Often in the process of carrying out economic activities, a legal entity is faced with the need to change the form of doing business from one legal form to another.

In this case, the legislation of the Kyrgyz Republic provides for such a form of business transformation as reorganization.

There are five forms of reorganization of a legal entity: reorganization in the form of transformation, merger, affiliation, division and spin-off:

• Transformation is a form of reorganization of a legal entity, which means a transition from one legal form of a legal entity to another.

  During transformation, the reorganized legal entity ceases to exist, and all rights and obligations of the reorganized legal entity are transferred to the newly created legal entity according to the principle of succession, (for example) - “A” LLC plans to expand its business through additional investments, by transforming it into another organizational structure in the legal form of “A” CJSC.

  When transforming, “A” LLC ceases its work and changes its organizational and legal form in “A” CJSC.

  A new legal entity registers the issue of shares, and concludes an agreement with the registrar.

  “A” CJSC continues to work under contracts with counterparties of its predecessor and assumes all its obligations.

“A” LLC => “A” CJSC

The legal form changes

• Merger is a form of reorganization when two or more legal entities merge and create a new legal entity.

  Reorganized legal entities cease to exist, and all rights and obligations of reorganized legal entities are transferred to the created legal entity according to the principle of succession.

  Thus, after the reorganization by merger, the successor pays the debts of the merged companies to the budget, creditors and counterparties - (for example) - As a result of the merger, “A” CJSC and “B” CJSC cease their activities and create “C” CJSC with transfer of all assets and liabilities of “A” CJSC and “B” CJSC.

“A” CJSC + “B” CJSC = “C” CJSC

• Affiliation is a form of reorganization when one or more legal entities cease their activities, and affiliate with the transfer of all their rights and obligations to another already existing legal entity.

  As a result of affiliation of one or several legal entities to another, the affiliated legal entities cease their activities, for example: “A” OJSC joins “B” OJSC = “B” OJSC with all assets, rights and obligations of “A” OJSC.

“A” JSC + “B” JSC = “B” JSC

Assignee. The company, which included legal entity (Company B).

• Division is a form of reorganization when one legal entity ceases to exist through the division into two or more new legal entities, with the simultaneous division between them of the rights and duties of a divided company.

  For example: Each of the participants of “A” LLC decided to conduct business independently, in connection with this it carries out the division = “B” LLC and “C” LLC, and each new entity is an independent legal entity with the antiquities, rights and obligations of “A” LLC in accordance with the separation balance.

“A” LLC => “B” LLC and “C” LLC

“A” LLC ceases its activity. Successors: “B” LLC and “C” LLC are working

• Spin-off is a form of reorganization when one or more legal entities are spin-off from one legal entity.

  The reorganized legal entity does not terminate the activity, but creates one or several new legal entities and transfers to them a part of its rights and obligations.

  Partial succession takes place. For example, Participants of “A” LLC do not want to continue to conduct joint business, and are not ready to close a legal entity, thus “A” LLC is spin-off from “A” LLC = “A” LLC and further exists as an independent legal entity, and “B” LLC also carries out independent activities as a legal entity, with the endowed part of the assets, rights and obligations of “A” LLC in accordance with the separation balance sheet).

“A” LLC => “A” LLC and “B” LLC

“A” LLC continues to work. “B” LLC is a new legal entity

The reorganization procedure in any form is quite a laborious and lengthy process, and each of the reorganizatioprocesses has its certain nuances, first of all – legal ones.

Lawyers of Corporate Lawyer Legal Firm LLC will advise on all issues of reorganization of a legal entity, organize the process of registration actions on reorganization, and will also be able to represent your interests during any form of reorganization of a legal entity.