Acquisition of an enterprise

Acquisition of an enterprise represents a consecutive process which results in joining of one legal entity to another where joining legal entity continues to exist as a part of a bigger structure.

Acquisition is a form of reorganization intended for increasing business in its size, capitalization and business expansion.

Acquisition of an enterprise is one of the relatively new services provided by our law firm but nevertheless we accumulated a great deal of experience in this area.

Reorganization via acquisition is a quite lengthy requiring special attention to detail step by step process where joint efforts of a law expert as well as its client guaranty achieving desirable results in full compliance with Ukrainian legislation.

Terms to completion may vary depending on length and results of inspection by Tax administration but not less than 2 months according to Ukrainian legislation.

Important, reorganization of a legal entity can only be finalized if there is no outstanding tax payments and only with due permission of Tax administration.

Cost of service is 10 000 UAH (ten thousands) this amount includes all fees and expenses.

Important! Before making a final decision one may have to consider the following factors:

• An outstanding tax payment prevents legal entity from removing its records out of Tax administration data base and as a result makes it is impossible to liquidate the joining enterprise.

• The fact that a joining legal entity has existing independent branches can prevent from entering record of termination of the enterprise into uniform state register of enterprises and organizations of Ukraine (EGRPOU);
• It is necessary to pay attention to the quantity of participants of the joining legal entity since after joining, the quantity of participants (shareholders) in new legal entity will inevitably increase. It's important because the total number of participants of LLC should not exceed 10;
• The authorized capital of the joining enterprise should be multiple to the authorized capital of a new legal entity, it considerably simplifies procedure of replacing shares of joined enterprise by shares in authorized capital of new legal entity.
• For joint-stock companies - the decision on reorganization and the following it additional stock emission cannot be made if at the end of every second and every following financial year the total value of assets of such a joint-stock company doesn't equal or supersede its authorized capital.

Consecutive stages of reorganization through acquisition

1. Accepting resolution on reorganization through acquisition in written form approved and signed by all authorized members of the joining enterprise and members of the legal entity-successor;

Please note! Resolution must contain all data about the composition and powers of the commission on acquisition (liquidation commission) which is created at this stage. Also, at this stage it is necessary to draft a contract on joining of enterprise, to define an order and time period during which creditors should submit their demands.

2. The conclusion of the contract on acquisition between the legal entity that joins and the legal entity-successor.

Please note! The contract should contain data on order and conditions of acquisition of the enterprise, order and proportions of an exchange of shares in an authorized capital stock of joining enterprise for shares in the authorized capital of the company-successor. And also, the data on number of other standard proceedings.

If the founder of the legal entity which stops its activity and the legal entity-successor is the same person conclusion of the contract is not necessary.

3. Written notification of state registrar on the resolution on reorganization in order to enter corresponding record into the uniform state register of enterprises and organizations of Ukraine (EGRPOU) and to publish corresponding notification in printed mass media.

In order to make an entry into the uniform state register of enterprises and organizations of Ukraine about termination of a legal entity the following documents should be submitted (sent over registered mail):

• Notarized copy of the resolution of founders, or the authorized body on termination of the legal entity.
• Receipt confirming payment for publishing information on termination of the legal entity in printed mass media - 51UAH.
• In some cases provided by the law, the document confirming the consent of corresponding public authorities on the termination of the legal entity may be in additionally required.
• Passport of the authorized representative and the document confirming its powers.

4. Publishing by the liquidation commission (in printed mass media) of information on termination of legal entity and on order and time period during which creditors should submit their demands. (Should be done simultaneously with publication by the state registrar).

Please note! In cases when the joining legal entity is a joint-stock company but the legal entity-successor is not, in addition, the state commission on securities and stock exchange (EGRPOU)must be notified and stop further stock turnover. Corresponding list of documents must be submitted to the commission in accordance with paragraph 2 of the Chapter 3 "On order of cancellation of share emission, registration of share emission and revocation of certificate of registration of stock emission" confirmed by the resolution of EGRPOU dated 30 December 1998.

Important!

Upon entering of a record in to the uniform state register of enterprises and organizations of Ukraine (EGRPOU) on termination of a legal entity it is unlawful to:

• register with the state changes to the constitutional documents of the legal entity;
• enter changes into EGRPOU regarding independent branches of the legal entity;
• initiate state registration of a new legal entity where the legal entity-subject of the liquidation proceedings is a founder (participant).

5. Within two months after publication, liquidation commission puts together a list of creditors and notifies all concerning parties on termination of the legal entity.

6. After entering a record on termination into EGRPOUall corresponding tax authorities state funds (pension fund and such) must be also notified.

7. After receiving notifications corresponding bodies run checks upon completion of which they issue inquiries. Social fund and pension fund issue inquiries confirming cancellation of the registration. Tax administration issues an inquiry confirming absence of an outstanding tax payments (form 22-OPP).

8. At the end of the 2 months term liquidation commission prepares an act on transfer of all rights and obligations of the reorganized legal entity including all creditors and debtors.

9. State registration on termination of the legal entity.

In order to duly register with the state liquidation of a legal entity the chairman of the liquidation commission, or the authorized body, upon the completion of provided by the law liquidation proceedings (but not earlier than 2 month2 from the time of publication) must submit the following documents to the state registrar:

• Application form #8 (for registration of termination of the legal entities as a result of merger, acquisition, division or transformation);
• Certificate of state registration of the legal entity;
• Originals of constitutional documents;
• Notarized copy of the transfer act;
• Inquiry from the archival body confirming receipt of the documents which according to the law are subject to long-term storage;
• Document confirming that the reorganization plan was confirmed by the state tax administration;
• Inquiry from the state tax administration confirming cancellation of the registration of the legal entity as a tax payer;
• Inquiry from the Pension fund of Ukraine confirming cancellation of registration with the fund;
• Inquiry from the social insurance fund of Ukraine confirming cancellation of registration with the fund.

10. Entering into the uniform state register of enterprises and organizations of Ukraine (EGRPOU) a record on liquidation of the legal entity.

11. State registration of amendments to the constitutional documents of the legal entity-successor.

In order to register amendments to the constitutional documents of the legal entity -successor its founders or the authorized body, must submit to the state registrar (in person or via certified mail) the following documents:

• Corresponding application form for registration of amendments.
• Constitutional documents of the legal entity-successor.
• Notarized copy of the resolution on amendments to the constitutional documents. Approved and signed by the founders (participants).
• Constitutional documents (originals) with the stamp confirming state registration of the documents.
• Two originals of amendments to the constitutional document, two originals of the new constitutional documents.
• Receipt confirming payment for the state registration of amendments to the constitutional documents.

Important! In case if the joining enterprise is a joint-stock company it is necessary within 7 days period after registration of amendments to the constitutional documents of the legal entity-successor, to submit corresponding documents to (EGRPOU) in order to cancel registration of stock emission.

In case if the legal entity-successor is a joint-stock company an additional stock emission will be made since the authorized capital of the company has increased as a result of reorganization.

Acquisition process is considered to be completed only after the state registration of liquidation of the joining legal entity and state registration of amendments to the statute documents of the legal entity-successor.