Reasons for excluding a participant from an LLC

LLC is one of the most common forms of entrepreneurial activity in Ukraine, primarily due to the convenience of internal management and the limitation of liability of its participants in particular.

However, there are situations when a member can be excluded from an LLC.

The exclusion of a participant from the LLC may have negative consequences for both the participant and the company.

Some of these consequences may be a negative impact on the image and reputation of the participant, provoking legal disputes between the LLC and the excluded participant, loss of financial assets of the LLC, control over the management of the LLC, etc.

There is a defined list of grounds for initiating such a procedure by current national legislation.

In particular, the main grounds for excluding a participant from the LLC are the following:

• Decision of the general meeting of members of the LLC/court on such exclusion. Such a decision may be adopted in the event of a violation by a participant of the LLC charter, the rights of other participants, or other obligations provided for by current legislation. At the same time, a participant who was excluded from the LLC may have the right to protect his interests in court;
• Recognition of a member of an LLC as bankrupt by the procedure established by law. If a member of an LLC has been declared bankrupt under the bankruptcy laws of individuals/legal entities, he may be automatically excluded from the relevant LLC;
• Inability to contribute to the authorized capital of the company. A clear deadline is set for the payment of each participant’s contribution, and the failure to pay his share before his departure may result in the participant’s exclusion from the LLC;
• Death of a participant/recognition of him as missing by a court decision. Here it is worth noting that in the event of the death of a member of an LLC, he is not only excluded from the composition of the LLC, but his share also passes to the heirs without the consent of other members of the company.

The exclusion of participants from the LLC is an important and rather difficult procedure, which must be carried out by the established rules and procedures defined by current legislation.

Qualified lawyers of JSC “Prikhodko and Partners” offer not only consulting services on this issue but also legal support at all stages of this procedure, in particular:

• Preparatory stage: establishment of a possible procedure for the exclusion of participants, based on a specific request of the client, preparation of the decision of the general meeting on the exclusion of the participant from the LLC, official notification of the participant on exclusion;
• Working stage: preparation of relevant documentation (report on meetings of participants, minutes of general meetings, etc.);
• Final stage: making appropriate changes to the registration documents of the LLC and the Unified State Register through interaction with state bodies.

It is important to note that the process of excluding a participant from an LLC must take place by the legislation and the statute of the company itself. Violation of the rules can lead to legal problems and litigation. Therefore, a thorough study of the statute and an appeal to lawyers can be useful before starting the procedure for excluding a participant from the LLC.

Conclusions:

Grounds for exclusion of a participant from the LLC include violation of the charter, legislation, bankruptcy, inability to contribute to the authorized capital, death of the participant/recognition of his missing person, and court decision regarding his exclusion.

It is important to follow established procedures and legislation when considering such issues, in which the help of qualified specialists of JSC “Prikhodko and Partners” will not be superfluous.