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.
Purchase of corporate rights from an individual
- What is the procedure for purchasing corporate rights?
- When does ownership of corporate rights arise?
- What does the buyer get when buying corporate rights?
The purchase of corporate rights is de facto the purchase of a share in the authorized capital. For example, a person owns a 50% share in a company. A person can sell this share.
In order to alienate this share, it is necessary to notify the other founders of the company. This is called a preemptive right. Such a requirement is mandatory in accordance with Art. 20 of the Law of Ukraine “On LLCs and VAT”.
What is the procedure for purchasing corporate rights?
Within 30 days of receiving the notification, other members of the company must respond to the purchase of such a share. For failure to notify, the agreement on the sale of such a share to third parties may be challenged in court.
After the agreement on the purchase of corporate rights, the parties must conclude an agreement on the purchase and sale of a share in the authorized capital. This contract is entered into personally between you and is not required to register an action.
To register the action, an act of acceptance and transfer of a share in the authorized capital is concluded on the basis of the contract. Signatures on this act must be notarized.
Sometimes the parties wish to enter into a preliminary agreement (prior to the conclusion of the contract of sale), in which they indicate the agreement on the purchase and sale of corporate rights in the future.
After concluding the act, only application form No. 3 is filled out – this procedure will be sufficient to register changes in the register. Changes in the register can be registered at a notary public or at TsNAP.
Both the buyer and the seller of a share can apply for registration. The articles of association may sometimes provide for the possibility of selling corporate rights only with the permission of other participants.
When does ownership of corporate rights arise?
In essence, corporate rights are property. Therefore, using Art. 190, 334, and 664 of the Civil Code of Ukraine, the ownership right to them upon purchase arises from the moment of transfer of such rights.
The moment of transfer in this case is the moment of actual delivery of the object of sale to the buyer. That is, the main contract must provide for the moment of transfer of such rights. If a preliminary agreement is concluded, it does not provide for the automatic transfer of ownership of such rights.
What does the buyer get when buying corporate rights?
The purchase of corporate rights does not mean the acquisition of ownership of a contribution to the authorized capital, regardless of what it consists of – property or monetary contributions.
Also, we are not talking about a part of the company’s property in proportion to the purchased share.
Such a procedure in this case involves the transfer of rights and obligations in connection with participation in the company, for example, the right to participate in the management of the company (for example, during voting at the general meeting) or the right to receive part of the profit from the company’s activities (withdrawal of dividends) .
The transfer of ownership in relation to corporate rights means that the buyer will now be entitled to receive part of the assets (or compensation for them) if another member of the company leaves it, or if the company is liquidated. In the latter case, parts of the property are distributed among all members of the partnership in proportion to each person’s share.
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