Loss of interest in being a partner in a company / When a partner can withdraw / Rights of the withdrawn partner / How we can help you
Loss of interest in being a partner in a company
In general, people hold membership/shareholding in a company in the hope of obtaining material benefits in the form of money received as dividends from the company’s profits.
The receipt of dividends is not the only reason why a certain person/entity wants to be a shareholder in a company (e.g. certain shareholders want to carry out a certain type of business activity together with other people they trust, certain shareholders want to hold the shares only until the business is developed to such an extent that they can sell it for a generous amount, certain shareholders want to influence certain decisions in various branches of the economy, etc.).
Depending on the particular circumstances of each individual company, at a certain point in time the persons holding shares in the company lose interest in holding this capacity (e.g. the company has reached the threshold of its own growth for sale, disagreements with the other partner/shareholder, lack of dividends, economic decline of the company, etc.).
Cases in which an associate may withdraw
The easiest way to give up membership/shareholder status in a company is to transfer all shares/shares held in the company.
For more details on the transfer of shares please go to the section Transfer of shares.
Another method of abandoning membership/shareholder status is to withdraw from the company.
The cases in which a partner/shareholder can withdraw from a company are of three kinds: (i) legal (expressly regulated by law, (ii) conventional (regulated by the company’s articles of association), (iii) judicial (determined by a court of law).
Among the legal cases that allow withdrawal we exemplify: change of the main object of activity of the company, moving the registered office of the company to another country, change of the form of the company, merger or division of the company, withdrawal with the consent of the other shareholders.
Conventional cases vary from company to company depending on the provisions of the articles of association (e.g. increase in the number of shareholders above a certain threshold, decrease in turnover below a certain level, increase in the company’s debts above a certain threshold, removal of one of the shareholders from the company, etc.).
Court cases are determined by each individual court, depending on the specific situation, but in all cases there must be and be proven good cause (the most common reason encountered in practice is serious disagreements between partners).
Any person wishing to abandon their membership/shareholding in a company should check whether they fall under one or more of the legal/conventional/judicial cases set out above.
Rights of the withdrawn associate
Abandoning the status of partner/shareholder in a company does not mean that the person will leave the company without any benefit.
The law states that any partner/shareholder who withdraws from the company is entitled to a quota – a share of the benefits offered by the company, expressed in money in relation to the number of shares held and the financial situation of the company.
In other words, from the moment the withdrawal becomes effective, the associate/shareholder is entitled to receive a certain amount of money from the company.
The amount of money to which the withdrawn partner/shareholder is entitled is calculated according to the following formula: ( the value of all the company’s assets – the value of all the company’s debts ) / the share of profits ( 10%, 25% etc ).
In rare cases (companies in a state of insolvency) the rights of the retired partner may have a value of 0 or negative. In the latter cases the withdrawn partner/shareholder is not entitled to receive any money from the company.
In view of these circumstances, the timing of withdrawal from the company must be carefully planned by the partner/shareholder in order to maximise the rights to which he is entitled.
The amount of the rights of the withdrawn associate/shareholder can be determined by mutual agreement or through the courts.
How we can help you
Our lawyers can advise you and provide you with legal assistance and representation in any proceedings concerning the withdrawal of your membership/shareholding in a company and the collection of your rights.
Additional information regarding withdrawal from the associate capacity