Suspending The Activity Of A Moldovan Limited Liability Company: Is It Worth It?

Why should one know about sus­pend­ing the activ­ity of a Moldovan lim­ited lia­bil­ity com­pany (LLC)? What are the steps to be fol­lowed? What are the pros and cons?

Gen­er­ally, apart from dis­so­lu­tion (liq­ui­da­tion), an LLC can tem­po­rary sus­pend its activ­ity for a period that may not exceed three years as of state reg­is­tra­tion of sus­pen­sion. Start­ing with the date of state reg­is­tra­tion of sus­pen­sion, an LLC is not required to sub­mit any reports with the Moldovan author­i­ties or pay any taxes.

Pro­ce­dure

Cor­po­rate decision

The pro­ce­dure is ini­ti­ated on the basis of an LLC's shareholder(s) cor­po­rate deci­sion (pro­to­col or deci­sion of the sole share­holder; Deci­sion). The Deci­sion has to be in due form and pro­vide for the exact period of sus­pen­sion. It must also be accom­pa­nied by an empow­er­ment list­ing per­sons that will carry the legal/other formalities.

Simul­ta­ne­ously / prior to / imme­di­ately after the Deci­sion, it is advis­able that the LLC sum­marise infor­ma­tion on its cur­rent cred­i­tors and pend­ing con­trac­tual rela­tions. This can be effected via a legal due dili­gence. An exhaus­tive cred­i­tors' list and contracts-to-be-addressed list are cru­cial for the suc­cess of the entire procedure.

Noti­fi­ca­tion of creditors

Next, the LLC must notify in writ­ing all cred­i­tors about its inten­tion to sus­pend one month prior to pub­lish­ing the Deci­sion in the Offi­cial Gazette (OG). In prac­tice, we rec­om­mend that orig­i­nal notices by the LLC be kept for any pos­si­ble later dispute(s) with creditors.

In the period that fol­lows the noti­fi­ca­tion and prior to state reg­is­tra­tion, the LLC must set­tle all rela­tions with its cred­i­tors and ter­mi­nate or restruc­ture its con­trac­tual rela­tions with third parties.

Pub­li­ca­tion

Addi­tion­ally, the LLC must pub­lish the Deci­sion in the OG. From the day of pub­li­ca­tion, a two-month period starts run­ning for cred­i­tors to raise their claims against the suspension.

Labour for­mal­i­ties

Moldovan law is pro­tec­tive towards employ­ees. It is cru­cial to solve the labour issue prior to state reg­is­tra­tion of sus­pen­sion, since a fail­ure to address this will leave a risk that the sus­pen­sion is annulled later.

Employ­ees' labour agree­ments can be sus­pended with their con­sent (Arti­cle 77 Labour Code). Should employ­ees how­ever dis­agree to sus­pend their labour rela­tions, uni­lat­eral ter­mi­na­tion option(s) by the LLC should be con­sid­ered (col­lec­tive dis­missals, etc.).

Tax audit

A sus­pen­sion can be legally reg­is­tered after a state tax audit con­firms that the LLC has no debts to the state budget(s). Usu­ally, an appli­ca­tion to be sub­jected to a tax audit is filed with the tax inspec­torate after pub­li­ca­tion in the OG.

Depend­ing on the exact activ­ity of the LLC, a state tax audit may last from one week to up to two months, some­times even longer.

The audit ends with a ver­i­fi­ca­tion act and a con­fir­ma­tion of absence of debts towards the Moldovan state.

State reg­is­tra­tion of suspension

Fol­low­ing the expiry of two months after the pub­li­ca­tion with the OG, the LLC files an appli­ca­tion with the Moldovan trade reg­is­ter (Cam­era Înreg­istrării de Stat; TR). If the appli­ca­tion com­plies with the law and there are no objec­tions from cred­i­tors, the TR takes effect with the cor­re­spond­ing state reg­is­tra­tion with the State Reg­is­ter of Com­pa­nies and sus­pends the LLC for a con­crete period (but not exceed­ing three years as of the date of state registration).

Report­ing and tax­a­tion duties

Start­ing the day of state reg­is­tra­tion of sus­pen­sion, the LLC is not required to sub­mit any reports with the Moldovan author­i­ties or to pay taxes, except for the real estate-related reports. Real estate taxes are to be paid imme­di­ately after the LLC restarts its activity.

Dur­ing the sus­pen­sion, the LLC may not per­form any com­mer­cial activ­i­ties under threat of lia­bil­ity (admin­is­tra­tive and penal) and risk to repay the caused prejudice.

Retak­ing activity

An LLC may decide to can­cel its sus­pen­sion, through its com­pe­tent body, at any time (includ­ing before expiry of the ini­tial sus­pen­sion period). The deci­sion to restart the activ­ity is to be filed with the TR accom­pa­nied by an appli­ca­tion and enclosed as regulated.

Should in the course of a sus­pen­sion a cred­i­tor with claims be dis­cov­ered (and files a com­plaint with the TR), the TR must annul the sus­pen­sion (Art.30(9) Entre­pre­neur­ship Act).

Quote: Pros of suspending the activity of a Moldovan limited liability company: (i) keep a company non-operational without liquidating it; (ii) quick to implement; (ii) easy to restart activity. Cons: (i) may prove as expensive and time consuming as a liquidation (eg, in case of labour or tax issues); (ii) can be annulled also by creditors.

This article was originally published in the schoenherr roadmap`14 - if you would like to receive a complimentary copy of this publication, please visit: pr.schoenherr.eu/roadmap.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.