Entity Liquidation in Brazil

Kestrel Partners (‘KP’) assigned a project manager to manage the resolution of all tax issues relating to the inventory, the balance sheet cleanup, and the entire liquidation.  During the assignment, the KP project manager evaluated and engaged tax and legal counsel as well as  the liquidator.  The KP project manager worked with various experts and management of the parent company as appropriate.  This internal team included representatives from the following departments:  Tax (direct, indirect), Legal, Accounting (Payroll, Business Unit, Accounts Payable, Fixed Assets  and Consolidations Accounting), Treasury, IT,  and Record Retention. 

Key considerations were minimizing all tax risks relating to the inventory and a fast, orderly liquidation. 

After a review of the existing entity and receiving a high-level plan form the corporate tax team, Kestrel Partners (‘KP’) developed a detailed operational plan encompassing two key phases:

• Phase 1:     Preparation of the legal entity for liquidation
• Phase 2:     Entity liquidation

Phase 1 was designed to address all issues with potential tax exposure, including exposure from inventory as well as inaccurate accounting statements and inaccurate historic tax returns.  A comprehensive tax resolution plan was formulated and executed.  The end result of this phase was a balance sheet with zero net assets (except goodwill).  This is a key prerequisite for starting a liquidation in Brazil.

Phase 2 leveraged KP’s Legal Entity Transition methodology and was adapted to the unique requirements in the state and city this entity was based.   Some tasks relating to this phase started or were concluded concurrently with Phase 1.

The resulting work plan was used to project-manage the various aspects of this transition.   The following tables highlight key objectives and aspects that were under the purview of KP during this project.