Lawyer
Expert in corporate and international corporate law. Has extensive experience in supporting the acquisition of financial licenses in Ukraine, as well as business incorporation in the EU, the United Kingdom, Switzerland, the UAE, and key Asian jurisdictions.
A legal dispute between the participants of LLC
What is a legal dispute between members of the company?
If the partnership has two or more members, and they cannot come to a joint decision through negotiations, then a legal dispute arises.
The subject of such a dispute may be, for example, the following issues:
- alienation of shares in the authorized capital of the LLC in violation of the procedure established by law,
- establishing the size of the authorized capital and shares of the members of the LLC,
- restoration of the state that existed before the violation of the rights and interests of the members of the LLC.
A dispute regarding the sale of a share to third parties
Consider the situation when a dispute arises regarding the sale of shares to third parties, namely sales a member of the partnership of his share to a third person without prior notification of the other members. The court is often still considering such cases the question of how one of the participants can obtain permission to alienate a share to a third person.
So, if the participant did not properly inform other participants about the sale of the share, then those who were not notified can file a lawsuit with the demand to transfer the rights and obligations of the buyer of the share to them.
The law obliges a company member to notify other members in writing of the intention to sell his share to a third party.
But if the participant did not report the sale of the share, the court may declare the sale invalid if it is proven that other participants did not have the opportunity to exercise their preferential right to purchase the share.
A participant may be considered to have given proper notice of the sale of a share if he has given written notice to the other participants, and if those who did not object to the sale were present at the general meeting of participants and voted to approve the sale.
Persons who knew about the sale of the share and agreed to it cannot later challenge the sale in court, as this is contrary to the principle of good faith.
The dispute regarding the appeal of the decisions of the general meeting of the company
Another reason, which is often referred to by members of the company in litigation, is the appeal of the decisions of the general meetings of the company.
Some violations automatically invalidate the decision, and some do not always mean the invalidity of such a decision (violations that did not affect the participant’s ability to attend the meeting and express his opinion)
Failure to notify meetings may invalidate their decisions if:
- The participant will prove that he was not informed about the fees.
- He will also prove that:
- There were other grounds for invalidating the decision.
- He did not have the opportunity to attend the meeting.
- Decisions contradict the legislation or the company’s charter.
- Decisions violate his rights and interests.
A dispute between a member of the company and the director
Often a dispute may arise between a member of the company and the director regarding the salary. When a director is appointed in a company, the salary is fixed in the staffing schedule, which is approved by the member(s) of the company, because it is the member of the company who sets the salary for the director.
But sometimes directors on the day of their appointment personally approve a new staff schedule with a different salary. When the director is dismissed, a dispute arises regarding the salary change.
In such a case, the member of the company can file a lawsuit in court with the aim of collecting the difference between the amounts approved by him and the director. Court practice shows that in such cases the position of the plaintiff, that is, a member of the company, is supported.
The grounds are:
- first, this is the statute, which states that it is the member of the company, or rather the general meeting, that sets the salary;
- the second is the Law “On Limited and Additional Liability Companies”, namely Art. 30.
This article clearly stipulates that the election of the executive body and the determination of the amount of compensation for members of the company is within the competence of the general meeting.
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