The Ministry of Economy has updated the draft on determining the value of shares for co-owners leaving the LLC
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The Ministry of Economy presented a revised version of the bill, allowing participants leaving limited liability companies (LLC) to receive funds for their shares, taking into account their market value. The agency proposes to reconsider the approach to attracting independent appraisers to determine it – this will be done not by the participant leaving the company, but by the LLC, but on the condition that the leaving co-owner pays for the assessment. Experts consider reforming approaches to determining the value of a share to be overdue, but they differ in their assessment of the proposed option.
The Ministry of Economy has finalized its proposals regarding the legislative enshrinement of the possibility of participants leaving an LLC to receive the value of their share according to market valuation – we recall that the department developed draft amendments to the Civil Code and the law on LLCs back in the summer (see Kommersant of June 27, 2023), and now has presented its updated version. Currently, payments to participants leaving the business are determined based on the book value of net assets determined by the LLC, which is often significantly lower than the market value. Disagreement with the price often leads to legal disputes; the amendments should reduce their number.
As First Deputy Head of the Ministry of Economy Ilya Torosov explained to Kommersant, the department finalized the project taking into account the proposals and comments of business. The concept has not changed, but the document is noticeably detailed: for example, it is written that the co-owner leaving the LLC has the right to submit an application to establish the market value of his share within a month from the date the company becomes obligated to pay its price. In the new version, the company must ensure that the assessment is carried out if the outgoing participant bears the costs of this (a month is allotted for this; previously it was assumed that the owner of the share himself could attract an appraiser). The payment must be made based on the assessment; if the owner of the share disagrees, he can go to court.
This possibility is also provided for creditors (for example, in the case of a court foreclosure on a participant’s share) and other persons to whom the value of the participant’s share is subject to payment (for example, heirs). According to Ilya Torosov, a wide list of grounds for using payment of the market value of a share “is justified by the need to maintain a balance and equal consideration of the rights of all participants in legal relations when the LLC becomes obligated to pay the actual value of the share.”
The request to reform the approach to determining the value of a share has long existed, says Forward Legal lawyer Maxim Ignatov. The proposed mechanism, in his opinion, is sufficiently balanced and avoids the risk of manipulation of the assessment. Managing Partner of PB Legal Alexander Panin adds that the company has more information about assets, which will allow for a more expeditious assessment, and to avoid abuse on the part of the LLC, the right to review the assessment results in court remains. At the same time, warns Maxim Ignatov, the “vulnerability” of this mechanism is its low efficiency in the event of a corporate conflict.
Managing partner of BBNP Maxim Barashev, however, believes that the proposed approach as a whole will be “unfair from the point of view of balancing the interests of participants in corporate relations – the market value will be higher than the actual value, especially in companies with low asset values, for which paying the market value to the departing founder may become a serious burden.” He also has questions about the provisions regarding the selection of an appraiser by the company itself, which may not take into account the interests of the participant and even choose an expensive appraiser whose services he cannot pay for. Senior lawyer at BGP Litigation Ekaterina Baranova agrees with this: it is unlikely that the changes will significantly reduce the number of legal disputes, since their subject may now be challenging the assessment results.
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