Over three months have passed since the law on companies came into force. Although sufficient practice has not yet been worked out, one can draw the first conclusions about the “work” of the law, about its advantages, which can sometimes turn into traps.
Advantages/trap № 1. How to control the shareholders and their share?
Narrowing the list of required information in the charter received ambiguous assessment from the very beginning. Simplification, at first sight, the procedure of alienation may turn into significant risks for the whole company.
Since the information about the shareholders and the size of their shares are not longer required to be specified in the charter, in the case of transactions with the shares (their parts), changing of charter is not necessary.
The procedure for registering changes does not require the convening of a general meeting, the applicant is the acquirer of the share or its alienator.
On the one hand, the simplification of the procedure protects the rights and interests of the person who has acquired a share in the company. But here is a problem in controlling the changes by company. Theoretically, the company may not know that the share was alienated, and a new one appeared among the shareholders.
In order to avoid such a situation, the legislator introduced amendments to the law on state registration. In case of changes of the shareholders the registrar or notary is obliged to send an excerpt to the company, the applicant and all members of the company – both those that were indicated in the register before the registration action, and new ones.
Obviously, the motives of the legislator were the notification of all persons whose rights may be affected by the registration. However, there are some problems here. The law clearly provides for the submission of an excerpt, which does not contain information about the founders (shareholders). The only way thss action can protect the rights of the shareholders – to become an indicator of making some changes to the registry and to force shareholders to check information. But only if this person is familiar with the law and knows about the legal requirement to send an excerpt.
Advantages/trap № 2. How does priority right work?
In the procedure of priority right, one should pay attention to one feature. Shareholders have a priority right to purchase a share (part thereof) that is sold to a third party. That is, it is enough to simply conclude a contract other than a sale-purchase contract (for example, a barter or a gift). And you are free from the priority right.
Advantages/trap № 3. Withdrawal of shareholder having 50% or more.
Dividing the procedure of withdrawal for shareholders with less than 50% of the share capital (without consent) and those having 50% or more (only with the consent of other shareholders), obviously aimed at protecting minority owners from the withdrawal of most of the assets from a company. A shareholder with more than 50% actually controls the company, and therefore the possibility of its unhindered release will negatively affect the company as a whole.
But how to protect minority shareholders from such an exit, taken in account the possibility of blocking any decisions of a company by shareholder who want to withdraw? The shareholder does not get out, but the company does not make any decisions.
Such a “runaway” may use a different opportunity – to divide their share. Given that priority right applies only to cases of sale, one can give part of the share (for example, 40% of 80%) to some of the family members. After this, each of those having 40% can freely go out.
For minority owners is only one way in this case – to leave the company earlier, preventing the redistribution of shares, – immediately after the appeal majoritarian with the consent of the exit or after the division of his share. However, to do this, you need to be careful and timely respond to changes in the registry.
Advantages/trap № 4. Exclusion of shareholder.
The protection against unlawful exclusion of shareholder is realized due to the lack of exclusion opportunities for non-fulfillment of shareholder`s obligations. But such protection may result in blocking decisions that require a unanimous vote if there are shareholders who do not systematically attend meetings and do not send representatives.
It is possible to exclude such shareholder s now (until 17.06.2019) only if such provisions exist in the charter of the company (during the year from the moment of the entry into force of the law, the charter is valid). Starting from June 17, 2019, it will be impossible to exclude a shareholder due to non-fulfillment of duties, because the specified norm of the statute will be in conflict with the law.
What to do then? To exclude such shareholders now or to conclude a corporate agreement, which would consolidate the obligation to sell a share in case of non-participation in the meeting. However, in the case of exclusion, the outcome may be a lawsuit and the need to prove non-fulfillment of obligations. And for the conclusion of a corporate agreement you need consent.
Advantages/trap № 5. Payment is not necessary?
Flexibility of the new law is its great advantage over the previous one. But at some points, the law can be called too flexible.
By establishing the general rule – the obligation to pay to a shareholder who has left, the market value of its share during the year, the law allows to change this term in charter. There are no maximum or minimum limits. Therefore, it is allowed to determine in the charter terms of 50 or 100 years.
Thus, the outcome of the participant will not have content, and the cost of the share significantly devalues, because it is determined on the day preceding the state registration of changes.
What to do?
The risks of the new law may cause anxiety, which can hardly be called unjustified. However, it is possible to protect oneself and company, by means of drafting a quality charter and concluding a corporate agreement. In these documents, it is possible to regulate as much as possible in detail all procedures and predict possible risks, establish procedures for action in case of conflict, the obligation to obtain consent to alienate a stake, fix a percentage or the number of votes, other than the size of the share. This will substantially minimize the risks of the new law.
Olesia Todoriuk
associate at Attorney at Law “Bachynskyy and Partners”
assistant attorney of Andriy Kavchuk, head of practice
corporate law and compliance
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