Exclusion of a partner from a limited liability company. How and when?
In life, conflicts often arise between friends and colleagues, and then they can no longer work together. It is quite possible for this to happen between partners in a limited liability company. It is not uncommon for one of the partners to change their personal business strategy after the company has been established. This leads to actions on their part that directly threaten the interests of the company.
These scenarios have been taken into account by the legislator, who has provided for the possibility of excluding a partner from a limited liability company in the presence of scenarios specifically provided for in the law.
В тези случаи е препоръчително, съдружниците, които желаят да пристъпят към изключване на съдружник от ООД, да се обърнат към добър адвокат по дружествено право. Това е така, доколкото процедурата по изключване на съдружник от ООД разкрива сериозни специфики, а стриктното спазване на изискванията за законосъобразното ѝ провеждане е гаранция, че дори и при съдебното ѝ оспорване, изключването няма да бъде отменено.
In what situations can a partner be excluded from a limited liability company?
In first place, the law provides a general hypothesis for all commercial companies, which may be applied also to the exclusion of a partner from a limited liability company.
Each partner may request the court to terminate the participation of another partner in the company when that partner intentionally or through gross negligence fails to fulfill their obligation under the articles of association or the fulfillment of the obligation becomes impossible, or when the partner acts against the interests of the company.
This option is rarely chosen by the partners in a limited liability company because the decision to exclude a partner must be taken by the court, while the other options provided by the legislator are implemented by the general meeting of the partners, which is much faster, easier, and more convenient for the partners themselves.
The other options for excluding a partner are specifically provided for partners in a limited liability company. The law provides for the possibility of excluding a partner if they fail to pay or contribute the amount owed to the company in exchange for the company shares received in their favor. If the partner fails to fulfill this obligation, the law provides for the possibility of his exclusion if he fails to pay or contribute his share within an additional period determined by the general meeting, which cannot be shorter than one month.
In this situation, the deadline should be set by a majority of at least half of the company’s capital. Before the partner is excluded, they must be notified of the upcoming exclusion by the company’s manager. This notification should be made in writing and must specify the additional period granted to the partner to fulfill their obligations to the company. If they fail to do so and are excluded, this partner is not entitled to receive their contributions to the company’s capital.
The law provides for several additional scenarios for exclusion of a partner from a limited liability company. These are as follows:
- when it fails to fulfill its obligations to provide assistance to the company;
- when it fails to implement the decisions of the company’s general meeting;
- when acting against the interests of the company;
- in the event of failure to pay an additional monetary contribution, in the event that the partner has not exercised their right to withdraw.
It is evident that the hypotheses for excluding a partner from a limited liability company are formulated quite broadly, providing the partners with the opportunity, if justified, to proceed with the exclusion of the partner.
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What should be done in order to proceed with the exclusion of a partner from LLC?
There are statutory requirements that must be complied with in order in order to avoid reaching to cancel the exclusion, if it is challenged through legal proceedings.
As a first step, the partner must be notified in writing of the planned exclusion, stating the legal grounds on which he will be excluded. Once the partner has received the notice, the decision on their dismissal is taken by the general meeting of the limited liability company. At this general meeting, each of the partners has the right to vote, except for the partner whose exclusion is being decided.
If a decision is made to exclude a partner from a limited liability company, this should be published in the Commercial Register. Most often, the manager authorizes a good commercial lawyer to perform these actions.
Consequences of the exclusion of a partner
Exclusion, as well as the other grounds for termination of a partner’s membership, entails financial consequences. Except in situations where a partner is expelled for failure to contribute or pay their capital contribution, in all other legal scenarios the partner is entitled to receive the equivalent of their share in the company at the time of termination of their membership. The share is calculated on the basis of the balance sheet at the end of the month in which the termination took place. In the case of the exclusion of a partner, this is the month in which the General Meeting took the decision to exclude him.
The excluded partner has the opportunity to appeal his/her expulsion before the court, if he considers that the same has been carried out unlawfully.
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