The Supreme Court creates new practice on the issue of the exclusion of a participant from a limited liability company even if his share is 50% and more

25 November 2024

We will tell you about the new practice, which is increasingly being created by the Supreme Court of the Russian Federation, concerning the exclusion from a limited liability company of participants with a larger share of the authorized capital within the framework of corporate disputes.

According to the Decision of the Supreme Court of the Russian Federation of 25.01.2022 in case No. A76-41125/2019, the Participant of the LLC did not prove that his actions are aimed at achieving the goals of the creation of the LLC.

In a long corporate conflict, the court must find out which of the LLC participants maintain the original objectives of its activities, and who prevents the company from carrying out activities, in accordance with the objectives of its creation. In this case, there were two founders with equal shares, one financing a project and the other managing the project. When the manager stopped to carry on the activities of the LLC, his colleague filed a lawsuit. Three instances refused to make a decision on this dispute, and the Supreme Court of the Russian Federation ruled: “a participant against whom an exclusion proceeding has been initiated must provide evidence that he is acting in the interests of the company or that the activity is impossible at all. Otherwise, the exclusion claims should be satisfied.”

In addition, there are other grounds for excluding a participant with half a share or more from an LLC, namely:

1. Actions at general meetings against the interest and purpose of the LLC.

For example, when a participant prevents the replacement of a director who leased out land on terms unfavorable to the company. The Supreme Court of the Russian Federation upheld the courts' decision that such actions of a participant were detrimental to the company and excluded it.

2. Loss of confidence to the participant in LLC.

A participant in an LLC contributed land plots as a capital contribution to another LLC, which reduced their value. Thus, the participant lost confidence in the LLC. The Supreme Court considered this to be sufficient grounds for excluding the participant from the LLC, so it sent the case for a new review.

3. Inactivity of a participant in the LLC resulted in an inability to achieve the goals set for the Company.

The participants in the LLC were spouses. After the divorce, the wife received a 50% share in the LLC, but she did not participate in the activities of the Company and did not wish to do so. The court stated that she should be excluded from the number of LLC participants, because inactivity of a participant leads to a threat of exclusion of the company from the Unified State Register of Legal Entities, respectively, it is not in the interests of the company.

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