By its nature the company share is the shareholder’s portion of the property and assets of a limited liability company. The company share is a concept that also reflects the shareholder’s participation in an LLC as a set of material and non-material rights and obligations, i.e. his membership. Pursuant to the Commerce Act the company share is determined according to the shareholder’s participation in the capital and may be transferred.
The transfer of company shares is a derivative method of acquisition. By succession is also such a method. Acquisition of company shares in a limited liability company may be also effected through original, non-derivative methods – e.g., when increasing the capital of the company.
The procedure for carrying a transfer of company shares into effect is set forth in the law – Art. 129 et seq. of the Commerce Act. The transfer may be effected through entering into a sale-purchase contract, as well as through other transactions and methods with translative effect, such as a contract for exchange, donation, settlement, in-kind contributions to the capital, etc. The contract of sale has a complex character since it transfers not only rights but also obligations. It is also possible to transfer undivided interest in the shares whereupon joint ownership will occur with the corresponding consequences of such ownership.
The contract for transfer of company shares needs to be notarized – notarization of both signatures and content, made simultaneously1. Where shares are to be transferred between current shareholders, no consent of the other shareholders would be needed. Where shares are to be transferred over to a third party, all legal requirements for admitting a new shareholder would need to be complied with – i.e., it would be necessary for the new shareholder to submit an application to the General Meeting of Shareholders requesting to be accepted as a shareholder and agreeing to the terms of the Articles of Association.
It would always be necessary to a have a resolution of the General Meeting for amending the Articles of Association in connection with the occurred changes in the company’s shareholding. Such resolution should be adopted by a majority of more than 3/4 of the capital, unless greater majority is required by the provisions of the Articles of Association.
The transfer needs to be entered into the Commercial Register – following from Art. 140, Art. 119 and other provisions of the Commerce Act.
Application and Necessary Documents
A special application needs to be filed with the Commercial Register for the purposes of the transfer transaction to be registered – a standard form application A4. The application may be filed via the Internet as well – by being signed with an electronic signature. The application should be submitted by the company’s director but a lawyer may be authorized for such purposes as well – the power of attorney should be explicit but does not require any notarization of the signature.
The following documents need to be enclosed to the application:
Contract for sale-purchase of shares;
Standard form declarations by the director and the transferor that the company has no outstanding debts for labour remunerations, compensations and social insurance contributions2;
Application for admitting a new shareholder (if applicable);
Minutes with resolutions of the General Meeting of Shareholders;
New or amended Articles of Association;
Declaration on the truthfulness of the stated for registration circumstances and acceptance of the submitted for announcement acts;
Document for paid state fee.
In certain situations it might be necessary to present other documents as well, such as a certificate for a shareholder (legal entity from a foreign country) or invitations and other documents evidencing the proper calling of the General Meeting. Additional documents will be necessary when making secondary changes as well – for example, when changing the director certain declarations by the new director are to be presented.
In other situations it might be necessary to consider possible specifics and applicable corresponding requirements – for example, when admitting a new shareholder it might be necessary to have the signatures and content of the Minutes notarized.
Fees and Other Costs
Pursuant to the Tariff on the State Fees Collected by the Registry Agency, the state fee for entering changes into the Commercial Register is 30 Levs or 15 Levs when the application is filed electronically, including by an authorized lawyer.
Additional costs for notarization fees will also apply depending on the particular situation – the amount of the price under the sales contract, whether or not the Minutes need notarization, etc.
Information about the due attorney fee may be found on page Fees. Please, note that the published information is for reference purposes only – I reserve the right to negotiate a different amount of the fee for each separate case, mostly where the transfer of shares entails certain specifics (for example, where the shareholder is a foreign legal entity).
1 The article has been updated on 23.01.2017 in connection with amendments to the Commerce Act which you may find more information about in News article Legal protection against corporate hijacking.
2 The article has been updated on 06.03.2018 in connection with amendments to the Commerce Act which you may find more information about in News article Prohibition on transferring companies with debts.