Liquidation of a representative office with debts

Dissolving a non-resident company's representative office entails more than just discontinuing operations; it also involves removal from the registry at the Ministry of Economic Development and Trade of Ukraine, deregistration with the Tax Inspection, and the Pension Fund. 

The issue of closing a representative office with outstanding debts is exceedingly intricate because it necessitates undergoing specific inspections. 

Today, our legal experts will guide foreign companies aiming to close their Ukrainian representation while still having obligations to creditors or the tax authorities.

Procedure and Timelines for Dissolving a Foreign Representative Office in Ukraine

To initiate the deregistration process, your first step is to contact the State Tax Service (STS). However, be prepared for potential delays, as waiting for an STS audit can stretch into months. If salaries and taxes have been consistently paid on time, and reports have been submitted under regulations, you can expedite the audit in as little as ten days.

Following the deregistration with the STS, the subsequent step is to complete the deregistration with the Ministry of Economic Development and Trade, which typically involves a one-month document review period.

Please note! It's impossible to simultaneously undergo procedures with both the tax authorities and the Ministry of Economic Development and Trade. This is because the latter necessitates a certificate of deregistration from the STS.

Confirmation that your representative office has no outstanding claims comes in the form of a certificate indicating the absence of debts and the successful deregistration. Without this certificate, the Ministry of Economic Development and Trade will not even consider your documents for closing the representative office.

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Can a representative office be liquidated if it has outstanding debts, and how can we assist?

Dealing with outstanding debts of a representative office is a complex issue, as it's not possible to close a representative office while debts remain unpaid.

In such cases, we:

• Assess the situation and identify potential risks.
• Develop the most optimal action plan, and we work with the client to agree on the cost of our services and the stages of their provision.
• Implement the action plan as quickly as possible.

It's worth noting that there is no concept of outright refusal for liquidation. If the documents submitted for initiating the liquidation process are in order, but outstanding debts are discovered during the inspection, the representative office is given a grace period to settle the debts before the inspection concludes. This grace period typically lasts for 10 days, and for larger taxpayers, it may be extended to 15 days.

It's essential to stay in touch with the tax authorities, as nobody else is concerned about your deadlines. Both the outcomes of the inspection and the debt settlement are entirely your responsibility.

If you fail to settle your outstanding debt within a specific timeframe, an inspection report will be compiled, detailing the debt amount, and the representative office will not be deregistered. In such a scenario, your liquidation process will be put on hold.

We offer our clients assistance throughout the regulatory agency inspection, which includes:

• Preparing all the necessary documents in advance.
• Maintaining continuous communication with government agencies: we stay updated on the current status of your case and take necessary actions promptly.

Please note! By a court decision, the head of a non-resident debtor's permanent representative office may be temporarily restricted from leaving Ukraine if the tax debt, which has not been settled within 240 calendar days from the date of the demand notice, exceeds 1 million hryvnias.

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How to address outstanding debts to creditors?

If the representative office's accounts do not have sufficient funds, the most straightforward approach is to liquidate assets to settle the debts with creditors.

Please note! The bankruptcy procedure cannot be applied to a representative office.

In any case, the debt owed to creditors must be paid off, and potential methods of repayment should be examined on an individual basis, with a clear action plan developed. Our legal experts are available to assist you with this process.

For more comprehensive information, please reach out to us. We will guide you on what steps to take in your specific situation and create a personalized pathway to resolve the problem.

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Check out the cost and timeline of liquidating a representative office here.