When can a shareholder exit an LTD company?

When can a shareholder exit an LTD company?

Doing business in Europe also means that you have to understand the possibilities to exit the company. A private company limited by shares (LTD) is a company made of shareholders’ deposits of the founding capital. The percentage that each shareholder puts into the company can vary. When there are more shareholders within one company, the relationships between them are defined by the Companies act. They are also a part of the company’s establishment act.

A shareholder of an LTD company can exit the company by selling his shares or they when they are a subject of inheritance. When selling a share in the company, you have to check if the other shareholders have preemption rights.

This means that they can buy the shares of the company under the same conditions but have priority before other buyers when doing so.

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Exit of a shareholder from a LTD company

When doing business in Slovenia, non-EU citizens have the possibility to establish an LTD company. This company type can have more than one shareholder. They can also have different percentages amongst themselves and do not have to be equal partners.

Every shareholder can transfer their share to a third party under certain conditions. In this case, the relationships between the partners will remain the same and there will only be a new shareholder replacing the one that took the exit.

But the Companies Act defines an additional way a shareholder can exit the company. He can leave the company without selling his share. It will only mean that his share will no longer be valid. Hence, the founding capital of the company will decrease proportionally.

The law allows for the company’s establishment act to define the possibility for a shareholder to exit and determines the conditions, procedure and consequences of the exit.

Regardless of the state, a shareholder can demand by lawsuit to exit the company if there are reasonable grounds for it. Those grounds can include reasons like the company or other shareholders cause financial damage to the exiting shareholder or are in the way of the shareholder to fulfill his right to exit.

Consequences of the shareholder’s exit from the LTD company

When a shareholder exits the company, his business share is no longer valid and all connected rights or obligations cease to exist.

Within three months from the shareholder’s exit, the remaining shareholders have to:

  • Reach a decision on lowering the founding capital for the size of the share of the leaving shareholder,
  • Or proportionally take over the existing shareholder’s shares or increase their own existing shares in the company to the amount to reach the same height of the founding capital as it was before the existing shareholder left.

Payout of the estimated value of the share

The shareholder who existed the company has the right to a payout of the estimated value of the business share.

The company has to payout the share no later than within years from the exit of the shareholder. He is also entitled to payout of interest. If the shareholder has put in material items instead of cash deposit of the founding capital, he can also get the items that he put into the company returned instead of the cash payout. But the condition with this possibility is that the worth of those items cannot surpass the estimated value of their share. Should the existing shareholder request this type of refund, he can only due so after three months from the day of his exit.

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