Termination of the contract of purchase and sale of a share in an LLC. In what cases is such a measure necessary to protect your rights?

Jan, 15 2024


An agreement for the purchase and sale of a share in an LLC is an officially executed transaction on the transfer of a share in the authorized capital of a company from one person to another for a pre-agreed amount.

The subjects of the agreement are always two persons – the seller and the buyer. Both an individual and a company selling a share in an LLC to a counterparty can alienate a share in a limited liability company. Individuals or legal entities can also acquire such an asset.

One of the most basic conditions for a purchase or sale agreement to be considered legitimate is the form and procedure for drafting such a document. Registration of the contract in the notary office is mandatory.

There is more than one method of protecting violated rights we are talking about filing a statement of claim for termination of an agreement on the purchase or sale of a share in the authorized capital to the court.

Judicial practice provides for cases where the share is not paid in full or in part, this may not always lead to a material violation of the terms of the contract on the part of the buyer. Some courts think differently and conclude that the lack of payment of the share is a significant violation of the contract and may lead to its termination.

Thus, as the situation shows, for a full legal assessment, it is necessary to know all the circumstances of the case, in which you may need the help of a qualified lawyer.

Challenging the sale of a share in an LLC: how can I terminate the contract of sale?

The process of termination of an agreement on the purchase and sale of shares is not easy in legal practice. The main difficulty is the fact of notarization of such a document, which involves checking two subjects of the transaction. Accordingly, for the contesting of the sale to be successful, it is necessary to have knowledge and experience.

When terminating an agreement on the sale or purchase of a share in a company, it is important to rely on:

  • Article 454 of the Civil Code of the Russian Federation, which regulates the purchase and sale process as a whole and considers the basic requirements.
  • Article 488 of the Civil Code of the Russian Federation, which contains provisions on the termination of the agreement and the payment of agreed compensation if the buyer did not transfer funds in time for the share purchased in the LLC.

The law stipulates that after the conclusion of the agreement and notarization of the transaction, the seller is obliged to transfer a share in the authorized capital of the company to the buyer. However, there are often situations when funds are not transferred to the seller’s account within the time period established by the contract. Then you can challenge the agreement based on two articles:

  • Article 450 of the Civil Code of the Russian Federation, which allows to cancel the agreement if the seller or buyer ignores the terms of the transaction.
  • Article 488 of the Civil Code of the Russian Federation, which allows to challenge the agreement because of the goods not paid on time.

There are situations when the parties agree to terminate the contract by mutual agreement of the parties. Note right away, such cases are rare. But this situation applies specifically to you, then it is necessary to consider that the seller has no reason to insist on alienating the sold share in the authorized capital in his favor. In fact, this means voluntary termination of the agreement in the presence of obligations that have entered into force. However, the right to demand payment for the transferred share remains.

To return the share, in case of termination of the contract of sale, the seller must specify the appropriate clause in the agreement. Then it will be refunded if the buyer does not make the payment or fulfills it partially.

Termination of the share sale agreement: essential circumstances

First, we are talking about changing the agreement or canceling it without a court decision. In the second case, the case is considered by the judicial board, which decides in favor of one of the parties. However, to send a statement of claim, it is necessary to proceed from the occurrence of substantial grounds – a valid reason for termination of the transaction. Most often, such situations include violation of agreements, as we discussed earlier, or violation of the law.

Substantial grounds almost always imply situations when the buyer or seller incurs monetary losses because of the transaction. As a rule, we are talking about:

  • Unforeseen situations that are not regulated by the text of the contract. In simple terms, the parties did not prescribe in the agreement a certain basis, which occurred. Often such circumstances entail monetary costs, which is unprofitable for one of the parties. Thus, the transaction ceases to have value. This directly relates to natural disasters, military campaigns, financial crises, the imposition of sanctions and other conditions related to the external conjuncture.
  • A unilateral desire to terminate the contract due to the dissatisfaction of one participant in the transaction. Then it is mandatory to file a lawsuit in court, which may side with the plaintiff if certain conditions are followed. We are talking about the unpredictability of the provision, the impossibility of changing it, incurring significant financial losses and in case of imperfection of the text and conditions prescribed in the contract.

Return of the share to the seller

As we have already noted, the cancellation of the agreement does not restore the subject to the rights to the sold share. Despite the decisions of this kind, the court also has no right to make such a decision. By the way, the buyer can challenge such a verdict in a higher court.

However, there is a legal “loophole” that allows you to regain ownership of the share. If there is a judicial act on the return of immovable property, the seller may terminate the state registration of the buyer’s property right.

Since a share is a complex object of civil rights, it can be returned by recognizing the right to own it.

Preparation of a statement of claim for the return of a share in the authorized capital of an LLC

Judicial practice does not give a clear answer to the question under what circumstances the plaintiff will be able to win the case. The applicant is based on two articles of the Civil Code of the Russian Federation – Article 486 “Payment for goods” and Article 453 “Consequences of amendment and termination of the contract” – when drawing up a claim. However, you can be sure that the court will consider other circumstances of the case.

Legal practice says that when making a verdict in the case of the return of the sold shares in the LLC, the court will rely on existing precedents, that is, on the circumstances of similar cases considered earlier. To minimize your risks, we advise you to seek detailed advice from a professional.

VALEN’s lawyers have considerable practical experience in terminating various purchase and sale agreements, including shares in the company’s authorized capital. We will study all the circumstances of the case and, if necessary, provide legal protection in court.

Author of the article
Termination of the contract of purchase and sale of a share in an LLC. In what cases is such a measure necessary to protect your rights?
Valentina Khlavich
Managing Partner
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