Supreme Court: after the liquidation of an LLC participant without successors, their share is not counted when determining voting results

In the event of the liquidation of an LLC participant (a legal entity without successors), the competence of the LLC general meeting is determined without taking into account the share of the liquidated participant, and the votes of the remaining participants constitute 100%. By analogy of the law (Article 23 of the Law of Ukraine "On Limited and Additional Liability Companies", Article 8 of the Civil Code of Ukraine), a decision to terminate the powers of the executive body made by the sole active participant with a minority share is lawful and cannot be declared invalid due to insufficient votes.

This conclusion was made by the panel of judges of the Cassation Commercial Court within the Supreme Court in case No. 910/5717/23.

Case circumstances

The case concerns the challenge (by the former LLC director) of disputed decisions of the general meeting of participants, according to which he was dismissed and a new manager appointed. The dispute concerns the legitimacy of the LLC general meeting because, as the plaintiff argued, the company that owned 99.999% of the LLC's authorized capital was liquidated, and therefore all decisions made at the general meeting of participants are invalid.

The Commercial Court dismissed the claim, reasoning that after the liquidation of the majority participant, their share is not counted, and the vote of the sole participant of the company (0.001%) automatically constitutes 100% for decisions on the dismissal of the director. The appellate court overturned the first instance court's decision and issued a new ruling to satisfy the claim.

Decision of the Cassation Commercial Court of the Supreme Court

Upon review, the Cassation Commercial Court of the Supreme Court noted that the Law of Ukraine "On Limited and Additional Liability Companies" establishes a mandatory procedure for determining the number of votes required for decisions by the general meeting and does not allow the charter to establish a different approach to quorum determination if it contradicts the law. In case of conflict between the charter and the law, the provisions of the law apply.

To resolve this legal uncertainty, the application of analogy of the law (Article 8 of the Civil Code of Ukraine) is justified. By analogy, the rule of the same Article 23 of the Law applies, which states that "such a decision is made without counting the votes of the participant who is excluded." In the event of liquidation of the majority participant (removal from the register) without succession, their legal capacity terminates, so their vote cannot be counted. This approach corresponds to the general principles of reasonableness and fairness of civil law, considering that the active participant, even holding a minority share (0.001% as in the case), has a legally defined right to participate in the management of the legal entity. Meanwhile, the director is an executive body who performs current management and is not a bearer of corporate rights to manage the company or a subject of corporate relations.

The Cassation Commercial Court of the Supreme Court agreed with the first instance court's conclusion that the competence of the general meeting of participants is determined without considering the share in the authorized capital that belonged to the liquidated participant, and the vote of the other participant(s) constitutes 100%.

The Cassation Commercial Court of the Supreme Court satisfied the cassation appeal, canceled the appellate court's ruling, and left the first instance court's decision unchanged.

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