The owners and former owners of the company have the right to challenge the decisions of the general meeting on the redistribution of shares of the company. In the case of a controversial redistribution of shares, not only the interests of certain owners (shareholders) suffer, but also the interests of the company. It is necessary to spend financial and human resources on resolving controversial issues, correspondence and often on participating in court sessions. Our experienced lawyers can understand the redistribution of shares of the company and give an opinion on the legality or illegality of their redistribution.
Redistribution of shares in the authorized capital by the decision of the company
The most common cases are when, by decision of the general meeting, shares in the authorized capital of the company are redistributed:
- When a company increases its authorized capital.
- When the company reduces the authorized capital.
- When the number of participants (shareholders) changes.
- When a company buys out their shares from the participants (shareholders) in whole or in part.
- When other participants buy out their shares from the participants (shareholders) in whole or in part.
- When a company transfers shares free of charge to members of the board of directors, executive body, and employees of the company.
- When a participant sells his share or part of it in the authorized capital (shares).
Pre-emptive right to purchase a share (part of a share) in the authorized capital of a limited liability company
When a participant in a limited liability company wants to sell his share or part of it, he must first offer this transaction to other owners of the company. They have the pre-emptive right to purchase a share (part of a share) of this participant in proportion to the size of their shares in the authorized capital. Another procedure for the owners to exercise the right of pre-emptive purchase may be contained in the company’s articles of association.
The procedure for the actions of a participant who is going to sell his share (part of it) is prescribed in the company’s articles of association and must include certain information. Our experienced lawyers can understand compliance with the requirements for the pre-emptive right to purchase a share (part of it) and the legality of the transaction for the sale of a share (part of it). In particular, the pre-emptive right can be exercised within 30 days from the date of sending the notification of the sale of the share (its part).
The assignment of the pre-emptive right to purchase a share (part of it) is prohibited.
When the pre-emptive right to purchase a share is violated, any owner of the company or the company itself has the right to request the transfer of the buyer’s status to them within three months. Such claims are considered by the court.
Pre-emptive right to purchase shares of a joint-stock company
The pre-emptive right of shareholders to purchase additional issue shares may be provided for in the articles of association of the joint-stock company. In this case, the charter should contain a number of mandatory information. In particular, this is the validity period of the pre-emptive right to purchase shares and the procedure for shareholders who want to exercise their right of pre-emptive purchase of shares. Violation of the right of pre-emptive purchase of shares of an additional issue gives grounds for challenging the decision to refuse to exercise the pre-emptive right.
The main causes of disputes in the redistribution of shares
- Interested parties have not studied the legislation and the articles of association, which establish the procedure for the sale of a share (part of it). Violation of the procedure for the sale of a share (shares) may lead to the cancellation of the decision on the redistribution of shares. For example, it is impossible to sell a share in a limited liability company, in a company with additional liability, to a third party immediately. You must first offer to buy this share to other members of the company. And if they refuse, then offer to buy out the share of the company itself. Only after the refusal of the company, the participant can sell his share to a third party. When the participants violated this procedure, the interested person can challenge the redistribution of shares in court.
- Sale of an unpaid share. A participant can only sell a fully paid share or a part of a share. The sale of an unpaid share can be challenged in court as illegal.
- Sale of a share to third parties when the articles of association prohibit such sale. The court may invalidate such a sale agreement.
- Violation of the procedure for holding a general meeting at which the issue of redistribution of shares is resolved. In this situation, participants whose shares have been sold or changed without notifying these participants often appeal against the decisions of the general meeting. Violation of the procedure for convening and holding a general meeting is a reason for appealing a decision taken at such a meeting.
- The shares were redistributed, but no changes were made to the charter. After making a decision at the general meeting on the redistribution of shares, it is necessary to amend the charter and carry out state registration of changes. This must be done within 2 months after the decision is made by the general meeting. When there is a decision of the general meeting, but the articles of association have not been changed, participants whose rights have been violated can demand in court to force the company to change the articles of association. A participant who sold his share often goes to court, but is still listed in the charter as one of the owners of the company.
- Shares of some companies were sold to third parties without an offer to buy them to the regional executive committee, the Minsk City Executive Committee. In relation to a number of companies, government agencies have a preferential right to purchase shares. This applies to shares of companies included in special lists and companies that are created on the basis of organizations for processing agricultural products. When the right of state bodies to pre-emptive purchase of shares is violated, they can demand in court the transfer of ownership of shares to them.
What we can do for you to challenge the redistribution of shares in the authorized capital
Corporate relations is one of the specializations of our company. We can:
- Understand your situation, sort out the documents and find out what are the violations in the redistribution of shares in the authorized capital;
- Give a conclusion on the legality (illegality) of the redistribution of shares in the authorized fund;
- Prepare a package of documents with evidence of violations for the court;
- Prepare a statement of claim to the court;
- Represent your interests in court when considering a case of illegal redistribution of shares in the authorized capital (shares).
Contact us
If you have any questions or disputes when redistributing shares in the authorized capital in the Republic of Belarus – we will be happy to help you! Our many years of experience in the field of corporate law will help you in resolving any disputes in this area.
Phone and email communication options are available for your convenience:
- +375291422719 (WhatsApp/Telegram/Viber);
- info@ambylegal.by.
