ACQUISITION OF PROPERTY COMPLEX
The Russian practice of business holding is actively added with the methods of purchase or take off business from partners and competitors in order to expand the own presence in one or another segment of the market.
One of the most popular forms for execution of such transactions is purchase of enterprise with property complex (business) through acquisition of shares (stocks) in the said enterprise.
The legal economic support to acquisition of enterprise with property complex includes the series of events, beginning from analysis of the legal fundamentals of transaction, drafting and realisation of the project, up to transfer of documentation and property complex to the purchaser.
Major stages in legal economic support to acquisition of enterprise with property complex:
1. Express analysis of legal and financial status of enterprises makes the preliminary stage.
2. Legal economic analysis.
2.1. Analysis of legal status of enterprise.
2.2. Legal analysis of right certifying documents for the property complex.
2.3. Expertise of accounting conditions in enterprise. Drafting measures to eliminate defects.
With respect to the nature of the discovered violations and distribution of the burden of costs for correction thereof, the purchaser and seller may select either of several versions of cooperation.
Version 1: to eliminate discovered defects before drafting the scheme of transfer of the property rights.
Version 2: to eliminate discovered defects before the transaction for transfer of the property rights.
Version 3: to eliminate defects before delivery and acceptance of the property complex.
Version 4: to eliminate defects by the purchaser after completion of the project.
There is also the version, where the discovered defects are eliminated by stages. In order to execute the purchase transaction in relatively short time, it would be expedient for the purchaser to undertake the burden of elimination of the discovered defects.
3. Realisation of project for acquisition of property complex.
3.1. Drafting scheme for transfer of ownership rights.
3.2. Support to transaction for transfer of ownership rights.
3.3. Support to delivery and acceptance of property complex.
This form became popular due to the presence of a series of advantages, taking into account the specific features of business organisation in Russia.
1. Sale of shares (stocks) of legal entity is not subjected to value-added tax that provides a sufficient saving of money (20 per cent) as compared to the version of property sale.
2. Money is transferred directly to business owners though legal ones.
3. Within the terms of transferring the rights of enterprise, the new owners will receive not only the property but also the licences required to carry out business, and no long re-registration of property rights is required.
4. In some cases, acquisition of enterprise is the only way to acquire business, because its holding is possible only in the combination with the rights, which cannot be alienated or their transfer depends upon the will of third persons and is payable: rights of lease, use, investment contracts, etc., and this is very popular practice in Russia.
In addition to the advantages, application of this form to acquire business involves also serious risks for the purchaser.
In addition to the property of enterprise, the purchaser acquires the related problems:
Claims of tax authorities, non-budgetary funds, other governmental authorities to the business of enterprise before
acquisition thereof that may result in substantial financial sanctions.
The defects in registration of property rights may result in deprivation thereof.
Violation of the laws in creation of enterprise, prior change of members and restoration of the latter causes losses of the purchaser.
Requirements of creditors, who may initiate the procedure of bankruptcy and remove the purchasers from management of the enterprise, and finally take off the property.
Project terms from three months to one year.