Shareholder withdrawal from LTD – reasons and methods

Shareholder withdrawal from LTD - reasons and methods

Withdrawal of a shareholder

The withdrawal of a shareholder from a limited liability company (Ltd) can be voluntary, but it can also be in the form of expulsion. Therefore, how can you arrange the withdrawal of a member of a Ltd? Usually, there can be a lot of reasons that can lead to a shareholder withdrawal. However, one cannot simply withdraw.

Establishment of an Ltd to carry out commercial activities

In essence, the Ltd can have more than a single founder. Therefore, more founders who wish to carry out business activities can open it. Moreover, the members have specific rights and obligations, including the right to manage the Ltd and to receive profits. However, they also have obligations. They include compliance with Ltd’s resolutions, and act in company’s best interests. Apart from that, what if a member decides to withdraw as a member of the Ltd? Does this interest you? Do you want to know about shareholder withdrawal? Maybe you want to know the difference between shareholder and representative?  Don’t wait! Just call us on +386 40 530 718 (Viber/WhatsApp)! Our experts will be happy to help you!

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Two ways for a shareholder to leave an Ltd

The shareholder has a voluntary status in the Ltd. What does this mean? This means that a partner can leave the Ltd at any time. In all cases, one also must follow certain laws and the articles of association. For instance, the Companies Act (ZGD-1) provides two forms of withdrawal. Firstly, withdrawal on the basis of a right under the articles of association. Secondly, withdrawal on the basis of an action by the shareholder. However, it is also possible to expel a shareholder from the company. When can this happen? This can happen in cases if one member seriously breaches the rules of the articles of association or damages the Ltd. In that case, there are two possible forms of expulsion:

  • expulsion of a shareholder on the basis of a procedure laid down in the articles of association; or
  • expulsion of a shareholder on the basis of an action for expulsion by another member.

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Shareholder withdrawal – the conditions, procedure and consequences

Moreover, the terms, procedure and consequences of a shareholder’s withdrawal (or expulsion) can be set out in the articles of association. However, a member may also seek to resign from the Ltd by bringing an action against the company if there are good reasons. For instance, if one causes damage to a member, if the Ltd or the members block the exercise of member’s right to resign etc. What is more, the expulsion of a member may also be by action if there are good reasons. In particular, if one causes damage to the Ltd or other member, if one acts contrary to the resolutions, or blocks the function of the Ltd or the work of other members. The worst case is if the member breaks the contract. Does your company have problems with shareholder withdrawal? Contact DATA! We have a team of experts that can assist you!

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Shareholder withdrawal, shareholding and other rights

To emphasize, after a shareholder withdrawal or expulsion, he/she loses all rights and obligations to that share. In other words, the shareholder no longer holds the shares. Therefore, this suggests certain obligations of the other members. They must adopt a resolution within three months that reduces the share capital. After withdrawal, the shareholder can request for the payment of an estimate value of his/her shareholding at the time of withdrawal. The Ltd pays this in three years of withdrawal. That includes interest as well. In case the shareholder makes a contribution in kind, he can in lieu of payment demand the return of assets and rights not earlier than three months after the exit.

Does this interest you? Do you want to know more about the topic of shareholder withdrawal? Contact us and schedule a consultation with our legal advisors! You can call us on +386 40 530 718 (Viber/WhatsApp) or email as at Get in touch with us! Last but not least, follow our Facebook profile to get the latest updates on our work!

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