Exclusion of a partner from a limited liability company – legal bases (part 1)

Publication / 08.07.2024

The exclusion of a partner from the company should be regarded as a kind of last resort in relations between partners. Such a demand can only be decided by the court at the request of all other partners, if the shares of the partners demanding exclusion constitute more than half of the share capital. The shares of the excluded partner must be taken over by the partners or third parties. The takeover price is determined by the court based on the actual value on the date of the lawsuit being served.

In the course of a lawsuit for the exclusion of a shareholder, it is necessary to prove the existence of so-called valid reasons concerning the shareholder in question, i.e. the shareholder to be excluded. Valid reasons may be, for example, the use of information acquired in the exercise of the right of control for competitive activities, failure to fulfill the imposed obligation to make surcharges, failure to perform repeated non-monetary services stipulated in the articles of association, or the inability to interact with a partner without conflict, resulting from interpersonal relations within the company. The grounds for exclusion may be acting to the company’s detriment, a partner’s failure to implement resolutions, undertaking competitive activities, abusing the right of individual control, violating the principles of loyalty to the company, failure to cooperate in the adoption of resolutions, illness, etc.

In any case, however, it must be borne in mind that a valid reason is such a circumstance that makes it possible to conclude that the company’s business in its existing personnel composition will be highly impeded or even impossible. In other words, in a possible exclusion lawsuit, it would have to be shown that the circumstance that allows the exclusion of a shareholder is also one that makes it significantly difficult or impossible for the company to conduct its business. Thus, it would not be sufficient to show that there are conflicts between the partners requesting exclusion and the excluded partner. It must then be proven that these conflicts significantly destabilize the company, making it significantly difficult or impossible for the company to conduct its business.

It should also be borne in mind that the described demand must not be treated as a way to get rid of an inconvenient shareholder from the company. In a possible trial, the court will evaluate the demand for exclusion from this angle as well.