Sale of shares in a limited liability company (LLC)

Share in the authorized capital of the LLC — it is a percentage of the total amount, which determines part of the property rights and obligations of the participant in the company.

The size of the share is usually proportional to the participant’s contribution to the authorized capital, however, the company’s charter may provide for other rules regarding the distribution of shares.

The legal regime of a share in an LLC includes two main aspects:

• property aspect– determines the participant’s right to receive dividends and a share of the company’s property in the event of its liquidation,
• management aspect– related to the right to participate in the management of the company, including voting at the general meeting of participants.

The sale of a share in an LLC is a procedure that requires compliance with certain stages and consideration of legal requirements:

1. Preparatory stage –all necessary documents are prepared and the legal status of the share is analyzed. It is important to find out whether there are any restrictions or prohibitions imposed on the share, such as a lien or lien.
2. Messages from other participants. In case of intention to sell his share, the member is obliged to inform other members of the company about his intention. According to the company’s charter, other participants may have a preemptive right to buy out this share.
3. Evaluation of the share– is carried out to determine its value. It can be an internal evaluation of the company or the involvement of an independent evaluator. The assessment is important both for the seller and for potential buyers.
4. Agreement with other participants. According to the company’s charter, the sale of a share may require the consent of other participants. This rule is introduced to ensure stability in the structure of the company and prevent unwanted changes in the composition of participants.
5. Conclusion of a sales contract. The contract for the sale of shares in the LLC must be concluded in writing. It specifies all the key terms of the agreement, including the size of the share, the price, the order of payment and the terms of transfer of the share.
6. Registration of changes in the state register. After concluding the sales contract, it is necessary to register changes in the membership of the company in the state register of legal entities. This completes the process of selling the share.

The sale of a share in an LLC may be limited both by legislation and by the company’s internal documents:

• Prevailing right. One of the main restrictions is the overriding right of other members of the company to redeem the share. This right guarantees other participants the opportunity to maintain control over the company, preventing shares from falling into the hands of outsiders.
• Prohibition on the sale of shares. A ban on the sale of a share can be established in cases where a participant violates his obligations to the company, or if such a ban is provided for by the company’s charter.
• Pledge of share. A share in an LLC may be subject to collateral, which makes it difficult to sell. The sale of the pledged share is possible only with the consent of the pledgee.

The sale of a share in an LLC is associated with certain legal and financial risks that should be taken into account during the transaction, for example:

• Illegal alienation of a share – in the event that the sale of the share was carried out without proper observance of procedures, for example, without obtaining the consent of other participants or in the absence of the necessary documents, such an agreement may be declared invalid.
• The difference in the assessment of the value of the share between the seller and the buyer can become the basis for disputes. The involvement of an independent appraiser will help to avoid such situations.
• The seller of the share in the LLC is responsible for the company’s debts incurred before the sale, unless otherwise stipulated by the contract. This can be a serious risk if the company has significant liabilities.