The withdrawal procudure for LLC members has been changed

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Pepeliaev Group advises that the amendments made to the Russian Civil Code and to the Law on LLCs to specify the procedure for LLC members to withdraw from an LLC took effect on 11 August 2020

On 31 July 2020 Federal Laws No. 251[1] and No. 252[2] were adopted aiming to improve the procedure for entering into the Unified State Register of Legal Entities (the ‘Register’) the data concerning a member’s withdrawal from a company and to clarify the moment when such member’s participation interest is transferred to the company.

According to the new rules a member's participation interest is treated as having been transferred to the company:

  • on the date when the company receives the member’s withdrawal statement - for credit institutions;
  • on the date when the relevant entry is made into the Register in connection with a member’s withdrawal - for other entities.

According to the amendments, the obligation to submit to the tax authority an application to enter the relevant amendments in the Register is imposed on the notary who has certified the member’s withdrawal statement. To do it, the notary has 2 business days from when the withdrawal statement was certified. Following that, not more than one business day from the date when the relevant application was filed, the same notary should deliver to the company a copy of the application to the tax authority and the member’s withdrawal statement certified by such notary.

comment.jpgPlease be reminded that before the specified amendments took effect, the participation interest was treated as having been transferred to the company when the company received the member’s withdrawal statement, and the obligation to submit the documents in connection with the relevant changes being made to the Register lay with the company itself.

According to the amendments, the charter may entitle to withdraw from the company certain company members who are directly named in the charter or those who have specific characteristics (for example, those whose participation interest in the issued capital exceeds or does not exceed a specific amount).

Also, an opportunity is introduced to establish in the charter provisions that the right to withdraw:

  • is conditional upon the occurrence or non-occurrence of specific circumstances or upon a specific period, or both;
  • is provided by a unilateral decision of the general meeting of all company members.

Please note that the above amendments do not apply to credit institutions.

What to think about and what to do

Taking into account the new opportunities that Federal Laws No. 251 and No. 252 provide, we recommend revising the current charters with respect to the provisions concerning the right to withdraw from a company and making the relevant amendments, if necessary.

Help from your adviser

Pepeliaev Group’s lawyers have an extensive experience in advising clients on issues relating to compliance with the requirements of corporate legislation and are ready to provide any legal support in corporate and registration procedures as well as to provide comments on disputable issues relating to the application of statutory provisions.

[1] Federal Law No. 251-FZ 'On amending article 94 of Part I of the Russian Civil Code' dated 31 July 2020).

[2] Federal Law No. 252-FZ ‘On amending the Federal Law ‘On limited liability companies’ to improve the procedure for entering into the Unified State Register of Legal Entities the data concerning withdrawal of a limited liability company member from such company’ dated 31 July 2020.

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