Transfer of Shares in Limited Liability Companies

Transfer of Shares in Limited Liability Companies: Procedure and Legal Principles

The transfer of shares in a limited liability company is not simply an agreement between the parties; it is a transaction strictly bound by the formal and procedural requirements laid down by law. Conducting the process correctly and completely is therefore of great importance for the legal security of both transferor and transferee.

1. Formal Requirement

The share transfer must be made by written agreement and the parties' signatures must be certified by a notary. A transfer agreement lacking notarial certification is invalid. This step is the fundamental condition for the transaction to come into legal existence.

2. General Assembly Approval

Provided it is not expressly prohibited in the articles of association, a share transfer is as a rule subject to the approval of the general assembly. If the general assembly withholds approval, the transfer has no effect as regards the company and the transferring shareholder retains the rights and obligations arising from membership.

Where the general assembly does not adopt a decision refusing the transfer within three months, the request is deemed approved. The assembly is entitled to withhold approval without giving reasons. However, where share transfer is prohibited in the articles of association and approval is likewise withheld, the shareholder's right to withdraw from the company for just cause may arise.

3. Registration and the Share Ledger

Following general assembly approval, the transfer must be registered with the trade registry. The application to the registry is made by the company managers; if the managers fail to apply within thirty days, the departing shareholder may also apply to the registry.

Although registration and announcement are declaratory in nature, they are mandatory in order for the transfer to be asserted against third parties and to ensure legal publicity. The transfer is also recorded in the company's share ledger. Following a share transfer duly registered and announced, the transferring shareholder is as a rule not liable for company debts arising in the subsequent period.

The Share Transfer Process in Brief

In practice, a share transfer in a limited liability company is completed through the following steps:

Preparation of the necessary documents

Execution of the share transfer agreement before a notary

Obtaining general assembly approval

Registration with the trade registry

Entry in the share ledger

Conclusion

The transfer of shares in a limited liability company is a process bound by formal requirements that must be conducted with care. A deficiency at the stages of notarial certification, the general assembly resolution or trade registry registration in particular may directly affect the validity of the transfer and the liability position of the parties. It is therefore of great importance that the transaction be carried out in a planned manner and in accordance with the legal framework. For this reason, obtaining legal support and consulting a lawyer in share transfer transactions is extremely important.