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Comments to an article entitled “LLCs are agog with re-registration” made by lawyer Daniil Kazin

2 November 2009

The state drive for a re-registration of limited liability companies has resulted in panic. Executives of firms are frequently getting in line overnight to submit documents to a specialized tax office (no.15) located at 39, Professora Popova str. And today in 9 a.m. there was a huge queue there. However, taxmen and experts are trying to reassure people: first, you may relax and continue working with your old charter even after January, 1. Second, you may send documents by mail. Thirdly, you may send them via an authorized courier.

Hundreds of quasi-law firms offering to solve all the issues "on a turn-key basis" for a rather low fee took advantage of the situation. There is nothing illegal or inappropriate in their activity, but the prime minister of Russia Vladimir Putin discharged anger upon them last week: «Often people are bound to have recourse to paid intermediaries. I’ll be frank, they wore everyone out... It is necessary to kick all intermediaries away...”

Assault?

Subject to the law adopted in the end of the last year, all LLCs should essentially amend their constating documents within the period between July, 1 and December, 31, 2009. No consequences are stipulated for the companies evading from such procedure.

And vice versa. Such formulation has resulted in panic. According to the Federal tax service of the Russian Federation, about ten percent of all LLCs existing in Russia have re-registered their charters by the end of October. And since the middle of September the amount of applications sharply increased and this that inevitably resulted in queuing.

Given that not too long ago tax administration used to insist that executives and/or founding parties should be physically present to make any changes (to Company charters), many directors of LLCs were bound to assault the specialised tax office located at Professora Popova street.

“I'm sorry to say, re-registration has escalated into a sort of slap-stick comedy, into a conflict between tax authorities and representatives of companies,” told Natalia Sibgatulina, director in a law firm ASN. “People join the queue at 5 p. m. the day prior to submission, stay there all night long to prick down the list, and raffle the tickets off in the morning. Officials of the tax inspection have deliberately adopted such working practice that makes it impossible for average citizens to muscle in with their applications. It is a nice “pastime” for executives addicted to extreme sports. Nevertheless executives of major companies underwent this procedure as early as last summer and with no rush.”

All the interviewed lawyers unanimously declared that directors need not personally “assault” the tax office. “I believe that the problem of company executives facing painful and time-consuming re-registration of LLC is a bit far-fetched,” believes Stanislav Danilov, the Senior Associate in Pen&Paper. “All the world knows that some persons provide a fee-based service of “queuing”. And practically each firm can send an employee to queue in the tax office without resort to outsiders”.

Besides, mailing documents is not prohibited. Of course, time taken to consider them will be drawn out (up to one month). And still, given that the matter is not of great urgency, mailing may prove the most simple and economic method. However, tax office does not accept ordinary and registered letters, and returns them unopened. So documents should be only sent by post with the declared value at the time of mailing and a list of contents.

The registering authority also reminded that documents can be send by mail, and director generals or the founding parties of LLCs needn’t be physically present.

However, all the people queuing at the doors of the tax office at Professora Popova street are executives. Tax workers explain their mandatory presence very simply: to combat against such phenomenon as raiding activity (corporate raids), documents are amended only in the presence of director of an LLC Company.

Instead of New Year Celebration

Seeing recent developments in Moscow and St.-Petersburg and, probably, being afraid that in the end of December business owners will really assault tax offices, public officers started to assure businessmen that the term of December, 31 is not preclusive. I.e. should an LLC fail to timely undergo re-registration, it shall not be a big deal. For example, an the official interpretation published by a tax administration on October, 29, states that the law does not prescribe any sanctions for companies, whose charters are not brought in line with the legislation by January, 1, 2010. They can be neither liquidated, nor excluded from the register. “Charters of such companies shall be applied insofar as they do not conflict with legislation, as it occurs now,” explained workers of tax administrations.

Officials in the Ministry of economic development and trade of the Russian Federation and experts interviewed by a Fontanka reporter are of the same mind.

Also after January, 1, all the LLCs, including those failing to undergo re-registration, can change their seat of business, director, etc. without ado. The only trouble is there will be no data as to the sizes of shares of company participants until the charter is brought in accordance with the new requirements of legislation in the Unified State Register of Legal Entities (USRLE). Therefore owners of an LLC may blow their chances to redistribute shares (or, at least, complicate or tighten this procedure), by shrinking away from the campaign. Again, it is entirely possible that banks will refuse to accept the "old" charter and that after January, 1 the companies will be unable to set up new settlement accounts, obtain credit, etc.

Not-so-cheap favour

Taxmen maintain that the problem of queues, in particular in Moscow, “was artificially created by certain firms, rendering services pertaining to registration of legal entities, which discovered some advantages in transitive provisions of the federal law and made haste to derive some benefit out of it”. Such firms are popping up all over St.-Petersburg as well.

“Indeed, they spout up like mushrooms,” said Daniel Kazin, lawyer in the law firm S&K Vertical. “However, I believe that legal component of their activity is rather insignificant. In most cases such firms specialize in “adapting” charters based on templates, submitting and receiving documents using some well- trained people skilled in queuing in tax offices.”

Cost of services provided by such consultants-intermediaries-couriers range from two thousand roubles to six thousand roubles. As a rule this amount does not include duties: 400 roubles – for procedure only, 200 roubles – to be paid to notary officer for certifying the application, another 200 roubles– for obtaining a copy of registered documents. Besides, new charter is to be submitted to the bank where LLC has set up a settlement account. It means that a copy should be ordered again in inspectorate no. 15 (with all time spending that come with it) or certified with notary officer (statutory notarial tariff – 10 roubles per page, but notaries generally charge 500 roubles per document).

Can an LLC owner decline the services of intermediaries and carry out re-registration all by himself? Yes, in general. The revised Charter template may easily be found on many websites. However, to obtain it one should send an SMS using a shortcode, while the price may be several times more than indicated on the website (you’d better contact the call-center of your mobile operator and inquire about the prices).

The second issue is to certify the signature of the director general on the application. As explained Liubov Soldatenko, the notary, to do it one should submit the State Registration Certificate and tax registration certificate, the charter, alterations to it, and also a document confirming the official powers of director (protocol of election, or resolution on assignment). The tariff is 200 roubles.

However, in answer to a question by reporter of Fontanka about what documents are to be submitted for certification and how much does it cost, Elena Tcherkasova, the press secretary of The St. Petersburg Notarial Chamber said that “in each case a list of documents will vary, all depends on specific situation, on specific LLC etc. Consequently, the cost of services will also vary”. In particular, some notary officers require only originals of constating documents, and refuse to accept copies, even those certified by themselves (by doing that they flout the law and the stand of Constitutional Court of the Russian Federation on this matter).

Apart from the application and revised version of the charter one should forward to inspectorate no. 15 the resolution of general meeting of participants approving the new Charter as well as order for payment of state duty of 400 roubles.

Is there any use in hurrying? If in foreseeable future a company does not intend to change participants or to redistribute shares between them, to set up new accounts or to draw upon a credit, it may well continue its operation with existing constating documents. Besides, a new reform of corporate legislation is developed by Administration of the President of the Russian Federation. In particular, it provides an increase in size of the charter capital for the LLCs (probably up to one million roubles).

So it cannot be ruled out that should a LLC director manage to avoid panic he shall save both pains and money.

Fontanka.ru


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