Resignation of a LLC member

Resignation of a member of a limited liability company (LLC) is one of the reasons for the termination of member status of that company. So, first we need to start with what LLC is.

Limited liability company

The Law on Companies (LOC) defines LLC as a company in which one or more members have shares in the capital of the company, but, as a members of the company, they are not responsible for obligations of the company, except in the case of fulfillment the requirements for the implementation of the institute of puncturing the legal personality.

A large number of companies in Serbia are established in the form of LLC. Some of the reasons for organizing business in this form is a low minimum founding capital of only 100,00 RSD, the possibility of choosing between a single-member and a multi-member company, as well as the fact that the member is not responsible for obligations of the company with his personal property.

You can read more about the founding of the LLC on the website of Pavleski Law Law Firm in our text How to register a limited liability company in Serbia?

What are the reasons for termination of a member status in LLC?

The LOC stipulates the reasons for the termination of the membership of the LLC member taxatively, which means that only in following cases membership can be ended:

death, if the member is a person, or by deletion from the relevant register, if the member is a legal entity
act of resignation/leaving
exclusion from society
the transfer of the entire share
withdrawal and cancellation of share

This text will be based on leaving the company as the reason for termination of the member status.

U ovom tekstu ćemo se bazirati na istupanje iz društva kao razlog prestanka svojstva člana.

How to leave the LLC?

LOC dictates the following variants of resignation:

leaving without claiming compensation for the share
leaving for justified reason
leaving for justified reason due to court decision

The main difference between these types of leaving is that in the case of leaving without seeking a compensation member is not obligated to have justified or any reason to leave the company, while in other two situations a justified reason prescribed by law or the founding act is necessary.

Leaving without claiming compensation for the share

In accordance to what is said above, if the member wants to leave LLC without claiming a compensation for his share, he can do that without giving any reason for leaving and at any time. In order to leave the company, leaving member is obligated to fulfill the following conditions, cumulatively:

submission of a statement of resignation to the company
absence of debts to the company based on the unpaid contributions

The share of a member who has left the company becomes company’s property by law, which means that the company is not obligated to do anything in order to become the owner of the share.

However, leaving of the member and the acquisition of the share by the company must be registered in accordance with the Law on Procedure registrations in the Business Registers Agency (BRA) because registration of these actions has constitutive effect, which means that a member who has left the company is not its member starting from the day of registration of that fact in accordance with the law.

The following documentation is required for this type of registration:

statement of the member to the company in which is said that the member is leaving the company without seeking compensation for his share
proof that the statement is received by the company
data change registration form – required data
addition 12 form-members/shares
proof of payment of compensation in the amount of 2,800.00 RSD

Reqired forms can be find at the BRA’s website.

Leaving the company for justified reason

LOC defines the following situations in which a member of company is able to leave it:

if one or more other members or the company causes him damage by actions or omission, or if it is obvious that such damage, according to the regular course of things, will occur
if he is seriously prevented from realizing his rights in the company
if the company imposes disproportionate obligations on him

Law does not state these justified reasons for leaving in fixed manner. Just the opposite, law contains typical situations in which the member’s resignation is justified, leaving the possibility for the founding act of the company to enumerate other reasons for leaving, as well as the leaving procedure itself and the method for determining appropriate compensation for the leaving member in those situations.

However, the founding act cannot exclude in advance the right of a member to leave the company, nor can a member may waive that right in advance. The law prescribes these restrictions in order to protect members.

A member who wants to resign because of a justified reason is obligated to submit a request for resignation to the company. This request must contain the following information:

reasons for leaving
the amount claimed from the company as the compensation for the share
the period in which the compensation for the share should be paid, unless such period is determined by the founding act

Also, a member of the company may request from the company to provide him security for the payment of compensation for his share by establishing a pledge on that share which becomes property of company after his leaving. If company decides to accept this kind of request, in that case it is obligated to accept members request to leave as well.

The Assembly is obliged to make a decision on the request for resignation within 60 days from the receipt of the request, and by a simple majority vote of all the members. Majority from LOC can be changed by founding act, but only in an increasing manner.

By a decision of the Assembly, the request can be completely accepted or rejected. So, partial adoption of the request is not an option. Company is obligated to inform member about its decision, all in the after-mentioned deadline.

It should be emphasized that the company is obliged to pay the required compensation to the member who left it for justified reason, and that the right to compensation of that member is privileged in comparison to the right to profit of other members. That means that , in order to pay full compensation to ex member, company is obligated to refrain from distributing profits to its members. Also, the company is obliged to:

allocate all realized profit to reserves intended for payment of the said compensation
all assets of the company obtained through the sale of its own share (which was in property of member who left) can be used only for payments to the ex member, in order to pay him the compensation for his share

Everything that is said about the obligation of registration also applies on this variant of resignation but required documentation is slightly different. In accordance to that, the following documentation is required:

request to leave
acceptance of the request by the Assembly (decision)
data change registration form – required data
addition 12 form-members/shares
proof of payment of compensation in the amount of 2,800.00 RSD

Leaving for justified reason due to court decision

In this variant the member of the company files a lawsuit to the competent court against the company in which he requires the termination of member status of the company, due to a justified reason, and also seeks a compensation for its share. Member has this option in the following situations:

the Assembly rejects the request for the resignation of that member or
the Assembly fails to decide on the request for resignation of that member within 60 days from the day of receiving that request

The lawsuit must be filed within 6 months of finding out the reason for the leaving, but no later than 3 years after the reason appeared.

If the court finds that the member’s claim is proven, it issues a judgment stating the following:

the share of the leaving member becomes the share of the company
the amount of the fee that the company is obliged to pay to the member is determined by the market value of that member’s share on the day the lawsuit was filed, but not less than the proportionate share of the value of the net assets of the company corresponding to the share of that member in the capital of the company on the day of filing the lawsuit (the founding act may predict a different way of determining this amount)
the deadline for payment of compensation in accordance with the financial situation of the company and the expected revenue of the company in the ordinary course of business, except that this period can not be longer than 2 years from the day the judgment becomes final (the founding act can predict a longer deadline, but not longer than 5 years)

All said about the fact that the right to compensation of ex member for its share is privileged in comparison to the right to profit of other members applies to this situation as well.

Right to compensation for damage

If a member who has left the company for justified reasons, by the act or by the omission of the company suffered damage, he has the right to seek compensation, which he can claim in a separate litigation.

If the company fails to pay this compensation, the ex member of the company may seek enforcement execution but only by selling the share which the company has acquired from him. Beside the company, the other members of the company are also obligated to pay this compensation. Their responsibility is solidary and in proportion to their own shares in the capital of the company.

Date: 21.04.2020.