The decision to liquidate an NPO. How is the liquidation of non-profit organizations (NPOs) carried out?

Yulia Chuvikina, Head of the Department of Registration and Liquidation of Legal Entities and Individual Entrepreneurs, Legal Bureau "Constant"

Non-profit organizations are created without a limitation on the period of activity, unless otherwise established by their constituent documents. They can carry out their activities for as long as they want, but it may also be necessary to stop their activities and begin to liquidate the non-profit entity.

If such a need arises, first you need to understand what result you want to get in the end. Current legislation understands liquidation as the termination of the activities of a legal entity without transferring rights and obligations to third parties. In simple words as a result of the liquidation procedure in the register legal entities a record of liquidation is made and there is no legal successor. In other cases, when there is no such record, it is impossible to talk about liquidation; everything else is pseudo-liquidation. This kind of pseudo-liquidation can include proposals to reorganize the NPO or simply change the director and address of the NPO.

First, about the liquidation of NPOs

Liquidation non-profit organization carried out in the manner prescribed by the Civil Code of the Russian Federation, the Federal Law "On Not commercial organizations", Federal Law "On state registration legal entities and individual entrepreneurs".
In general, the liquidation of a non-profit organization can be divided into two types: voluntary and forced liquidation.
Official voluntary liquidation implies the liquidation of an NPO by decision of the management bodies of the NPO. The procedure is very similar to the voluntary liquidation of commercial organizations, but differs in significantly longer terms and a thorough inspection by the Ministry of Justice. It is important to remember the main stages during the voluntary liquidation of an NPO:
– it is necessary to notify about the decision to close the NPO and undergo inspection by the following authorities: the department of the Ministry of Justice, the Federal Tax Service inspection at the place of registration and registration of the non-profit organization, territorial divisions of extra-budgetary funds;
– place an announcement of liquidation in the State Registration Bulletin;
– make settlements with creditors (if any);
– undergo a tax audit, submit interim and liquidation balance sheets.

It should be noted that for some forms of NPOs, a decision on liquidation can only be made by a court and only upon the application of interested parties. It's about about funds. The specifics of making a decision on liquidation can also be established by the organization’s charter.
The liquidation procedure ends by making an entry in the Unified state register legal entities to exclude it from the register due to liquidation.

Forced liquidation is a consequence of legal actions of government bodies: the court, the prosecutor's office, the federal tax service and other bodies. The reasons for forced liquidation may include repeated and significant violations of the law by a non-profit organization, for example, the implementation of activities that are not permitted for this organizational and legal form, the contradiction of the organization’s activities to its statutory goals, violation of the rights and legitimate interests of citizens and legal entities in other ways, the presence of fatal errors made in registration of a legal entity. Special attention should be addressed on such a basis as carrying out activities that contradict the statutory goals of a non-profit organization.

Reorganization of NPOs

The procedure for terminating the activities (closing) of an NPO through reorganization in the form of incorporation or merger is also very similar to the merger/incorporation of a commercial company. That is, an NPO that wishes to terminate its activities ceases its activities by transferring all its obligations, rights and debts to another NPO - the legal successor. With this procedure, a tax audit is not currently carried out. Reorganization procedure:

– making a decision on reorganization;
– notification of registration and tax authorities about the reorganization;
– placement of two announcements about reorganization with a frequency of one month in the State Registration Bulletin.

The difference from the merger/incorporation of commercial organizations is the timing of the procedure: total term will be twice as long (5-6 months), and, of course, for such a procedure you need to have or pre-register a non-profit organization of the same form as the one that is ceasing its activities (in pairs for reorganization).

As alternative form closure of an NPO can also be considered reorganization in the form of transformation. When a legal entity of one type is transformed into a legal entity of another type (change of organizational and legal form), the rights and obligations of the reorganized legal entity are transferred to the newly emerged legal entity in accordance with the transfer deed. An NPO is considered reorganized from the moment of state registration of the newly emerged legal entity.

The transformation of an NPO into a commercial organization can also be considered as a preliminary stage before reorganization in the form of a merger/accession, in order to avoid difficulties in registering an NPO (in pairs before the reorganization). Those. after the transformation of the NPO into business society(for example, LLC, JSC) then carry out the reorganization of two commercial organizations. Here there are a number of restrictions established by the Federal Law “On Non-Profit Organizations”. The legislator clearly outlined the forms of non-profit organizations that can be transformed into a business company: these are non-profit partnerships, private institutions, foundations (not all types, you need to look at the focus of the fund, for example, a charitable foundation according to the law on charity cannot be transformed into a business company).

Brief summary of some (most common) forms of NPOs

NPO form	Initiator of liquidation/reorganization	Property of a liquidated NPO	Forms of reorganization
Fund	Interested parties by submitting an appropriate application to the court	The property is directed in accordance with the foundation documents for the purposes for which it was created and (or) for charitable purposes	Transformation - it is necessary to look at the direction of the foundation (for example, if it is a charitable foundation, then according to the law on charity the foundation cannot be transformed into a business company)
Non-profit partnership (NP)		Property is subject to distribution among members of a non-profit partnership in accordance with their property contribution	Merger, accession, division, separation. Transformation is possible into a foundation, an autonomous non-profit organization, or a business company
Autonomous non-profit organization (ANO)	By decision supreme body management		Merger, accession, division, separation. Conversion is only possible into a fund
Institutions (private)	By owner's decision	Transferred to its owner	Merger, accession, division, separation. Transformation is possible into a foundation, an autonomous non-profit organization, a business company
Associations/unions	By decision of the highest governing body	Property is directed in accordance with the constituent documents of the organization for the purposes for which it was created and (or) for charitable purposes	Merger, accession, division, separation. Conversion is possible into a public organization, autonomous non-profit organization, non-profit partnership or foundation

Change of director, address in the NPO

To close commercial organizations, it is often proposed to simply re-register the company as three persons (change of founders, executive body and addresses). This form of closure in itself is questionable, plus it is not possible to make such changes in all non-profit organizations.
For example, if there is a connection to the territoriality of an organization, such as a homeowners association (the sign of territoriality is required), it is no longer possible to change the address.

Changing founders is also not possible everywhere. In membership-based NPOs (non-profit partnerships, associations, unions), after state registration, the founders accept the status of members of the organization, and the organization maintains an internal register. In such organizations, a change of members is quite possible. As for the rest, you need to consider the specific form of the NPO to understand how possible this is. For example, in private institutions, the founder is at the same time the owner of the property, which he transfers to the institution with the right of operational management.
Regarding the change of executive/ governing body in NPOs, this is possible. The only limitation is that for almost all forms of non-profit organizations, the executive/governing body cannot be the Managing Organization, which is so common today in commercial organizations.

Liquidation of a non-profit organization is a common phenomenon. Considering that this form organization is a legal entity, the process must be carried out in accordance with current legislation Russian Federation. In particular, the procedure is regulated by provisions from the Civil Code, as well as a number of laws and decrees. We will consider the main reasons why an NPO may be liquidated, as well as the procedure for in this case.

Closing a non-profit organization: initiators, causes and consequences

So, first of all, it is necessary to establish who can act as an initiator in the event of liquidation of an NPO and for what reasons. If the message comes from the founders, then the motivation is quite clear and transparent:

• The NPO achieved the purpose for which it was opened.
• The period allotted for the activities of the organization, prescribed in the charter, has expired.
• There is inappropriateness of further functioning (insufficient funding, inability to achieve set goals, etc.)

Also, the state and individual authorized bodies can act as initiators. In this case, the reason for liquidation may be:

• Systematic violation of the law.
• Reluctance to correct wrongdoings.
• Incorrect registration procedure for NPOs, etc.

In addition, the reason may be bankruptcy, claims from the Pension Fund, creditors and other interested parties who have suffered damage.

Liquidation of a non-profit public organization: procedure

If we draw a parallel between the closure of a commercial legal entity and an NPO, we can notice many similarities. However, there are also some peculiarities. Let us sequentially analyze each step in implementing this procedure:

1. Making a decision on liquidation. As a rule, the management of the organization is responsible for this. However, a meeting of key persons must be held with mandatory minutes taken. The protocol is sealed with the signatures of the participants. Next, a liquidation commission is created or a singular liquidator is identified, who undertakes the obligation to close the NPO.
2. The next step is to notify the relevant authorities of the decision. First of all, an application is submitted in form RN0005 with an attached copy of the minutes of the meeting, a certificate of registration, copies of the founders’ passports, an extract from the Unified State Register of Legal Entities and a certified decision. One of the features of the process and the main difference is the fact that in addition to the registration authority, various extra-budgetary funds and other organizations, mandatory a notification is sent to the Department of the Ministry of Justice. Let us remind you that ordinary legal entities. persons are not required to do this.
3. Next, the company’s creditors and debtors are notified, who, within two months after receiving the notification, have the right to bring property claims against the NPO in court.
4. Created interim balance. In case liquidation of an autonomous non-profit organization, which did not lead entrepreneurial activity, this procedure is quite simple, since it does not include recording the movement of funds across accounts. For the same reason, the tax office quite often refuses to conduct on-site audits.
5. The next stage is settlement with creditors and employees of the organization in accordance with the Labor and Civil Code of the Russian Federation.
6. After all debt obligations are fully repaid, a final liquidation balance sheet is prepared. It is this document that is the main basis for the official closure of an NPO.

If after settlements there are funds left on the balance sheet of a non-profit organization, they are distributed among the participants in the manner prescribed in the charter. If there is property that cannot be divided, it goes to the state without the right of return.

The last stage of liquidation of a non-profit organization

The final step is to submit a package of documents, including the liquidation balance sheet, to the registration authority. Here it is verified and the corresponding entries are made in the Unified State Register of Legal Entities. After this, the organization officially ceases to exist.

We hope that step by step instructions on the liquidation of an NPO in 2017 will help you resolve the issue of closure without unnecessary delays and time costs. If you are not the initiator of this event, it is worth knowing that you have the opportunity to cancel the forced liquidation by providing substantial grounds for this to the court.

Competently defending your rights in accordance with the laws of the Russian Federation will allow you to extend the term of the NPO for the required period, if there are no violations, you are not suspected of extremism, and the legal entity itself actually performs useful functions and adheres to the intended plan.