Liquidation of an NGO or Public Union

Liquidation of an NGO or a public union is an official procedure for terminating a public association with legal entity status without succession. Once the procedure is completed, the NGO or union ceases to exist as a legal entity, and a termination record is entered in the Unified State Register.

In practice, the decision to liquidate may be related to the completion of a project, absence of actual activity, loss of need for the public association, change of team format, termination of grant programs, lack of members, or inability to continue maintaining the organization.

It is important to understand that liquidation of an NGO or union is not limited to one set of minutes for the state registrar. The procedure requires review of the charter, a proper decision of the highest governing body, appointment of a liquidation commission or liquidator, work with creditors, tax authorities, banks, employees, archives, assets and remaining funds.

Voluntary liquidation of a public association is carried out through self-dissolution. The decision on self-dissolution is adopted by the highest governing body of the public association in the manner prescribed by its charter.

Such a decision should address the key elements of the procedure: termination of the NGO or union, creation of a liquidation commission or appointment of a liquidator, period for creditors to submit claims, handling of assets and funds, and the person responsible for filing documents with the state registrar.

After the relevant entry is made in the Unified State Register, the public association obtains the status of being “in the process of termination.” From that moment, the liquidation procedure begins and ends only when the final termination record is entered.

Voluntary liquidation may be the best solution if the NGO or public union no longer operates, has no active programs, members do not plan to continue activities, and maintaining the legal entity creates administrative, tax and organizational costs.

Liquidation may also be appropriate if a grant or social project has been completed, the team is moving to another legal structure, the organization has lost relevance, lacks resources for reporting, or needs to legally close its operating history before launching a new project.

If the NGO or union has debts, assets, remaining grant funds, employees, branches, disputes or tax matters, a preliminary legal and financial review is recommended before starting the procedure.

The liquidation procedure by decision of the highest governing body usually includes the following stages:

• Consultation and analysis of the current condition of the public association.
• Review of the charter, governing bodies, meeting procedure, quorum and voting rules.
• Preparation of the decision of the highest governing body on self-dissolution of the NGO or union.
• Appointment of the liquidation commission, liquidator, or body authorized to perform liquidation commission functions.
• Decision on the use of funds and assets after liquidation in accordance with the charter and law.
• Notarization of documents where required by law or the charter.
• Filing documents with the state registrar and entering the NGO/union into termination status.
• Identification of creditors and review of their claims.
• Inventory of assets, funds, property, grant financing, liabilities and documents.
• Support with tax procedures, inspections, reporting and deregistration.
• Closing bank accounts and terminating agreements, electronic signatures, accesses and special registrations.
• Settlement of employment matters if the organization has employees.
• Transfer of documents to an archival institution.
• Filing the final package of documents with the state registrar.
• Entering the final termination record into the Unified State Register.

Working with creditors is one of the key stages of liquidation. The decision on termination of the public association must specify the period during which creditors may submit their claims.

This period may not be less than two months or more than six months from the date of publication of the notice on the decision to terminate the legal entity.

After receiving a creditor’s claim, the liquidator or liquidation commission must review it and notify the creditor of the decision. Unresolved creditor claims may prevent completion of liquidation or lead to a court dispute.

For NGOs and public unions, the use of assets and remaining funds after satisfaction of creditors’ claims is especially important. The public association must act in accordance with its charter, the decision of the highest governing body and legal requirements on transfer of assets for statutory or charitable purposes.

If the organization has non-profit status, grants, charitable contributions, targeted financing or donor funds, the terms of their use, reporting, return or transfer should be checked before liquidation. Mistakes in this area may create tax risks and claims from donors or authorities.

Bank balances, property, equipment, humanitarian aid, intellectual property rights, donor agreements, project completion acts, primary documents and confirmation of targeted use of funds should be reviewed separately.

After the NGO or union is entered into termination status, controlling authorities may conduct inspections. Therefore, before launching the procedure, it is important to check tax reporting, debts, bank accounts, non-profit status, employees, social security contributions, cash registers, VAT registration, licences or other special statuses if any.

Special attention should be paid to accounting documents, primary documentation, bank statements, grant reports, settlements with counterparties, receivables and payables.

If liquidation is carried out without a preliminary review, the organization may face missing reports, absent documents, unclosed bank accounts, creditor claims or inability to complete the procedure quickly.

Before liquidation, it is necessary to check the current membership, notification procedure, powers of governing bodies and compliance with the charter. For a public union, the legal entities that are members of the union and the authority of their representatives should also be reviewed.

If the organization has employees, dismissal in connection with liquidation must be carried out correctly, including orders, final payments, compensation and HR documents.

It is also necessary to close bank accounts or leave one account for liquidation settlements, terminate agreements, resolve issues with electronic signatures, seals, accesses, licences, permits and transfer long-term storage documents to an archival institution.

Self-managed liquidation of a public association may seem simple only at the first stage. In fact, the procedure requires precise compliance with the charter, legislation on public associations, state registration, tax accounting, employment matters and archival storage of documents.

The most common risks include improperly convened meetings, lack of quorum, mistakes in minutes, incorrect appointment of a liquidator or liquidation commission, wrong creditors’ claim period, unresolved grants, remaining funds, missing reports, open accounts or lack of archive confirmation.

As a result, liquidation may be suspended, delayed or create personal risks for the head, members of governing bodies or the liquidator. That is why a preliminary review of the NGO or union is advisable before starting the procedure.

The following documents and information are usually required:

• current version of the NGO or union charter;
• extract or information from the Unified State Register;
• details of the director, governing body members, liquidator or liquidation commission members;
• information about NGO members or legal entities that are members of the public union;
• previous minutes, decisions, orders and documents on governing bodies;
• information about assets, funds, property, debts, creditors and debtors;
• information about bank accounts, balances, grants, donor or targeted financing;
• information about employees, HR documents and reporting;
• accounting documents, primary documentation, tax and financial reporting upon request;
• information about agreements, projects, grant contracts, court disputes or enforcement proceedings;
• data on branches, symbols, licences, permits or other special statuses, if any.

VINCO’S Legal Company supports liquidation of NGOs and public unions at all stages – from the initial consultation to the final termination entry in the Unified State Register.

We help review the charter and decision-making procedure, prepare minutes on self-dissolution, appoint a liquidator or liquidation commission, organize notarized signing, file documents with the state registrar and support procedures with creditors, tax authorities, banks and archives.

If necessary, the VINCO’S team may conduct a preliminary legal and financial audit, review non-profit status, grants, remaining assets and risks before the procedure begins in order to choose a safe model for terminating the NGO or public union.