How to leave position of director of LLC without decision of the general meeting?

This material will be useful for directors who lost connection with members of general meetings but who need that their personal data is removed from the Unified state register. In the chapter Conclusion, you will find a step-by-step instruction concerning actions that need to be done for that.

Status of Director as an executive body of a limited liability company

According to the Commercial Code and Tax Code of Ukraine currently in force, the whole responsibility for activity of a limited liability company is laid on the corresponding executive body that is authorized by its founders/shareholders.

In particular, it is defined by the Commercial Code that for enterprise management, the owners of enterprise (or their authorized bodies or a supervisory board, in case it was created) shall appoint a head of such enterprise. The head of the enterprise, like the members of the collective executive body, have a status of an official [1].

In turn, the Commercial Code provides that tax payers (including legal entities – LLCs) and/or their officials [2] are responsible for committing offences defined by the current law. 

So, in case of a limited liability company, a responsible official is the head of its executive body, in particular in most cases, the Director (an individual body), or the Director General (the head of directorate as a collective body). Both appointing and dismissal of the Director is referred by the law to the competence of LLC founders/shareholders.

Legislative regulation of labor relations of the Director with the LLC

The constitution of Ukraine guarantees for everybody, including a LLC Director, the right for labor which provides his following elements

• free choice of work;
• person’s free agreeing for work;
• prohibition concerning forced labor [3].

Based on the rules of the current labor law, every worker is given the right for dissolution of the undated labor agreement made with him, provided that the owner of enterprise or his authorized body is notified 2 weeks before [4].

However, in the situation with the LLC Director, his submitting of statement about his voluntary redundancy and signing after 2 weeks the order of dismissal from the Director of the LLC based on Article 28 of the Labor Code is not sufficient for final termination of labor relations with the enterprise. In this case some discrepancy both with other provision of the law and with actual circumstances of the case arises.

Thus, the current Commercial Law refers the question of selecting/appointing and withdrawal/dismissal of Director of an LLC to the competence of the general meeting of its (LLC’s) founders/ shareholders [5]. Besides that, taking into consideration the specific nature of labor relations of Director with LLC, legally such labor relations can be considered as terminated only after the corresponding information about Director of LLC is excluded from the Unified state register. The reason for that registration action is a decision of the LLC’s authorized body about corresponding changes (in this case – about change of Director).

But, taking into consideration the situation when the LLC’s shareholders are not interested in keeping on its activity, do not summon and do not conduct the general meeting and there is no connection with shareholders – in fact the hired Director is in a no-win situation. Because as of today there is no legally regulated procedure for his dismissal without participation of LLC’s shareholders.

Applying to the court

Having regard to the above-mentioned legal collisions, as the only possible legal way to solve this situation, we consider LLC’ Director’s applying to the court with a claim about dissolution of the labor agreement concluded with him and obligation of the corresponding registration authority to make changes in the Unified state register by means of excluding the information about the person of LLC’s head and signee.

It should be noted that as of today, there have been positive legal precedents for the plaintiff (the LLC’s Director), (for example – cases No. 673/1463/17, No. 639/5303/17, No. 490/7699/17).

Conclusion

Having regard to the above, the algorithm of actions at dismissing the LLC’s Director without decision of the LLC’s shareholders’ general meeting is as follows:

1. Director’s submitting, according to Article 38 of the Labor Code, an application about dismissing from the current position by his own volition – by means of sending it to the LLC’s registered address, legal or actual address of each of LLC’s shareholders;
2. Sending to the LLC’s shareholders a notification about summoning and conducting the general meeting (with inclusion of the question about change of Director in the agenda).
3. In case there are no responses from the shareholders, filing a claim to the court about dissolution of the labor agreement concluded with the Director, and obligation of the corresponding registration authority to make changes to the Unified state register by means of exclusion of information about the person as the LLC’s head and signee.

The lawyers of the “Legal Assistance” Company will help you prepare all the documents necessary for dismissal of LLC’s Director without decision of the general meeting, and exclude from the Unified state register the information about him as a head and signee.

Normative regulation:

[1] Article 65 of the Commercial Code of Ukraine.

[2] Clause 110.1 of Article 110 of the Tax Code of Ukraine.

[3] Article 43 of the Constitution of Ukraine.

[4] Article 48 of the Code of Laws on Labor of Ukraine.

[5] Law of Ukraine “About Limited Liability Companies and Additional Liability Companies”.