Resignation and exclusion of shareholders in Limited Liability Companies

The new Companies and Associations Code (hereafter the “Code”) has introduced a major novelty in terms of the “mobility” of shareholders of limited liability companies (hereafter the “LLC”).

The resignation and exclusion of a shareholder, at the expense of the company’s assets, is now possible in an LLC, as was already the case in the cooperative company.

However, the provisions relating to resignations and exclusions are suppletive for the LLC. They must therefore be explicitly included in the articles of association, whereas in the case of a cooperative company, resignations and exclusions are an integral part of the mandatory provisions of the Code, and the shareholders are not entitled to depart from them when drafting the articles of association.

In an LLC, a shareholder now has the right to resign and be reimbursed for the value of his/her shares under the conditions we will examine below. The LLC may also provide for a system of exclusion for ‘just cause’, decided by the general meeting, as well as resignation by law.

RESIGNATION

The articles of association of the LLC can provide that a shareholder is entitled to resign at the expense of the company’s assets.

Even if the articles of association state otherwise, the resignation of the founders will only be authorized as from the third financial year following the incorporation of the company.

Unless otherwise provided for in the articles of association:

  • shareholders may only resign during the first six months of the financial year;
  • the shareholder must resign for all his/her shares, which will be cancelled;
  • the resignation will take effect on the last day of the sixth month of the financial year, and the value of the shares must be paid no later than the following month;
  • the amount to be paid to the resigning shareholder shall be equal to the amount actually paid up and not yet repaid for his/her shares, without however being higher than the amount of the net asset value of these shares as it results from the last approved annual accounts.

The amount to which the shareholder is entitled at the time of his/her resignation constitutes a ‘distribution’ within the meaning of the Code and can therefore only be effectively paid if the double distribution test (solvency and liquidity) is successful, it being however specified that this distribution has priority on any further distribution.

EXCLUSION

The articles of association of an LLC may now also provide that a shareholder may be excluded for ‘just cause’ or for any other reason specified in the articles.

The reasoned proposal for exclusion, which must be drawn up by the management body, is communicated to the shareholder concerned and, after the latter has had the opportunity to comment in writing and to be heart at his/her request, the decision to exclude is made by the general meeting of shareholders.

Unless otherwise provided by the articles of association, the excluded shareholder recovers the value of his/her shares, which are cancelled.

RESIGNATION BY LAW

Finally, the articles of association may also provide that in the event of the death, bankruptcy, liquidation or prohibition of a shareholder, the latter shall be deemed to have resigned as of that date.

The shareholder or, as the case may be, his/her heirs, creditors or representatives, recover the value of his shares, without being able to cause the liquidation of the company.

The articles of association may also provide for specific conditions for becoming a shareholder and that in the event a shareholder no longer meets these conditions, he/she is deemed to have resigned as of that date, without having to follow an exclusion procedure.

For any further information, do not hesitate to contact Pierre Willemart (pw@vancutsem.be) or Elisabeth Bousmar (ebr@vancutsem.be).