Procedure for Excluding a Member from a Limited Liability Company

The Civil Code of Ukraine in part 2 of article 100 provides that a member of a company may be excluded from the company in cases and in the manner established by law. This was reminded by the State Registration Department of the Khmelnytskyi Interregional Department of the Ministry of Justice.

The Law of Ukraine "On Limited and Additional Liability Companies" (hereinafter – the Law) defines an exhaustive list of cases in which the general meeting may decide to exclude a member:

I. Delay by a member in contributing the contribution or part thereof within the additional period granted to repay the debt, which is established by the executive body or the charter, but cannot exceed 30 days (parts 1 and 2 of article 15 of the Law).

This ground cannot be applied by the company after increasing the size of the authorized capital due to additional contributions from members or third parties, since such an increase is allowed only after all members have fully made their contributions after the company’s establishment (part 1 of article 16 of the Law).

Moreover, in such a case, the general meeting’s decision approves the results of the additional contributions and the sizes of shares considering the actually made contributions (part 10 of article 18 of the Law).

II. In the event of the death, declaration by the court as missing or deceased of a member – an individual, or termination of a member – a legal entity, whose share in the company’s authorized capital is less than 50 percent, and if within one year from the end of the inheritance acceptance period, his heirs (successors) have not submitted an application to join the company.

In this case, the decision is made without considering the votes of the member being excluded (part 2 of article 23 of the Law).

That is, a member – a legal entity that has been terminated – can also be excluded.

However, we remind that if a legal entity is a founder of other legal entities, this is a ground for refusal of state registration of its termination due to liquidation.

The decision to exclude a member from the company cannot be made by polling (paragraph 6, part 2 of article 36 of the Law).

The Law of Ukraine "On State Registration of Legal Entities, Individual Entrepreneurs and Public Formations" (hereinafter – the Registration Law) in part 5 of article 17 establishes the list of necessary documents:

- application for state registration of changes (form 2);

- document confirming payment of the administrative fee;

- decision of the general meeting of members on the exclusion of a member from the company, the authenticity of signatures on which is notarized with mandatory use of special notarized document forms.

If in the specified cases the decision is made without considering the votes of members, an additional document confirming the occurrence of certain circumstances (for example, a death certificate) is submitted.

The applicant is the head or representative of the legal entity, whose information is contained in the Unified State Register, or a person based on a notarized power of attorney (paragraph 8, part 1 of article 1, part 2 of article 14 of the Registration Law).

It is emphasized that according to the requirements of part 3 of article 25 of the Registration Law, when excluding a member, the state registrar must simultaneously enter a record about the reduction of the company’s authorized capital by the size of the corresponding share in the authorized capital.

Thus, the share of the excluded member does not remain in the company and is not distributed among other members.

No later than 30 days from the date of the general meeting’s decision to exclude, the company is obliged to notify the former member (his heir, successor) of the value of his share and pay it out (part 13 of article 24 of the Law).

Exclusion of a member from the company on other grounds (for example, failure to properly fulfill duties or obstruction of the company’s activities) is not provided for by current legislation and therefore can only be carried out through court proceedings.

Subscribe to our Telegram channel t.me/sudua and to Google News SUD.UA, as well as to our VIBER and WhatsApp, page on Facebook and on Instagram to stay informed about the most important events.