Exclusion of a shareholder from a limited liability company

Grounds for excluding a shareholder from a limited liability company by the court

Pursuant to the provisions of Polish law, for important reasons concerning a given shareholder, the court may order his exclusion from the company at the request of all other shareholders, if the shares of the shareholders requesting exclusion constitute more than half of the share capital.

The articles of association may grant the right to bring the above action to court also to a smaller number of shareholders, if their shares account for more than half of the share capital. In this case, all other shareholders of the company should be sued.

The court may exclude a shareholder from the company only for important reason. There is an important reason if, due to the shareholder’s person or his conduct, the achievement of the company’s purpose is impossible or seriously threatened, and therefore the shareholder’s continued participation in the company is not acceptable.

The jurisprudence and literature indicate, among others, the following as examples of important reason for exclusion of a shareholder:

• a shareholder undertaking a competitive activity,
• shareholder’ disloyalty,
• persistent failure of a shareholder to appear at shareholders’ meetings,
• personal characteristics of the shareholder, indicating the inability to cooperate without conflicts within the company,
• untrue certification or misrepresentation by a shareholder,
• the shareholder’s failure to perform the agreement or resolutions applicable to the shareholders,
• conduct contrary to the interests of the company,
• abuse of the right to control the company.

Acquisition of shares of an excluded shareholder. Price for shares in a limited liability company

The shares of a shareholder excluded by the court must be taken over by the remaining shareholders of the company or third parties.

The acquisition price is determined by the court on the basis of the actual value on the date of service of the lawsuit.

In its judgment, the court sets a deadline within which the share purchase price plus interest is to be paid to the excluded shareholder, counting from the date of delivery of the lawsuit. If within this time the amount has not been paid or deposited with the court, the decision to exclude the shareholder becomes ineffective.

If the court judgment on the exclusion of a shareholder has become ineffective due to the failure to pay the price on time, the shareholder who has been ineffectively excluded has the right to demand compensation from the shareholders suing him for the damage.

Consequences of exclusion of a shareholder from a limited liability company

A shareholder of a limited liability company, who has been legally excluded from the company by the court is deemed to be excluded from the company from the date of delivery of the lawsuit, provided that the price for his shares has been paid.

However, if the excluded shareholder participated in activities within the company after the date of service of the lawsuit, such activities remain valid.

Securing the claim

Lawsuit for exclusion of a shareholder of a limited liability company may be secured in such a way that the court suspends the shareholder from exercising his share rights in the company.

The security requires showing that there are important reasons for suspending the shareholder.

In the event of important reasons relating to a given shareholder, the remaining shareholders of limited liability company may file a lawsuit with the court to exclude him from the company. When ruling on the exclusion of a shareholder from a company, the court is obliged to determine the purchase price of the excluded shareholder’s shares.