How can I withdraw from the limited liability Partnership?

The limited liability partnership (LLP) is the most common for today in Kazakhstan, the legal entities form. And, of course, one of the reasons contributing is regulated by the law and procedure of changes in the composition of the participants. Simple procedure, however, is not always possible to avoid mistakes, which, in practice, faced some entrepreneurs.

The legislation allows the participant too the ability to withdraw from the partnership by:

- sale or assignment by any other means (gift, exchange) of its share in the property too another member of the partnership or a third party (article 29 of the Law of the Republic of Kazakhstan "On partnerships with limited and additional liability");

- reduce the share capital by the full repayment of the member's share (article 27 of the Law).

The transfer of the shares under the transaction

The party too has the right to sell or otherwise to concede the share in the property of a partnership or part of one or several participants of this company of their choice (paragraph 1 of article 80 of the Civil code of the Republic of Kazakhstan (General part), paragraph 2 of article 29 of the Law On partnerships with limited and additional liability"). Choose one or several participants to give up their share, and who is entitled to give the member. Assignment in any other way can be produced, for example in the form of gift exchange. Assignment of 1/2 of shares in a party, for example, which owns 50% in the property too means that he will remain 25%.

The participant too can also give up their share in the assets of the LLP (or its part) to a third party (not party too), if the constitutive documents of the LLP do not prohibit him or restrict it to certain conditions (and in most cases such limitations are not available).

When you exit the too there are the following options:

- All the participants and transmit their shares to the incoming party (or parties).

- One or more participants out too and pass on their share to the remaining participants.

- One or more participants out of too and transfer their shares to the incoming participants.

The only party coming out and transfers his share to one or more of the incoming participants.

The right of pre-emptive

When selling shares of other partners in the partnership have the privileged right before third parties to purchase such shares (article 31 of the Law On partnerships with limited and additional liability"). This point must be taken into account, as failure to follow procedure often gives rise to disputes between the parties and the court proceedings.

The right of pre-emption can be used by any party. If members wishing to exercise this right, and the Foundation documents or any other agreement of the participants is not provided another order, they exercise this right in proportion to the size of their shares in the Charter capital. For example, from too leaves the party owning shares equal to 50%. The desire to acquire its share expressed two other member – owners 30% and 20%. The first will be eligible for another 30%, second 20%, unless, of course, they will not come to a different agreement.

The member who wants to sell his share or its part to a third party, is obliged to notify its intention to the Executive body (Director) LLP indicating the anticipated sales price. Within 7 days of receipt of such notice the Director shall notify all other participants, too. Party, too, wants to exercise its pre-emptive right of purchase shall in 7 days term to notify the Director, specifying that it intends to purchase offer for sale a share wholly or in part.

If the value of the bids does not exceed the size of a sold share, each participant takes on the part to which he aspired. The remaining shares may be sold to a third party.

If within one month from the date of the Director of the LLP notice of the offer shares, it or its part will not be purchased by other members share (or unredeemed portion thereof, may be sold to a third party, but at a price no lower than what was specified in the notice.

So, important steps:

- Written notice to the party Director about the upcoming sale.

- Within 7 days after notification, the notification by the Director of the other participants.

- Within 7 days of notification by the Director - other participants should declare the desire to acquire a stake or part of it.

- At the expiration of one month from the date of notification of the Director - sale of participant shares to a third party.

If the stake will be sold to a third party at a lower price than that which was specified in the notice, the contract of purchase and sale of shares may be declared judicially to be invalid. If the share or its part will be sold with violation of preemptive right to purchase any member of the LLP may, within three months to demand in a judicial procedure the transfer to him of the rights and obligations of the buyer, which actually also means the recognition of the transaction invalid.

The rules on priority rights of purchase shall also apply to the alienation of the share by a barter agreement-that is, when instead the shares are not money, and other property.

If participants do not wish to use the pre-emptive right to purchase the share or its part when it is sold to a third party, such right may be exercised by itself, too.

Donation of shares

The donation of shares to a third party, the seller of the share shall not be obliged to obtain the consent of other participants of the LLP or to offer them the right of pre-emptive. This rule is not directly enshrined in law. However, this conclusion follows from the contents of paragraph 2 of article 80 of the Civil code and article 31 of the Law On partnerships with limited and additional liability". The standards are talking about the pre-emptive right of purchase for the proposed party price, and also apply to alienation of the share by a barter agreement. The right of primary adoption in the gift of the law does not contain. This would contradict the nature of the contract of donation. Therefore, when the proportion of the donation party is free to choose the donee is not bound by duty to warn about the deal from other members.

The specified circumstance is often used, making the actual sale gift agreement that negates the right of pre-emptive. To prove that in fact there was a sale, that is, to prove feigned character of the transaction in court can be very difficult. You still need to submit proof that in fact the proportion was calculated in monetary form or another. In the case of recognition by court of the transaction sham in accordance with paragraph 2 of article 160 of the Civil code will apply the rules pertaining to the transaction which the parties actually had in mind, in this case, to the sale. Accordingly, the participants in the partnership will have the right to require the transfer to them rights and obligations under the transaction.

If you sell or exchange shares are covered by the donation, such a scheme has other risks for participants. In the event of termination of the transaction, for whatever reasons, the purchaser of the share will be not possible to seek a refund for her money, because the fact of calculation and its size is not reflected in the transaction.

If LLP is the only member?

Rules on pre-emptive purchase and notification to the other parties not applicable to the case when a partnership includes only one participant.

The only party coming out of the too by outright assignment of his share in the property to another person. He has the right to transfer his share to several persons in a certain ratio.

Do you require the consent of creditors to change the participants?

Considering that in accordance with article 61 of the Law On partnerships with limited and additional liability" the alienation of a share is not a reorganization of a partnership, notice to creditors of the partnership about the proposed change of structure of participants is not required.

If you want to publish the announcement in the media about change of structure of participants?

Requirements on the publication of the announcement of the withdrawal of a participant (participants) members of the LLP legislation does not contain.

The consequences of withdrawal of membership

Changing of constituent documents

Changes in the composition of participants implies the need for changes in Memorandum and articles of Association, too. In accordance with the subparagraph 2) of paragraph 2 of article 14 and subparagraph 2) of paragraph 2 of article 17 of the Law "On partnerships with limited and additional liability" Foundation documents of the LLP must contain the list of its participants. In the case that the LLP remains one member - constituent agreement shall terminate, and the Charter needs to be amended.

State re-registration of a partnership

According to subparagraph 3) of paragraph 6 of article 42 of the Civil code in case of changes in the composition of participants in a business partnership (with the exception of business partnerships where the register of participants is carried out by professional Registrar) should be made state re-registration of LLP in the judiciary.

At what point the participant is deemed to have withdrawn from the partnership?

In accordance with paragraph 2 of article 28 of the Law "On partnerships with limited and additional liability loss of right to a share for any reason shall entail the exclusion of the member from the LLP. The acquisition of shares in the manner prescribed by law, means the entry of an acquirer of shares in the number of participants too. Thus, the participant is deemed to have withdrawn from the partnership at the time of transfer of the share. This occurs at the time of conclusion of the contract on transfer of shares, if the Treaty itself provides otherwise.

Estimated value of the share of the withdrawing participant?

The law provides a mandatory assessment of the portion of the retiring member. Its value in the transaction is determined by agreement of the parties.

Does the authorized capital at the exit of the member from the LLP?

Typically, the size of the Charter capital of the LLP at the exit of the member from its composition remains unchanged if new members will not decide on its increase or decrease.

The output member of the company by reducing share capital

Paragraph 1 of article 27 of the Law On partnerships with limited and additional liability" provides another option of the party of too - reduction of share capital by repayment in full of the shares of the individual participants. This means that as a result of the capital reduction, the participant receives the complete value of their shares and leave the partnership. The shares of other members at the same proportionate change.

This option cannot be used if the LLP has only one member.

Reduction of share capital made in the General order by decision of the General meeting of shareholders with a notice period of two months from the date of the decision of all creditors of the partnership. It is a long and complicated method compared to the transfer of the shares in the transaction.

Aigul Satova

Chief specialist of Department of justice of Saryarka district

Member of the Astana branch of the Union of lawyers of Kazakhstan