HOW TO: settle relationships upon leaving a partnerLeaving and being removed from an LLC – what rights do I have and how can I protect them?

1. Introduction.
The Bulgarian version of the LLC which we will talk about (ООД) is a creation of German legal doctrine which aims to serve as the ideal company form for SMEs. In this article we will focus on some of the main aspects of the legal relationship between the LLC and the member. More specifically: the termination of the relationship and its consequences.

2. Leaving the LLC
We will first analyze the act of leaving. What does it include? What are the legal steps that must be taken?
2.1. Leaving with a unilateral notice (Art. 125, par. 2 of the Commercial Act).
This is the situation in which a member exercises his or her right to voluntarily terminate the legal relationship via unilateral notice. Every member may do so by their own free will pursuant to Art. 125, par. 2 of the CA. The notice must be made in writing. There is also a 3-month term. The articles of association may provide for a different term or a more sophisticated form to express one’s desire to leave (for example, by introducing a requirement that it be confirmed by a notary). Every member has this right. The consent of the other members is not required. After the term expires, you will automatically cease to be a member. You do not have to dispose of your share in order to be able to leave.
2.2. Leaving via a request.
The second possibility for leaving voluntarily is by a request which is directed at the CEO. When using this legal avenue the member is obliged to first dispose of his shares pursuant to Art. 129, par. 2 of the CA, that is by transferring them to another member or to a third party. The way to do this is outlined in Art. 129, par. 1 of the CA. In principle the member can transfer his or her shares to other members freely, but he or she can transfer them to third parties according to specific rules set out in the articles of association and the law. After the transfer is successful, the company has no further obligations towards the member.

3. Being removed from an LLC.
Removing a member is another way to terminate one’s membership at an LLC (Art. 125, par. 1.2 of the CA). The removal of a member differs from the voluntary leaving in that it doesn’t depend on the removed member’s will. You can be excluded from an LLC in 2 scenarios: by not contributing your share (Art. 126, par. 1 of the CA) and by not implementing a decision of the General Meeting (GM) (Art. 126, par. 3.2 of the CA). In both instances the member cannot be directly removed. In the first instance the law refers to a “term” which the GM must determine and which cannot be shorter than 1 month. In the second instance it refers to a “written warning”. When should I be informed of my removal? The courts hold that in the first instance the notice is given after the GM’s decision, whereas in the second one, since the law requires that there be a “warning”, the notice has to be given before the GM.

4. Protecting membership rights in the event of a decision by the GM.
The GM’s decision will be unlawful if it is taken in contradiction to the law or the articles of association. Since these decisions affect all members, they all have the right to challenge their legality before a court (Art. 74 of the CA). Where the law speaks of a breach, this refers both to the procedural rules regarding the GM’s convening and work, as well to as the rules which guarantee a real possibility for the member to exercise his or her right.
A claim can be brought against the LLC before the court where the seat of the company is. If the member was present at the meeting, the claim has to be brought within a 14 days. If not, the term is 14 days since learning about the decision, but no later than 3 months after the GM. In the case of a member being removed for failure to implement a GM decision, the warning has to contain information regarding the breaches that have been committed so that the member can adequately organize his or her defense. If it does not have this information, the warning will not be considered validly given and, as such, the removal will be deemed unlawful.

If you have any question regarding your rights as member of an LLC, do not hesitate to contact us – your online legal consultant!

Vladimir Slavov

1Legal.Net Blog © 2019

Materials published on this blog are copyrighted. No part of them can be copied or used without the express permission of the author.
Tags: HOW TO?