In its resolution as of July 5th, 2021 the Supreme Court of Cassation (SCC) clarifies how can an excluded shareholder claim the company to pay the value of his/her shares.
The facts of the dispute brought before the SCC:
- The general meeting of the shareholders (“GM”) of a limited liability company (“LLC”) resolved to exclude one of the shareholders.
- In breach of the requirements under the Commerce act, no interim balance sheet was drafted. According to the Commerce Act an interim balance sheet updated to the end of the month of adoption of the resolution for exclusion should be drafted in order to evaluate the amount payable to the excluded shareholder.
- Thus, the excluded shareholder contested the legitimacy of the resolution adopted by the GM and claimed its repeal.
- Since the resolution of the GM for exclusion enters into force immediately, the excluded shareholder acts as a third party to the company and therefore is not entitled to request an audit and a balance sheet for evaluation of his shareholding. Claiming that he has no other legal means for protection of his rights, the excluded shareholder brought a general claim under the Civil Procedure Code (CPC).
On the one hand, if the claim for repealing of the resolution of the GM is upheld, the annulment of that resolution will reinstate the shareholder as such, i.e. he will not be excluded. Thus, he will not be entitled to receive the value of his shareholding, since his exclusion as a shareholder is a prerequisite for payment of his shareholding in the company.
On the other hand, if the resolution of the GM for exclusion is not repealed, the shareholder permanently loses his capacity of shareholder and is expelled from the company. In such cases, he is entitled to pose a court claim against the company for payment of the value of his shareholding. In the court resolution for payment, apart from resolving whether the amounts are payable by the company or not, the court also determines whether such obligation for payment exists and its exact amount. In view of this, the SCC states that the general claim under the CPC is not the legal means for evaluation of the shareholding of an excluded shareholder (as being a third party towards the company). According to the SCC, in such cases the specific claim for shareholding payment upon termination of shareholding in a company is applicable.
According to the Bulgarian CA, the participation of a shareholder in an LLC is terminated upon:
- death or full disability status of the shareholder;
- exclusion by virtue of a resolution of the GM;
- termination of a legal entity-shareholder by liquidation procedure;
- bankruptcy of the company.
Considering all these provisions, the SCC states that evaluation of the shares held by an excluded shareholder cannot be claimed within the general court proceedings. Such evaluation is possible within the court proceedings initiated by the specific claim for shareholding payment upon termination of shareholding in a LLC.