawn up.

The property distribution among the Company shareholders shall be made on the basis of their joint decision, a protocol of the general meeting of shareholders. The liquidation balance shall be approved by the protocol of the general meeting of Company shareholders as well.

NINTH, shall submit the approved liquidation balance sheet to the local tax office to obtain a confirmation on absence of the Company's debt on taxes and other mandatory payments. Also, the liquidator shall receive from the territorial office of bailiffs a certificate (confirmation) on absence of an unexecuted writ of execution, in which the Company acts as a debtor. Copies these confirmations shall be provided to the CSS.

TENTH, after receiving a positive conclusions from the tax authority and territorial office of bailiffs, all bank accounts of the Company shall be closed. The bank shall close the Company's accounts and provide the liquidator a corresponding certificate. The bank also sends a copy of this certificate to the CSS.

ELEVENTH, shall submit to the public archive all accounting and other documents of the Company and receive a respective certificate (confirmation).

TWELFTH, shall submit following documents of the Company to the registration authority (CSS) to exclude the Company from the state register of legal entities:

• a certificate from the archive;
• a certificate from the authorized body on cancellation of issued securities, if any.

Within two working days after receiving all above documents from the Company and authorized state bodies, the CSS shall make an entry in the state register of legal entities on Company’s liquidation and provide a written confirmation (decision). At this point, the procedure for liquidating the Company shall be  considered completed.