The limited liability company (LLC) is a "product" of German legal thought. Its first regulation appeared in 1892 with the German Limited Liability Company Act /GmbH Gesetz/. This form of company has proved to be the most preferred legal form in most European countries including Bulgaria, where the vast majority of privately owned or mixed-ownership start-ups and companies with foreign participation choose the LLC form.
After successfully launching a new business clad in the organizational form of an LLC and building a profitable corporate reputation, often the relationships between the partners in the company can deteriorate and insurmountable conflicts arise, which inevitably affects the activities of the company. During such a development, the exclusion of partners may occur.
The legal grounds for the exclusion of a partner are contained in the provision of Art. 3 of the Trade Act. A partner may be excluded both for non-fulfilment of his material obligations - obligation to contribute (Art. 121 and Art. 126, para. 1-2), and for violation of his non-material obligations - to cooperate in the company's activities, to fulfil the decisions of the general meeting, activity in the interest of the company.
The expulsion of a partner shall take place in the framework of an out-of-court procedure. The competent body of the company which may take a decision on the expulsion of a partner is the general assembly of the Ltd - art. 137, para. 1, point 2 of the Trade Act in conjunction with art. 126, par. 3 of the Trade Act. The decision shall be taken by a majority of ¾ of the capital (the articles of association may provide for a larger majority) and the excluded partner shall not vote.
A possible legal defence available to the excluded shareholder is the possibility to file a claim under Article 74 of the Trade Law for the annulment of the decision of the general assembly, when it contradicts imperative norms of the law or the constituent act, i.e. there are no grounds for his exclusion or the procedure for taking the decision suffers from defects. The action shall be brought before the district court of the company's registered office within 14 days of the day of the meeting where the claimant was present or where he was duly summoned, and in other cases within 14 days of becoming aware but not later than 3 months from the day of the general meeting. It should be noted that this period is time-limited, which means that if it is not complied with, the court will not hear the claim of the person seeking protection.
In the imperative norm of Art. 1 of the Trade Law stipulates the requirements to be met by the invitation to convene the general assembly of the members of the limited liability company, namely, that it must be in writing, that it must state the agenda and that it must be received by each member at least 7 days before the date of the meeting, unless otherwise provided in the articles of association. In the provision of art. 139, par. 1 of the Trade Law does not regulate the method of serving the invitation to the general meeting, therefore, the case law accepts that the service may be made in various ways - by notarial invitation, by mail, through a company licensed to provide postal or courier services, through a private bailiff, the discretion to choose such a bailiff being left to the company itself. However, where the shareholders have provided in the articles of association for a particular method of sending/delivery of the summons, that method shall take precedence over all other possible methods of service. In its case law, the Supreme Court of Cassation has consistently and consistently adhered to this opinion.
A particularly important requirement provided for in the norm of Art, par. 3 of the Commercial Code, which should be complied with in the exclusion procedure is issuing a written warning to the partner. The warning may be substantiated in the invitation, reproduced in the record of a previous General Assembly meeting or may be contained in a separate document. The purpose of the written warning is to inform the partner of the existence of the offences found in relation to the company's affairs, and to give him the opportunity to prepare for the general meeting, to present arguments against the offences reported to him, and to correct his conduct if the offence permits.
The expulsion of a partner is the most severe penalty and the ultimate sanction against the conduct of the expelled partner, therefore it should be adequate to the offence committed. The warning should state the grounds for expulsion under points 1 to 4 of Article 126, par. 3 of the Trade law. The existence of a ground for exclusion must be assessed specifically. In view of this, it must precise and detailed It should not the action or inaction of the partner, the nature of the illegality of his conduct, where, when and how it happened, what are the provisions of the Trade law or the company contract that have been violated, as well as what are the specific adverse consequences of these actions. Failure to comply with these requirements shall be sufficient grounds to annul the decision of the General Meeting to expel the shareholder.
This article is for informational purposes only and does not constitute a legal opinion or legal advice. If you require any assistance or further information in relation to the matters discussed, you may contact us at. + 359 897 977 338 / + 359 876 267 112 or through any of the other contact channels of Vatev & Partners.