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3.8.1. Reorganization

Clause 1 of Article 57 of the CC of the Russian Federation provides 5 possible forms of reorganization:

i) Merger

At a merger of two organizations, a third, new organization is formed (formula A+B→С). Thus, the rights and duties of the existing organizations are transferred to the newly created one.

ii) Accession

One organization is absorbed by the second, thus the second continues to exist in the updated form (formula A+B→B). Thus, the rights and duties of first organization are transferred to the second one.

iii) Division

The organization ceases its existence, and with its assets, new organizations are created (formula А→B, C). Thus, the rights and duties of the existing organization are transferred to the newly created ones, according to the Transfer Act.

iv) Spin-off

A new organization is spinned from the organization, therefore the old organization continues to exist (formula А→A, B). Thus, some rights and duties of the existing organization are transferred to the newly created one, according to the Transfer Act.

v) Transformation

The organization changes its organizational-legal form (formula А→А). Thus, the rights and duties of this legal entity do not change (except for the corporate rights and duties).

The combination of various forms in the course of reorganization is allowed (for example, merger plus transformation).

The decision on reorganization is made by a general meeting of the legal entity's participants, or the legal entity's other managing body which is authorized to act in this way as per the charter. In addition to the aforementioned decision, this body sets the conditions of reorganization and implementation, and approves of the transfer act.

After entering into the USRLE a record about the commencement of the reorganization procedure, a notice about the reorganization is published twice in mass media (once a month). The creditor of the legal entity, whose claim rights have been established before the publication of the first notice of the reorganization of the legal entity, has the right to (1) demand early payment of the corresponding obligation by the debtor in a judicial proceeding, or (2) at the impossibility of early payment, demand a termination of the obligation, and compensation for the related losses (Clause 2 of Article 60 of the CC of the RF).