Call us
Online Consultation

Conflicts and misunderstandings may arise in any team or collective. Relations between shareholders in a limited liability company (OOD) are no exception, and in such situations this may lead to the exclusion of a shareholder.

In most cases, before taking steps to exclude a shareholder from an OOD, people seek legal advice, as the procedure is specific and must be strictly followed in order for the exclusion to be successful and to avoid the risk of court proceedings.

When can a shareholder be excluded from an OOD?

The primary obligation of shareholders in an OOD is to pay their capital contribution in exchange for the shares they receive in the company’s capital. Therefore, a shareholder may be excluded if they have failed to pay or contribute their share and do not do so within an additional deadline, which may not be shorter than one month.

Before a shareholder may be excluded, they must be formally warned by the company’s manager, who must notify them in writing and specify the additional deadline. In this case, after the exclusion, the shareholder is not entitled to recover the contributions they have made.

Exclusion of a Partner

Other grounds for excluding a shareholder include:

  • failure to fulfill their obligation to cooperate with the company;
  • failure to comply with resolutions of the General Meeting;
  • acting against the interests of the company;
  • failure to make an additional monetary contribution where the shareholder has not exercised their right to withdraw.

If there are only two shareholders holding equal shares in the capital and one decides to exclude the other, once the latter becomes aware of this, it often leads to a “race” as to who will exclude whom first.

For this reason, in all cases, strict compliance with the statutory procedure prior to excluding a shareholder is of fundamental importance. Due to the specific nature of the matter and the need for thorough knowledge of the applicable legislation, it is advisable – before initiating exclusion proceedings, or if you are a shareholder who has already been excluded from an OOD – to consult a specialist who can advise you, review and/or prepare the necessary documentation. If you find yourself in such a situation, do not hesitate to contact a corporate lawyer from Law Firm “Radoslav Shulev.”

What is the procedure for excluding a shareholder?

When initiating the exclusion of a shareholder from an OOD, the first mandatory step is to issue a written warning to that shareholder (most commonly by means of a notarized invitation). The warning must clearly state the grounds for the proposed exclusion.

After the shareholder has received the warning, the decision to exclude them is taken by the General Meeting of the OOD. It is important to note that even if the above-mentioned grounds exist, the remaining shareholders may decide to give the “offending” shareholder a second chance and not proceed with the exclusion. In other words, exclusion is at the discretion of the General Meeting, where each shareholder has the right to vote (except the shareholder subject to exclusion).

If a decision to exclude the shareholder is ultimately adopted, this decision must be registered with the Commercial Register. The manager must authorize a person – most often a qualified commercial law attorney – to carry out the registration.

Why consult a lawyer when excluding a shareholder from an OOD?

In practice, the exclusion of a shareholder from an OOD can almost always give rise to difficulties of various kinds. Therefore, if you are in such a situation, do not hesitate to consult a corporate law professional from Law Firm “Radoslav Shulev,” who will listen to you, advise you, and prepare all necessary documents, which involve specific legal requirements and nuances. After the successful completion of the exclusion procedure, the lawyer will register the change with the Commercial Register, namely the removal of the excluded shareholder.

What if the shareholder is also the manager of the OOD?

In this case, exclusion as a shareholder does not automatically result in removal from the position of manager, and vice versa. These are two separate procedures, each requiring a separate decision of the General Meeting.

What are the consequences of excluding a shareholder?

Exclusion, just like voluntary withdrawal from an OOD, entails property and financial consequences. These are settled on the basis of an accounting balance sheet prepared as of the end of the month in which the termination occurred – specifically, the month in which the General Meeting adopted the decision to exclude the shareholder.

Since exclusion is the most severe sanction that may be imposed on a shareholder, the excluded shareholder (as well as the remaining shareholders) has the right to challenge the decision before the court and seek its annulment if it is unlawful – for example, where the exclusion procedure has not been properly followed.

Do you need this service?
Don't hesitate to contact us.
Send Inquiry
4.5/5 - (67 votes)