Excluding a shareholder from the company - work with a lawyer
In the life of a company, situations may arise in which a shareholder has to be excluded. Whether it is a failure to perform assumed obligations, involvement in unauthorised activities or other circumstances provided for by law, excluding a shareholder is a complex process that calls for a rigorous legal approach. Working with a specialist lawyer is essential in order to navigate this process effectively and ensure that every legal requirement is met.
This article aims to give you a detailed look at the process of excluding a shareholder under Romanian law. We will examine the grounds for exclusion, the legal steps involved and the rights and obligations of the excluded shareholder. Whatever your particular situation, specialist legal advice is the key to protecting the company's interests and securing a lawful and efficient transition.
On what grounds can you exclude a shareholder from the company?
The exclusion of a shareholder from a company is strictly regulated by the legislation in force, in particular by Articles 222-226 of Legea societăților comerciale (the Companies Law). The grounds on which a shareholder may be excluded are clearly defined so as to protect the integrity and proper functioning of the company. The main grounds for deciding to exclude a shareholder are as follows:
- Failure to pay in the capital contribution
One of the fundamental grounds for excluding a shareholder is the failure to pay in the contribution to the share capital which that shareholder undertook to make under the company's articles of association. Under Article 222 (1) (a), where a shareholder has been given formal notice of default and still fails to perform the obligation to make the promised contribution, the company or the other shareholders may seek that shareholder's exclusion.
- Bankruptcy or legal incapacity
Under Article 222 (1) (b), a shareholder with unlimited liability may be excluded if they become bankrupt or legally incapable. Such situations may adversely affect the company's operation and financial stability, which is why the law provides for the possibility of exclusion in order to protect the interests of the company and of the other shareholders.
- Unauthorised involvement in the management of the company
A further ground for excluding a shareholder, set out in Article 222 (1) (c), is that shareholder's involvement in the management of the company without being entitled to do so, or breach of the statutory provisions on management. Such conduct may lead to unauthorised decisions capable of jeopardising the company's business.
- Fraud or misuse of the company signature and share capital
A managing shareholder may be excluded if they commit fraud to the detriment of the company or use the company signature or the share capital for their own benefit or for the benefit of others, under Article 222 (1) (d). Such conduct amounts to a serious breach of the standards of conduct and may justify excluding the shareholder in order to protect the company.
- Exclusion of general partners
The provisions of Article 222 also apply to general partners in partnerships limited by shares, under Article 222 (2). This means that, in such companies too, a general partner may be excluded on the same grounds as those laid down by law.
What are the steps for excluding a shareholder from the company?
The exclusion of a shareholder from a company is a complex legal process which requires a clearly defined sequence of steps to be followed in order to ensure that the procedure is lawful and fair. Under Articles 222-226 of the Companies Law, the essential steps for excluding a shareholder are as follows:
- Identifying the ground for exclusion
The first step is to identify clearly the ground for exclusion, in accordance with Article 222. The grounds may include failure to pay in the capital contribution, bankruptcy, legal incapacity, unauthorised involvement in the management of the company, fraud or misuse of the company signature and share capital.
- Commencing the exclusion procedure
Exclusion may be sought either by the company or by any of the shareholders. It is essential to have the supporting documentation needed to substantiate the grounds for exclusion.
- The application for exclusion before the court
Under Article 223 (1), exclusion is ordered by court judgment. The application must be filed with the competent tribunal and, where exclusion is sought by a shareholder, both the company and the defendant shareholder must be summoned, in accordance with Article 223 (2).
- Hearing of the application and the court's judgment
The tribunal will examine the application and the evidence submitted and, if the grounds are made out, will deliver a judgment ordering exclusion. Under Article 223 (3), the court will also rule on the structure of the other shareholders' holdings in the share capital.
- Registration of the exclusion judgment
The court judgment ordering exclusion becomes irrevocable and must be filed with the trade register office within 15 days for registration, in accordance with Article 223 (4). The operative part of the judgment is also published in Monitorul Oficial al României, Partea a IV-a (the Official Gazette of Romania, Part IV), at the company's request.
- Settling the financial and asset-related aspects
The excluded shareholder is entitled to profits and is liable for losses up to the day of exclusion, in accordance with Article 224 (1). The excluded shareholder's rights in respect of their share of the company's assets are converted into a sum of money representing the value of that share, in accordance with Article 224 (2).
- Meeting obligations towards third parties
The excluded shareholder remains liable to third parties for transactions carried out by the company until the exclusion judgment becomes final, in accordance with Article 225 (1). Where transactions are still under way, the shareholder must bear their consequences and may not withdraw the share due to them until those transactions have been completed, in accordance with Article 225 (2).
- Withdrawal of a shareholder
Where a shareholder wishes to withdraw from the company, this is possible under certain conditions, pursuant to Art. 226. Withdrawal may be provided for in the articles of association, may take place with the consent of all shareholders or, in the absence of specific provisions, on well-founded grounds, by decision of the tribunal.
How can a lawyer help you through this process?
Excluding a shareholder from a company is a delicate and complex legal procedure requiring a thorough understanding of the legislation and of commercial practice. Working with a lawyer specialising in corporate law offers numerous advantages and ensures the process is managed efficiently. Here is how a lawyer can assist you in this context:
- Assessment of the situation and legal advice
A lawyer can assess the company's particular situation and provide appropriate legal advice, explaining the rights and obligations of all parties involved. The lawyer can help identify legitimate grounds for excluding the shareholder, in accordance with the applicable legal provisions.
- Preparation of the necessary documentation
Complete and accurate documentation is essential in order to commence exclusion proceedings. A lawyer can help you prepare all the necessary documents, including the application for exclusion, the supporting evidence and any other relevant instruments substantiating the case before the court.
- Representation before the courts
One of a lawyer's most important roles is representation before the courts. The lawyer will file the application for exclusion, attend all hearings and put forward the arguments and evidence needed to support the shareholder's exclusion. The lawyer will also ensure that all statutory and procedural deadlines are observed.
- Managing communication with the parties involved
Communication with the other shareholders and with the defendant shareholder can be difficult and tense. A lawyer can mediate these discussions, ensuring that all communications are clear, accurate and compliant with the law. The lawyer can facilitate negotiations and help avoid unnecessary conflict.
- Post-exclusion assistance
Once the exclusion judgment has been obtained, the lawyer will help you complete all the formalities required to register the judgment with the trade register and to publish the operative part of the judgment in the Monitorul Oficial (Official Gazette). The lawyer can also advise you on the financial and patrimonial aspects relating to the shareholder's exclusion.
- Protecting the company's interests
Throughout the process, the lawyer's primary objective will be to protect the company's interests, ensuring that the rights of all parties involved are respected and taking all necessary steps to prevent any prejudice to the company.
- Advice in the event of withdrawal
Where a shareholder wishes to withdraw from the company, the lawyer can provide advice and legal assistance to ensure that the withdrawal is carried out in accordance with the law and with the articles of association. The lawyer can assist in negotiating the terms of the withdrawal and in determining the value of the withdrawing shareholder's shares.
The lawyers at Buju, Stanciu & Asociații are ready to provide the advice and support you need. With a dedicated and tailored approach, our team will guide you step by step through every stage of the process, protecting your interests and ensuring that all actions comply with the legislation in force!