Shares in LLC are brought to the market
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The Ministry of Economy proposes to allow participants leaving a limited liability company (LLC) to receive money for their shares, taking into account their market value. Now the legislation provides for the payment of funds based on the book value of net assets determined by the company – often it is significantly inferior to the market value. Disagreement with the valuation is increasingly leading to disputes between participants in the courts, due to the resumption of payments to former owners since October after a moratorium on bankruptcy in 2022. Experts welcome the initiative, but note that the Russian Federation also needs to reform the assessment institution.
The Ministry of Economy has prepared a draft amendment to the law on limited liability companies and corresponding changes in the Civil Code (available to Kommersant) – they provide for the opportunity for a participant leaving an LLC to receive money for his share, taking into account its market, not book value. In this case, the market value will be determined by an independent appraiser. The explanatory note notes that now the requirement of corporate law to pay the actual value of the share often causes disputes between the subjects of corporate relations – the participants do not agree with the assessment determined by the company.
In accordance with the draft law, the payment of the market value of an LLC’s share will be possible both at the decision of the company and at the request of the departing participant. “Now the law provides that the actual value of a share is determined on the basis of the book value of net assets, which is often significantly lower than the market value,” says Alexander Panin, managing partner of PB Legal. At one time, the Supreme Arbitration Court clarified that the company’s real estate should be accounted for at market value, but this does not solve the problem with other assets, not to mention that other factors, including the “control premium”, are not taken into account in such a calculation, notes He. In addition, the expert does not rule out the possibility of manipulation with financial statements to underestimate the book value of an asset if a participant leaves the company as a result of a conflict. Even if the company is ready to pay the fair value to the withdrawn participant, the law still requires that the balance sheet be followed, says Mr. Panin.
Now a market valuation of a share is possible only if the amount of the payment calculated by the company is challenged in court — the courts involve independent appraisers in the course of the proceedings, stresses Andrey Filippenko, partner of Forward Legal. It should be noted that the bankruptcy moratorium in 2022 suspended the process of payments to former owners, but since October last year, these processes have resumed, and disputes about this are increasingly common in courts. Earlier, the Supreme Court explained how to calculate the value of the share of a participant leaving an LLC: in the event of an adjustment in reporting, the real size of the company’s assets must be taken into account, and not just formally reflected in the balance sheet (for more details, see Kommersant-Online of June 2). In turn, the Ministry of Economy expects that the implementation of the documents will allow to evaluate the share, bypassing the courts.
“The withdrawal of a participant from the company and the forced sale of a share are pressing problems of corporate law,” believes Vladimir Shalaev, a lawyer and partner at Pravaya Group LLC. At the same time, he notes that the amendments will not solve the problem without a reform of the assessment institute. “By ordering the same report from different appraisers, you can get diametrically opposed results, which can be a reason for abuse,” the expert believes.
According to Andrei Filippenko, the proposed amendments should formalize the approach that has long been established in practice and save the courts from forced mediation in determining the market value of shares. “The indicator of net assets does not always correspond to the real state of affairs in the company and the market value of the business, which can be significantly lower. Also, this indicator is taken in isolation from the assessment of the availability of funds and property in the company, which can be freely withdrawn from circulation to pay off the claim against the former participant, the possible damage from the recovery for the current activities of the company is not assessed, ”says lawyer, partner of ProLegals Marina Morozova . The proposed amendments are reasonable, an alternative valuation of the stake is necessary, she believes.
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