Judicial practice on claims for liquidation of legal entities on the grounds of invalidation of registration (re-registration) of a legal entity

On the basis of subparagraph 10) of paragraph 1 of Article 19 of the Tax Code, state revenue authorities have the right to file lawsuits with the courts for the liquidation of a legal entity on the grounds provided for in subparagraphs 1), 2), 3) and 4) of paragraph 2 of Article 49 of the Civil Code, as well as other lawsuits in accordance with the competence and objectives established by the legislation of the Republic of Kazakhstan.

In accordance with paragraph 2 of Article 49 of the Civil Code, by a court decision, a legal entity may be liquidated if the registration of a legal entity is declared invalid due to violations of the law committed during its creation, which are irreversible.

According to paragraph 1 of Article 158 of the Civil Code, a transaction the content of which does not comply with the requirements of the law, as well as a transaction made for a purpose knowingly contrary to the principles of law and order, is contested and may be declared invalid by a court, unless otherwise provided by this Code and other legislative acts of the Republic of Kazakhstan.

By virtue of paragraph 1 of Article 2 of the Entrepreneurial Code, entrepreneurship is an independent, initiative activity of citizens, oralmans and legal entities aimed at generating net income through the use of property, production, sale of goods, performance of works, provision of services, based on the right of private ownership (private entrepreneurship) or on the right of economic management or operational management of a state enterprise. (state-owned enterprise).

In accordance with paragraph 1 of Article 39 of the Civil Code, as well as paragraph 1 of Article 5 of the Law "On Limited and Additional Liability Partnerships", the location of a legal entity is recognized as the location of its permanent body.

According to article 14 of the Law "On State Registration of Legal Entities and Registration of Branches and Representative Offices" (hereinafter referred to as the Law), a contract for the alienation (assignment) of the right of a retiring participant in a business partnership to a share in the property (authorized capital) of the partnership or part thereof, to which an individual is a party, is subject to notarization.

According to the rules of Article 14-2 of the Law, changes and additions to the registration data of a legal entity are made when the location of the legal entity is changed, when the location of the legal entity is changed, a document confirming the location is additionally attached to the notification, if the owner of the premises is an individual, a notarized consent of the individual is provided, such registration is notifying nature with the entry of information into the State database of legal entities (GBD Law).

When considering cases, the courts need to find out whether such transactions have been challenged in court, whether these transactions are disputed or void by virtue of a direct indication of the law.

Article 16 of the Law stipulates that a legal entity is considered to have ceased operations after entering information about it into the National Register of Business Identification Numbers.

The activities of legal entities and their branches (representative offices) are subject to compulsory termination in case of simultaneous compliance with the following conditions: those who have not applied to the registration authority for the formation of a business identification number in accordance with the procedure established by the Government of the Republic of Kazakhstan; those who are not registered with the state revenue authorities as taxpayers. Compulsory termination of activities is carried out in court upon application of the body carrying out state registration of legal entities. Exclusion from the National Register of Business identification numbers of Legal Entities is carried out on the basis of a court decision on compulsory liquidation, which has entered into force.

In accordance with paragraphs 10, 11, 12, 13 of the NP "On Judicial Practice of applying Tax Legislation" by the courts, legal entities whose registration (re-registration) is being challenged must be involved in the case as defendants. Since these disputes are considered according to the rules of the claim procedure, the judicial authority must necessarily be involved in the case as a co-respondent. When challenging the registration of a legal entity, its founders (participants) must be involved in the case. In case of challenging only the re-registration of a legal entity, the previous participant(s) should also be involved in the case. Invalidation of the re-registration and restoration of the previous registration data of a legal entity entails obligations for the previous participant(s) related to its activities, including tax obligations.

The fact of registration (re-registration) of a legal entity with an individual who is not related to its creation (re-registration) is the basis for invalidating the registration (re-registration) of a legal entity.

When stating in the statement of claim that one of the grounds for invalidating the registration (re–registration) of a legal entity is the absence of a legal entity at the place of registration, the courts should take into account that in such cases it is important to investigate and resolve issues related to the reliability of the address of the legal entity. If there is at least one of the circumstances indicating the deliberate provision of false information about the address of a legal entity during registration (re-registration), which excludes the possibility of any connection with this legal entity, as well as the exercise of state control and supervision, the claim may be satisfied.

The absence of a final decision on a criminal case in the field of economic activity cannot be an unconditional basis for rejecting a claim for invalidation of registration (re-registration) of a legal entity.

It should be noted that a stable practice has developed in cases of this category.

The basis for filing these claims are appeals to the Department of Pre-Trial Investigation of the State Duma of the Ministry of Finance of the Republic of Kazakhstan of individuals (titular managers and founders of partnerships), which indicate that they did not aim to engage in entrepreneurial activity, seals, constituent documents, crypto keys, financial and economic documents of the LLP were not transferred to them, any material, There was no physical, financial, or technical opportunity to engage in entrepreneurial activity.

Examples

1) The Russian State Institution "UGD in Atyrau" filed a lawsuit to recognize the state re-registration of Stroy Asia KZ LLP (hereinafter referred to as the LLP)  invalid as of March 4, 2019.

The lawsuit was satisfied by the decision of the Council of Ministers of Atyrau region dated January 15, 2020. The court found that the initial registration of the LLP was made on October 3, 2018 in the UGD in the Saryarkinsky district. In accordance with the order of the NAO "Government for Citizens State Corporation" dated March 4, 2019, the LLP re-registered, indicating its location: Atyrau city, Baymukhanova Street, building 12 B, apartment (office) 12. On June 12, 2019, a tax survey was conducted, which revealed the absence of an enterprise at the specified address.

By a decision of the Court of Appeal dated November 3, 2020, the court's decision was overturned, and the case was sent for a new hearing to the Council of Economic and Social Council.

The appeal found that the court did not involve the judicial authority as a co-respondent in the case, as well as the NGO "Government for Citizens", to whose jurisdiction the functions of registering legal entities were transferred. Also, N.N. Yuzeeva, who was listed as the first leader and participant (founder), was not involved in the case. LLP as of October 3, 2018.

2) By the decision of the Council of Ministers of the city of Nur-Sultan dated February 8, 2021, the claim was satisfied. The purchase and sale agreements for 100% of the share in the authorized capital of ANTARES Group Astana LLP (hereinafter referred to as LLP) concluded between Yerzhan Zh. and Safin D.R., between Safin D.R. and Stepanenko V.V. were declared invalid.. The state re-registration of the LLP was declared invalid and cancelled.

By the decision of the appellate instance dated April 14, 2021, the court's decision remained unchanged, citing the fact that the transaction is contested and subject to invalidation.

It follows from the case file that the founder of the partnership in the period from April 23, 2019 to October 4, 2019 was Safin D.R., from October 4, 2019 to the present is Yerzhan Zh.

Safin D.R. and Yerzhan Zh. they acquired a share in the authorized capital of the LLP on the basis of purchase and sale agreements. The purchase and sale agreement dated April 18, 2019, concluded between Stepanenko V.V. and Safin D.R., was notarized by Baydauletova P.K. The purchase and sale agreement dated October 3, 2019, concluded between Safin D.R. and Yerzhan Zh., was notarized by Ryskulbekova L.Z.

The Department of Pre-trial Investigation of the SRC of the Ministry of Finance of the Republic of Kazakhstan received statements from Safin D.R. and Yerzhan Zh., from which it follows that they did not set the goal of engaging in entrepreneurial activity, seals, constituent documents, crypto keys, financial and economic documents of the LLP were not transferred to them, any material, physical, financial and technical opportunity to engage in entrepreneurial activity They had no business.

The DGD appealed to the court with demands for invalidation of contracts for the purchase and sale of 100% of the share in the LLP and state re-registration, arguing that the company was acquired without the intention of carrying out entrepreneurial activities, which contradicts the statutory goals of the partnership and the interests of the state.

When resolving the claim, the court proceeded from the established fact that Safin D. and Yerzhan Zh. When signing these purchase and sale agreements, they were influenced by third parties, and as subjects of the transaction, they did not have an independent expression of will to carry out entrepreneurial activities.

According to the information of the state revenue authorities, the LLP is absent at its location, which indicates the absence of a permanent body, head and other persons without whom the legal entity cannot function.

From the information on the invoices issued according to the Pyramid of Buyers LLP report, it follows that the estimated amount of damage left 609,504,793 tenge, including VAT 228,564,293 tenge, VAT 380,940,500 tenge.

The arguments of the defendant Stepananko V.V. (the original founder of the company) that, along with the share of the authorized capital, accounting documents, EDS, seal and other documents reflected in the act of acceptance and transfer, the balance sheet were transferred to the buyer; there were no disputes and encumbrances on the share of the authorized capital; at the time of the conclusion of the contract, it was confirmed that there were no tax arrears, which were studied by the court, but were not taken into account, since the disputed purchase and sale agreements contradict the principles of law and order, and the main purpose of the persons who directed the actions of the parties in making these transactions was the subsequent evasion of tax obligations to the budget by issuing fictitious invoices and providing corresponding to the validity of tax reporting forms.

In the circumstances described, the court reasonably concluded that the purchase and sale agreements of April 18, 2019 and October 3, 2019 were invalid.

At the same time, based on the provisions of article 14 of the Law "On State Registration of Legal Entities and Registration of Branches and Representative Offices", as well as the norms of civil legislation on the consequences of invalid transactions, an invalid transaction does not entail legal consequences, it is invalid from the moment it is completed – the parties to the transaction return to their original position. Accordingly, the state re-registration carried out on the basis of these agreements was also correctly declared invalid and canceled.

3) The Russian State University of Internal Affairs for the city of Ust-Kamenogorsk filed a lawsuit to declare the purchase and sale agreement for shares in the authorized capital of Obshor LLP, concluded between Mahmudov Z. and Birzhanyly D., as well as the subsequent state re-registration of the legal entity invalid, with the cancellation of the order.

The lawsuit was satisfied by the decision of the Council of Economic Cooperation of the East Kazakhstan region.

The court motivated the satisfaction of the claim by the absence of the will of the person indicated in the constituent documents of the legal entity, which had nothing to do with its creation, did not carry out or carry out entrepreneurial activities. I took into account the statement of Birzhanyly D., in which he referred to the lack of awareness about the activities of AsiaPromTorg 2002 LLP.

The Court of Appeal, overturning the court's decision and sending it for reconsideration, pointed out that the court had concluded that the requirements of the law had been violated when concluding the contract, based only on Birzhanyly D.'s statement, and had not assessed or investigated the fact that the disputed share purchase agreement had been notarized. Accordingly, Birzhanyly D.'s will to sign this agreement was established. It follows from the content of the agreement that  Birzhanyly D. was notified about the nature of the activities and the financial state of affairs of Obshor LLP.  The court also did not analyze the actions of Birzhanuli D. related to the further re-registration of Obshor LLP in AsiaPromTorg 2002 LLP; orders signed by Birzhanuli D. related to the activities of a legal entity; documents signed by Birzhanuli D. submitted to the registration authority.

Based on the above circumstances, the judicial board pointed out the illegality of the court's conclusions on the execution of the purchase and sale agreement for the share of the LLP by deception and deception.

The court of first instance did not give a legal assessment to the fact that by the decision of the Ust-Kamenogorsk City Court of July 19, 2018, the purchase and sale of a 100% stake in the authorized capital of Obshor LLP between Birzhanuli D. and Bolatkanuli M. was recognized as valid.

The disputed agreement dated October 14, 2015, precedes the said transaction. Thus, when making a decision to invalidate the contract, the rights of Bolatkanuli M., who is currently, according to the court decision, the only participant in the partnership, are affected.

Bolatkanuli M. was not involved in the case, thus the rights and legitimate interests of this person were violated.

Upon a new review, the claim was dismissed by a court decision dated November 27, 2020. By the decision of the Court of Appeal of February 18, 2021, the court's decision remained unchanged.

The court of first instance justified the refusal to satisfy the claim by the lack of evidence of the plaintiff's arguments, pointing out that there were no grounds for declaring the above-mentioned transaction invalid.

The Court of appeal, agreeing with the conclusions of the court of first instance, indicated that the content of the contested contract complies with the requirements of the law, the contrary has not been proven to the court. The will of the parties is expressed by signing the contract, their signatures and the transaction are certified by a notary.

The court pointed out that Birzhanyly D.'s statement, made by him 3 years after the acquisition of the share from Mahmudov Z., after the re-registration of the partnership due to a change in the composition of its participants, is not evidence of non-compliance of the contract with the requirements of the law.

The motives that guided Birzhanyly D. in concluding the contested contract do not matter.

In addition, the court took into account reliable circumstances indicating that Aziyapromtorg 2002 LLP was engaged in entrepreneurial activity. Therefore, Birzhanyly D., who is the only participant of this LLP and at the same time its head, has no right to assert his non-involvement in its activities.

Further, the verdict of the Ayagoz District Court dated February 12, 2018 against Bolatkanuly M. established that Birzhanyly D. received wages, signed and stamped the documents of AsiaPromTorg 2002 LLP, all money received into the accounts of the LLP was cashed out by him.

In addition, the decision of the Ust-Kamenogorsk City Court recognized as valid the transaction made between Bolatkanuly M. and Birzhanuly D. on the purchase and sale of 100% of the share of Obshor LLP.

Subsequently, Birzhanyly D. re-registered the partnership with AsiaPromTorg 2002 LLP.

Taking into account the above circumstances, the court correctly recognized as untrue the arguments of this defendant about his non-involvement in the activities of Obshor LLP (since 2018, AsiaPromTorg LLP 2002).

4) By the decision of the Council of Economic Cooperation of the Mangystau region dated March 3, 2021, the Department's claim against GOOD COMPANY LLP for invalidation of the state re-registration of a legal entity was denied.

It follows from the case file that on May 26, 2017, GOOD COMPANY LLP was registered at Sh Street, Nur-Sultan. Aitmatova, the founder and head was Temirtasov M.

On August 24, 2017, this partnership was re-registered due to a change in the membership based on the purchase and sale agreement of 100% of the authorized capital dated July 28, 2018, the founder and head is A. Nurbasinov.

Simultaneously with the change of participants, a repeated location change was made in the city of Aktau.

The Department's stated claims challenge only the registration of a change of legal address, and no claims have been made to challenge transactions involving the purchase and sale of 100% of the Partnership's shares.

When considering the case, the court did not take into account the act of the tax inspection of the Department, which established the absence of the Partnership at the legal address, since the defendant's presence at the registration address is confirmed by the explanations of the owner of the premises and the defendant's representative.

The plaintiff also failed to provide evidence of the registration of several legal entities at the place of registration of the said partnership.

In resolving the claim, the court applied paragraph 14 of the NP "On Judicial Practice of Applying Tax Legislation" and Article 14-2 of the Law "On State Registration of Legal Entities and Registration of Branches and Representative Offices."

According to the mentioned article, the location of a legal entity belonging to a private business entity, a branch (representative office), with the exception of a joint-stock company, a branch (representative office) is changed by submitting an electronic notification, which is filled out on the e-Government web portal.

The Partnership has submitted such a notification. His absence at the place of registration, according to the requirements of the Tax Code, is the basis for de-registration for VAT due to non-confirmation of his location.

Thus, the re-registration of the Partnership was carried out within the framework of the current legislation, there were no comments on the documents submitted by the Partnership.

The plaintiff's arguments about the existence of tax arrears, the unfulfilled notification of desk control, indicating that the re-registration of a legal entity was not carried out for entrepreneurial activity, cannot serve as a basis for invalidating and canceling the order on state re-registration, without challenging the transaction on the alienation of 100% of the share.

5) The State Duma of the Aktobe region appealed to the Council of Ministers of the Aktobe region with a claim against Kaz-Temir-2 LLP, the Corporation, Ageev S.N. for invalidation and cancellation of the order on state registration of Kaz-Temir-2 LLP.

The court's decision of February 4, 2021 satisfied the claim.

It is established that the founder and at the same time the head of Kaz-Temir-2 LLP is S. Ageev.

In accordance with paragraph 2 of article 40 of the Law on Population Migration (hereinafter referred to as the Law), it is prohibited for foreigners who have not received an entry visa as business immigrants to establish a legal entity, as well as to participate in the authorized capital of commercial organizations by joining legal entities.

According to subparagraph 2 of Article 34 of the Law, immigrants arriving for the purpose of carrying out work include business immigrants - immigrants who arrived for the purpose of carrying out business activities in accordance with the legislation of the Republic of Kazakhstan.

The rules for issuing invitations, approving invitations for foreigners and stateless persons to enter the Republic of Kazakhstan, issuing, canceling, restoring visas of the Republic of Kazakhstan, as well as extending and shortening their validity periods, approved by the joint order of the Acting Minister of Foreign Affairs of the Republic of Kazakhstan dated November 24, 2016 No. 11-1-2/555 and the Minister of Internal Affairs of the Republic of Kazakhstan Dated November 28, 2016, No. 1100, a C-5 visa is provided for the category of business immigrants.

By paragraph 9 of the NP "On Judicial Practice of applying tax Legislation", failure, if necessary, to obtain a mandatory visa to enter as business immigrants by foreigners who created a person, as well as those participating in the authorized capital of organizations by joining the participants of persons, is characterized as an unavoidable violation of the law when creating a legal entity.

Failure, if necessary, to obtain a mandatory visa to enter as business immigrants by foreigners participating in the authorized capital of commercial organizations by joining the membership of legal entities is the basis for invalidation of registration.

Kaz-Temir-2 LLP was created and managed by a non-resident who did not enter the territory of Aktobe region as a business immigrant.

According to the response of the Migration Service Department, Ageev S. stayed in the territory of the Republic of Kazakhstan without a visa and without registration.

Based on the established circumstances, the court concluded that  Kaz-Temir-2 LLP was established in violation of the procedure established by law for the formation of a legal entity.

The court's decision has not been appealed, has entered into legal force and has been executed.

Regulatory and legal framework

In accordance with Article 2 of the Code of the Republic of Kazakhstan dated December 25, 2017 "On Taxes and other mandatory payments to the Budget (Tax Code)", the tax legislation of the Republic of Kazakhstan is based on the Constitution of the Republic of Kazakhstan, consists of this Code, as well as regulatory legal acts, the adoption of which is provided for by this Code.

If an international treaty ratified by the Republic of Kazakhstan establishes rules other than those contained in the Tax Code, the rules of the said treaty shall apply.

The main regulatory legal acts that courts should follow when considering cases related to the application of tax legislation are:

1. The Constitution of the Republic of Kazakhstan dated August 30, 1995;

2. The Code of the Republic of Kazakhstan "On Taxes and other Mandatory Payments to the Budget (Tax Code)" (hereinafter – NC);

3. The Civil Code of the Republic of Kazakhstan (hereinafter referred to as the Civil Code) (General Part) dated December 27, 1994, (Special Part) dated July 1, 1999;

4. The Civil Procedure Code of the Republic of Kazakhstan (hereinafter – CPC) dated October 31, 2015;

5. The Business Code of the Republic of Kazakhstan (hereinafter referred to as the Business Code) dated October 29, 2015;

6. The Law of the Republic of Kazakhstan "On Permits and Notifications" dated May 16, 2014;

7. The Law of the Republic of Kazakhstan "On Accounting and Financial Reporting" dated February 28, 2007;

8. The Law of the Republic of Kazakhstan "On State Registration of Legal Entities and Registration of branches and representative Offices" dated April 17, 1995;

9. Regulatory rulings of the Supreme Court of the Republic of Kazakhstan (hereinafter – NP):

- "On judicial practice of tax legislation application" dated June 29, 2017 No. 4;

- "On the application by courts of certain norms of civil procedure legislation" dated March 20, 2003 No. 2;

- "On some issues of the invalidity of transactions and the application by courts of the consequences of their invalidity" dated July 7, 2016 No. 6;

- "On some issues of application by courts of the norms of Chapter 29 of the CPC" dated December 24, 2010 No. 20;

Resolutions of the Government of the Republic of Kazakhstan, regulatory legal orders of the authorized body in the system of state revenue bodies.

Summary from the Supreme Court of the Republic of Kazakhstan on the judicial practice of applying tax legislation for 2020 and 3 months of 2021 dated July 9, 2021

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