The difference between leaving an LLC and selling a part: what to choose?

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In our practice, we have repeatedly encountered the fact that a member of an LLC, for one reason or another, wants to leave, or rather to withdraw from a company. It should be said that there are several options how one can get rid of his/her membership interest in an LLC. Today we will discuss this issue using the example of a case from our practice.

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The core of the case: Assistance to the Client-debtor in withdrawing from the Ukrainian LLC

In 2019, we were contacted by a Client, the UK resident - the owner of 51% of the authorized share capital, who wanted to withdraw from the LLC, as he was no longer interested in it.

Such procedure is quite possible today, and even has several options for development:

  • A member may voluntarily withdraw from the company;
  • A member has the right to sell its membership interest in the authorized share capital, and thus withdraw from the company. 

Both options have their own peculiarities and pitfalls. Having analyzed the specific case of our Client, we determined that the most suitable option for him would be to sell his membership interest, because:

  • In order to voluntarily withdraw from the LLC, a member must have less than 50% of the authorized share capital. 
  • If the member has more than 50% of the authorized share capital (as it was in our Client’s case) - he will need the consent of the other members of the LLC to withdraw from the company. In such a case, he can spend extra time waiting for the decision to be made (up to one month from the date of the application for withdrawal from the LLC) and for the company to pay out his membership interest (up to one year from the date when the company was notified of the member’s withdrawal).

At the same time, when selling your membership interest, the member must only inform the other founders of the company about such a decision, and if they are not interested in buying the membership interest - he/she may sell it to a third party on the same terms (from the 31st day from the date of receipt of notification by the founding members of the LLC).

Read also: How To Make Complex Changes To The LLC?

After we picked a side, we faced the following problem: our Client was listed on the Registry Of Debtors. Unfortunately, the presence of debt can cause certain difficulties not only when selling your membership interest, but also when simply owning it. 

Our team of lawyers found a way to find out and settle this problem without burdening the Client with all the nuances of its solution:

  • We remotely contacted the Dnipropetrovsk enforcement service and found out what the debt was and where it came from;
  • We specified what actions should be taken to address this problem in the most effective way; 
  • We accelerated the procedure of the Client’s withdrawal from the Registry of Debtors. 

After all the problem aspects have been settled for the sale of the Client’s membership interest, we provided legal support of sale and purchase of a membership interest in the authorized share capital.

If you want to withdraw from the Ukrainian LLC and do not know which way to go, don’t hesitate to call us. We will consider all possible options and take care of a successful withdrawal from the company.

Publication date: 27/05/2020

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