Table of contents
There are many cases when a company was dissolved and there is a need to restore it and start working with a legal entity already established in the market.
Restoration of a dissolved company, like its incorporation, is a specific procedure that requires experience and knowledge.
Introduction to Company Restoration
How to reinstate a dissolved company? The process of restoring the legal status of a company that was dissolved to resume the activities of such a legal entity (and the corresponding entry in the register) should be understood as company restoration.
Companies may need restoration for various reasons:
- deciding to continue doing business;
- transferring the company’s assets for management or sale.
Types of company restoration:
- Administrative restoration;
- Restoration by court order.
To restore a company, you should adhere to the following general steps:
- justification of the reasons for the need to restore the legal entity;
- availability of all documents related to the liquidation of the company;
- payment of outstanding fees, fines, and other monetary obligations.
The cost and time frame for restoring a company depends on the chosen method of restoration and the complexity of the situation with the company (debts, fines, lawsuits).
Recovering a company is always a process that involves several actions and it is extremely important to have a reliable legal advisor who can evaluate all the «pros» and «cons» to determine which path to take during the recovery of the company.
Steps for Restoring a Dissolved Company
To restore a dissolved company, the following algorithm should be followed:
- decide on the method of restoring the company. Allocate administrative restoration or restoration of the company through the court;
- confirm the company’s right to recovery. Every company can be restored, but every case of restoration is unique. Therefore, it is extremely important to find out that the company meets the criteria for the right to recovery;
- repay the debt and fines of the dissolved company (if any). Very often, at the time of the company’s recovery, it turns out that the company has unpaid debt;
- collect documents for recovery. When submitting documents for the restoration of the company, it is important to collect all the documentation related to the process of dissolution of the company, as well as fill out all the necessary forms;
- apply for restoration. Any process involves the submission of standard forms and the procedure for restoring a legal entity is not an exception;
- pay the necessary fees for applying and for the company’s restoration;
- get approval for the company’s recovery. Depending on the method you choose to restore the company, the terms can vary from several weeks to several months.
- after approval of the company’s restoration, it is necessary to submit a package of documents for the restoration of the legal entity. In addition, it is important not to forget to submit all missing reports and documents for the recovery of the company;
- to receive confirmation of the restoration of the company after the corresponding entry in the register of companies. As soon as the entry about the restoration of the company appears in the register, it means that the company can continue to carry out its activities within the limits of the legislation of the country of incorporation of the company.
Understanding the Grounds for Dissolution
Can a dissolved company be reinstated? Definitely! However, understanding the grounds for the dissolution of a company is important for the potential process of restoring such an enterprise. The dissolution of a company can occur both in connection with a voluntary decision of directors or shareholders and in connection with several legal grounds. Among the reasons for dissolution of a company, the following main points can be highlighted:
- Voluntary dissolution. This can be either a decision of a director or a shareholder to voluntarily dissolve a legal entity. In addition, the dissolution of a legal entity can be associated with its insolvency (in this case, there is a voluntary liquidation of participants).
- Forced dissolution. Forced dissolution of a legal entity is possible if it does not submit documents (for example, reports), does not pay fines or taxes, or violates other regulatory and legal acts in the country of incorporation of such an enterprise. In addition, a court decision can be the basis for the dissolution of a legal entity.
- Administrative exclusion of a company from the official register of companies. If a company becomes inactive, it may be struck off the register of companies. The register notifies the company (its representative) of a possible decision before dissolving the company, allowing it to start doing business. It should be emphasized that an inactive company that is no longer in use may also be voluntarily liquidated by its directors or shareholders.
- Other grounds for dissolving the enterprise. Such grounds may include illegal activity of the company, lack of a license (expiration or cancellation) for a certain type of activity, etc.
Understanding the grounds for dissolving a legal entity is important for building a further algorithm for its restoration.
Reviewing the Dissolution Process
The process of dissolving a legal entity is a certain step-by-step procedure, which looks like this:
- determining the type of dissolution of the company. At the beginning, you should choose whether it will be a voluntary or forced type of dissolution;
- preparing for dissolution. It is necessary to settle all issues with debts and unpaid fines, as well as fulfill other legal obligations;
- notifying third parties about the dissolution of the company. In this case, we are talking about employees, clients, creditors of the company, as well as the relevant authorities;
- filing official applications for dissolution of the enterprise. It is necessary to prepare the relevant resolutions on behalf of the directors/shareholders of the legal entity, as well as fill out the relevant forms;
- paying fees and fines. If there are outstanding monetary obligations at the time of dissolution of the company, they must be fulfilled;
- confirming the dissolution of the company. Once an application for dissolution of the company has been submitted, a certain period must be waited for by the register of companies to review the submitted application for dissolution of the company and make an appropriate decision.
- Receiving a notice of dissolution of a legal entity. If all requirements are met, the company will be excluded from the register and a notice of dissolution will be published. The company then ceases to exist legally and is no longer obliged to answer for its current obligations.
Once a company is canceled from the register of legal entities, it is no longer and cannot be a legal participant in any legal processes in the future: transactions, negotiations, etc.
Preparing Reinstatement Documents
When preparing documentation on company restoration, it is necessary to collect and fill out all the requested documents to restore the legal status of the enterprise. The following should be included in the mandatory steps related to company restoration:
- checking the selected method of legal entity restoration. There is administrative or judicial restoration of the enterprise. And when determining the method to be used, it is necessary to take into account the features of each;
- collecting the necessary documentation related to the company, and its assets;
- Fill out a special restoration form, which is required by the registry or court at the place of registration of the company.
The standard form for company restoration usually includes the following information:
- the name of the company and its registration number;
- the date and description of the reasons for the dissolution of the enterprise;
- contact persons who apply (for example, the director, shareholder, or other representative);
- declaration: this is a statement confirming the purpose of restoration;
- payment of outstanding monetary obligations. These may be overdue registration fees, fines from regulatory authorities, and overdue payment of fees;
- payment of the company restoration fee. The registry or court requires payment for the enterprise restoration procedure. The payment must be confirmed by a corresponding receipt.
- Submitting overdue reports or other documents required to be submitted before the dissolution of the company.
- Preparing additional documents for the restoration of the company. It may be necessary to explain the grounds for the restoration of the enterprise or additional statements from the parties;
- Filing a public notice of the restoration of the legal entity (if required). Official notice of the restoration of the enterprise may be required in certain jurisdictions. This procedure for notifying of the restoration of the company is especially required in the case of restoration by a court decision.
- Directly applying to restoration together with the accompanying documents to the registry or court;
- Obtaining confirmation of the restoration of the company. The registry or court, after reviewing the application for the restoration of the company, makes a final decision. Receiving a decision and official notice of restoration means exercising your right as an applicant for the restoration of the enterprise within the framework of the law.
Addressing Outstanding Liabilities and Compliance Issues
Resolving outstanding liabilities and compliance issues is an important element in the recovery process. If all overdue liabilities are met promptly, the company will be able to continue to operate without legal or financial risks after its recovery. Given the above, it is important to:
- determine the existing liabilities of the company: find out what debts exist, and in what amount and, if necessary, classify them (taxes, fines, wage arrears). All existing debts, including interest on debt, are subject to payment;
- prepare financial statements, tax returns, and relevant documents: this documentation can also be verified by auditors (depending on the jurisdiction of incorporation of the company that will be subject to recovery);
- notify partners, counterparties, and creditors of the legal entity about its recovery. Document outstanding liabilities, if any;
- Notify the tax authorities of the planned restoration of the legal entity: together with the notification of the regulatory authority, it is necessary to check whether there are any unpaid fines or fees, as well as possible interest on such overdue obligations. It is extremely important to obtain confirmation from the tax authorities that all known and necessary tax obligations of the company have been fulfilled;
- find out the company’s obligations to employees or other partners who provided services to the company, and also clarify the presence of obligations related to labor law issues: outstanding wages and bonuses are subject to payment, and all necessary contributions must be paid;
- confirm the company’s compliance with regulatory authorities and registries: it is extremely important to obtain documentary confirmation from government agencies about the company’s good standing.
The solution to outstanding company obligations and compliance issues always arises during the company’s recovery. Even before the start of the company’s recovery, it is important to familiarize yourself with the existing obligations of the company and make sure that the legal entity will be able to fulfill them and function normally without possible risks to the activity.
Filing for Restoration with the Relevant Authority
Since the restoration of a company is a process, the submission of an application and other accompanying documents, as required, is an integral part of this process. Before applying for the restoration of a legal entity, you should:
- determine the method of enterprise restoration: administrative restoration or restoration of the company by a court decision;
- fill out an application for restoration: in case of an administrative application, the appropriate form is filled out for submission to the register of companies. When restoring a company by a court decision, in addition to the standard official application for enterprise restoration, an affidavit is submitted with a detailed description of the reason for restoration;
- prepare a standard package of necessary documents, provide a certificate or notice of dissolution from the register, demonstrate documents confirming outstanding debt, unfiled mandatory reports, and other mandatory documents. In addition, you should describe and justify the reasons for the restoration of the company.
- pay off the company’s debt: if, when forming a package of documents for the restoration of the company, it is revealed that there is an outstanding debt, such payments (fees, fines) are subject to mandatory restoration;
- pay the official fee for restoration: the fee is subject to payment to the registry or court.
- draw up and submit an application to the appropriate authority: this can be either the registry or the court (depending on the method of restoring the company). The application is submitted together with a receipt for payment of the fee for the restoration of a legal entity;
- notify the relevant parties (if necessary): this condition is not mandatory, and everything depends on the jurisdiction of the company that will consider the request for restoration of the legal entity; 7. submit additional information: the registry or the court may ask for additional documentation or explanations;
- receive official confirmation of the restoration of the enterprise: if the application for restoration of the legal entity is approved, the result of its consideration is the restoration of the company’s status. Re-entering the company’s record in the registry means that the application for restoration of the company was properly completed, submitted with a full package of necessary documents, and was one that complies with all the requirements of the legislation in the country (jurisdiction) where the application for restoration of the enterprise is considered.
To summarize the above, we can conclude that applying for the restoration of a company requires an understanding of the legal acts of a particular jurisdiction and the requirements that apply to the procedure for restoring an enterprise.
Regaining Control of Assets and Operations
Restoring control over assets and operations during company recovery involves restoring legal rights to the company’s property (movable or immovable), bank accounts, and the legal entity’s intellectual property (if any). Recovering control over the company’s assets means resuming the company’s ownership status of what it legally owned, disposed of, and used. To regain control over assets and operations during the enterprise recovery procedure, you should:
- obtain an official order approval for the company’s recovery (again, it is necessary to pay attention to the method of company recovery);
- check whether the restored company is in the register of companies;
- contact the servicing bank with a notice of company recovery to reopen or restore closed accounts, or open new ones;
- restore the status of the company’s leased or owned real estate by notifying the landlord or the relevant authority, demonstrating the order of recovery to declare the rights of the enterprise;
- conduct an inventory of the legal entity’s assets for their presence and physical condition;
- Recover control of the company’s intellectual property (trademarks or copyrights): It is important to check the status of such intellectual property and pay any fees or penalties if necessary. If domain names and digital assets have expired, the appropriate fee must be paid (if necessary) and credentials must be restored to prevent unauthorized access;
- Check the company’s obligations related to employees: If employees were dismissed due to the dissolution of the enterprise, and such employees want to continue their cooperation with the company after its restoration, the possibility of rehiring the dismissed employees;
- restore licenses if the company’s activities after its restoration will require such special permits
- restore contact with partners, and clients, and notify them about the restored status of the enterprise and the resumption of activities. It is extremely important to convince partners and clients that the company, despite its restoration after dissolution, is a reliable partner that can be trusted;
Restoring control over assets and operations is a step-by-step process that requires careful and comprehensive analysis. In this case, it is important to have an experienced legal advisor who knows how to act correctly and best during the restoration of the company.
Asset Recovery Strategies
To return the assets of a restored company, it is necessary to:
- documentary verify the ownership of the assets: familiarize yourself with the availability of certificates, certificates, extracts, contracts, and invoices for each asset of the enterprise;
- restore the frozen accounts of the company by showing the resolution on the restoration of the legal entity or a certificate to the bank servicing the company to unfreeze the accounts;
- analyze the actual condition of the equipment, vehicles owned by the company. If there are lawsuits or debts for storage, parking of inventory, or vehicles, these disputes must be settled by covering the existing debt;
- restore intellectual property rights by documenting the ownership of the legal entity to such trademarks and copyrights belonging to the company.
- Recover financial assets: review data that indicates digital records regarding the company’s financial assets. Information from such documents will allow the financial part of the legal entity’s functionality to be resumed;
- Contact reliable legal advisers, accountants, and auditors regarding issues of settling disputes over assets owned by the company: engaging specialists in a specific field will allow for due diligence of assets that belonged or belonged to the company to determine the legal status of such assets of the enterprise. The purpose of cooperation with the engaged specialists: confirmation that all assets are registered by the law, accounted for on the balance sheet of the enterprise, and protected from loss or misuse, or are not subject to litigation.
Re-establishing Business Operations
Restoring business operations for a restored company includes the following actions:
- assessing the general economic situation in the market for similar services/works that the company provides: it is necessary to assess how the company will function after its restoration;
- conducting a financial audit of the company’s assets, finding out the financial obligations of the enterprise to develop a financial strategy for the enterprise;
- analyzing which employees will be needed for the subsequent functioning of the company after its restoration: it is important to determine which personnel positions need to be filled and what functions will need to be assigned to such hired employees;
- Notify partners and clients about the restoration of the legal entity: send an official notice to former and potential clients to inform them about the resumption of the enterprise’s operations.
Step-by-step restoration of business operations for the restored company will allow the enterprise to smoothly return to normal work and the full functioning of such a legal entity.
Navigating Legal and Tax Obligations
Managing legal and tax liabilities during company recovery involves settling the legal entity’s outstanding obligations and restoring the business to compliance with all regulatory requirements, which includes the following steps:
- Checking the legal status of the company: is there official confirmation from the court or the company registry that the company is restored?
- Determining the business’s liability to the tax authorities: is it necessary to check the business’s overdue tax returns, corporate tax arrears, VAT, or payroll liabilities?
- Paying off the business’s outstanding liabilities and debts to third parties: paying overdue debts to creditors, suppliers and creditors;
- Reinstating (renewing) expired licenses, permits and certificates issued in the name of the business;
- Reinstating the business’s insurance coverage (insurance policy), if possible: checking that the company’s insurance policies, including general third-party liability insurance, property insurance, or insurance for the legal entity’s employees, are valid. If policies have expired, contact your insurer to reinstate them (if possible);
- Take inventory of intellectual property and digital assets that the company owns or legally uses: it is important to analyze what trademarks and copyrights the company owns and what condition these assets are in;
- Consult with legal and tax advisors who can analyze the current situation of the company at the time of its recovery and develop a strategy for compliance in the company after its recovery.
Legal Considerations for Restored Companies
Legal aspects for restored companies include several aspects:
- confirmation of the legal status of the restored company. The presence of an order or certificate on the restoration of the enterprise serves as evidence of the resumption of the legitimacy of the company’s existence;
- resolution of overdue obligations of the enterprise that may have arisen before or during the period of dissolution. It is important to pay off existing debts and/or possible interest associated with the delay of obligations to third parties;
- settle issues related to the employment of new employees or hiring employees who were involved in the company before its restoration;
- check the status of assets owned by the company before its restoration. If assets were sold or transferred by third parties during the dissolution of the legal entity, it is necessary to check the legality of these transactions;
- conduct due diligence on intellectual property rights at the time of the enterprise dissolution and on the date of its restoration;
- analyze the status of permits or licenses owned by the legal entity. If the permitting documentation can be renewed after the company’s restoration, it is necessary to notify the regulatory authorities. If it is impossible to restore such documentation, it is necessary to take care of obtaining new permits or licenses if the company’s activities require such mandatory documents;
- check the status of unfiled tax returns or unpaid taxes, and fines to tax authorities. It is important to clarify the list of all outstanding obligations to tax authorities, the deadlines for their fulfillment after the company’s restoration, as well as possible legal consequences due to existing violations;
- officially notify shareholders of the restoration of the enterprise. It is necessary to check the status of all corporate documents and, if necessary, update the version of such documentation if required by law;
- check the compliance of the company’s standards with data protection laws. After the company’s restoration, you should make sure that customer and employee data is reliably protected and all privacy rules are observed at the highest level.
- implement policies and rules among employees regarding compliance with the company’s corporate policy, storage of personal data, execution of contacts, holding tenders, etc. It is constantly necessary to update the company’s operating standards to the current economic situation or the legal field of a particular jurisdiction. Those involved in the analysis of the legal situation of the status of the restored dissolved company will help to compile a list of legal issues that are extremely important at the initial stage after the company’s restoration.
Tax Implications and Obligations
The tax implications and liabilities for a reconstituted company arise from the requirement to pay both overdue and new tax liabilities. These tax implications include the following:
- Retrospective on liabilities and applicable penalties: a reconstituted legal entity, regardless of the method of reconstitution, is considered as if it had never been dissolved and all liabilities that the company had to the tax authorities are due from the original date of dissolution. All tax returns missed during the period of dissolution must be completed and filed;
- Payment of penalties: the tax authorities may collect interest on overdue amounts. It is essential to clarify all monetary liabilities of the company at the time of its reconstitution, as well as the prospects for paying such penalties;
- Renew tax benefits, and if applicable VAT benefits: if it is possible to use benefits and document the right of a legal entity to such benefits, it is important to use this chance for the company, which will allow saving money at the initial stage of the company’s activities after its restoration;
- Clarification of obligations related to wages, bonuses, vacation pay, etc.: income taxes and social security contributions must be paid. If necessary, it is possible to re-submit records of employees and the corresponding deductions related to their employment;
- Review the company’s corporate documents: if necessary, it is important to amend the income tax returns for past periods to reflect income earned before the legal entity was dissolved. It should be emphasized that some jurisdictions’ tax systems allow losses from past periods to offset future taxable income;
- Review shareholder dividend information: it is important to document that any dividends were distributed before the entity was dissolved. Unreported dividends may result in additional taxes or liabilities for the company;
- If the company owns real estate or other assets, it is necessary to check the ownership status of the restored company, all deductions associated with the ownership of the property, as well as the status of the assets (including their depreciation);
- Compliance with tax system requirements: after the company has been restored, it is extremely important to comply with tax laws by filing all reports, and declarations, and paying taxes and other liabilities on time. Do not forget that correct and strict compliance with legal regulations will allow the company to minimize risks from tax authorities during inspections (both scheduled and unscheduled).
Building a Stronger, More Resilient Business
Building a stronger and more sustainable business after the company’s recovery requires an assessment of the situation and future planning. To do this, you should think about the following strategies:
- A long-term vision for the company’s development after the mistakes that existed before its recovery;
- Assessing the company’s financial condition, strict budgeting, and cost control to prevent over-limiting expenses;
- Automating service processes to minimize business costs;
- Expanding professional contacts with existing and future clients, building mutually beneficial cooperation with partners;
- Developing loyalty programs for existing and new clients;
- creating a risk management plan that will lay out the company’s course of action in the event of a disruption in the supply of goods, the performance of work, the dismissal of key employees, or a cybersecurity threat.
It is possible to restore a dissolved company, but it is also extremely important to organize the next business in such a way that the renewed company will generate profit.
Implementing Best Practices for Corporate Governance
When reviving a dissolved company, it is important to properly organize the corporate governance structure. To implement best corporate governance practices in a revived company, the following should be taken into account:
- assess the overall situation of the corporate governance structure;
- analyze the existing composition of the board of directors and other employees;
- implement strict financial control and audit, which will ensure accuracy in the financial part of the company;
- continuous monitoring of the company’s status for compliance with relevant laws and standards;
- creation of a comprehensive risk management structure, including risk identification, analysis of their impact on the company’s activities, and development of strategies to mitigate the consequences of risks;
- develop corporate standards and policies for all employees to clearly define the rights and responsibilities of all employees of the enterprise.
Enhancing Financial and Operational Stability
Increasing the financial and operational stability of a restored company includes several comprehensive measures.
To improve both the financial and operational stability of an enterprise, it is necessary to:
- implement a financial system with reliable tools
for tracking cash flows in the company;
- analyze the presence of financial obligations of the company to third parties, restore the creditworthiness of the enterprise;
- review relationships with partners, and implement a system for automating business processes;
- strengthen existing IT processes, improve cybersecurity in the restored company, conducting regular vulnerability assessments of the enterprise;
- develop and implement a risk management plan and actions in emergencies in the enterprise.
FAQs
Can any dissolved company be restored?
A liquidated company can be restored. However, the process and conditions for its restoration vary depending on: where the company is registered, the reason for the liquidation, and the period that has passed since the liquidation.
What are the costs associated with restoring a company?
The costs that may be associated with the restoration of a liquidated company depend on the jurisdiction of the companies, the method of restoration chosen, and (possibly) any outstanding (unpaid) liabilities. The costs of restoring a company may include administrative fees for restoration, payment for specialists involved (legal adviser, accountant), costs of restoration by court order, and advertising costs (if notification of the application for restoration of the company is required. The above costs are not exhaustive and there may always be a need to incur additional costs (for example, payment of fines, if any).
How long does the restoration process take?
The period for company restoration depends on the company’s jurisdiction (each jurisdiction has its specifics), the method of restoration, and the overall state of the company at the time of its liquidation. In general, we can talk about the following time frames for company restoration: a) Administrative restoration: from 2 to 3 months. If all fees and debts (including fines) are paid, this process happens quickly; b) Restoration by court decision: approximately from 3 to 6 months, but may take longer. The time frame depends on the workload of the court (the place where the case is heard) and the nuances of the process itself. How long does it take to restore a dissolved company, in short, administrative restoration of a company is faster (including in terms of document flow) than restoration of a legal entity by court decision. Each of the methods has its nuances and sometimes the complexity of the restoration process may exceed the agreed time frame.
