Cancellation of a partner in Ltd. after refusal of registration by the Commercial Register.
An interesting case arose in our practice related to the attempt of a commercial company to enter the cancellation of a partner in the Commercial Register, which partner had previously submitted an application to leave the company within the meaning of Art. 125 of the Commercial Law.
The team of A.EFFE. CONSULTING working on the case.
Coordinator: Adv. Andrea Favaro, Adv. Mila Hincheva
Operational activity: Adv. Mila Hincheva
The case.
It is a limited liability company with two partners, one of whom has exercised the right to withdraw from the company voluntarily in accordance with the provisions of Art. 125, para. 2 of the Commercial Law, with a notice of 3 (three) months. After the expiration of the notice period, the termination of membership occurs automatically (according to law and unanimous case law) and therefore the manager and legal representative of the company has correctly submitted a request to the Registry Agency – Commercial Register to delete the partner.
Refusal by the Registry Agency.
Despite the existence of all the conditions necessary for the exercise of this right (notification to be made in writing and the expiration of a certain period – three months), the Commercial Register has refused to register the deletion of the outgoing partner due to lack of decision of the General Meeting the fate of the shares of the leaving partner and the subsequent changes in the company composition. According to the reasons set out in the refusal, due to the termination of the participation in the company, the relations related to this participation should also be duly settled. Again, according to the refusal, without the actual transfer (or any disposition) of the shareholder’s shares, there would be risk for the creditors and the reflected capital would not correspond to the actual one (an element inadmissible by the current legislation). In fact, the current legislation does not require as a condition for leaving the company and therefore for the occurrence of the legal consequences of leaving the existence of a decision of the general meeting about the consequences of the termination of the partnership. On this basis, an appeal was lodged against the refusal of the Registry Agency.
Result of the appeal.
After appealing the refusal, the competent court ruled with a decision by which the refusal was revoked and the Registry Agency was instructed to register the deletion of the partner, according to the application of our client. The reasons for the decision – well known and supported by the prevailing case law – were in summary confirmation of the fact that the deletion of the partner has only a declarative function should be notified to all under Art. 119, para. 1 item 1 in conjunction with Art. 115, para. 3 of the Commercial Law. In this sense, the possible consequences regarding the choice of the partner to leave the company belong to the full autonomy of the company and it is not admissible for the Registry Agency to require the existence of other prerequisites. It is interesting to note that the decision in question was appealed to the Court of Appeal by the Registry Agency.
This fact is interesting given that, based on the decision of the Court of Appeal, the Agency is not entitled to challenge the decisions of the Court of First Instance on the refusal of registration and is therefore deprived of active standing. Accordingly, the decision of the Court of Appeal did not examine the case on the merits, ruling only on procedural admissibility, stating that the Agency had no legal interest in appealing and therefore is lacked any active procedural standing. In its reasoning, the Court emphasized that the Agency, in its capacity as the deciding body for entries, does not have the status of a party to the security proceedings and was therefore not entitled to challenge an act of the Court issued in connection with an appeal against its act. The procedural right to file an appeal against an act / refusal / issued by a jurisdictional body in the civil proceedings, honouring which is the security proceedings, belongs to the party in this proceeding, with the aim of eliminating the vicious actions of the Registry Agency as a deciding body. In the decision, the court also ruled on the legal quality of the entities concerned, recognizing that the Agency has no administrative function, given that it is only entrusted with the task of verifying the existence of the prescribed details under current law and to proceed with registration. of the circumstance requested by the applicant entity, or to refuse registration if the requirements of the law are not complied with.
This decision corresponds to the established in the case law, which is unanimous regarding the fact that the law does not give the Registry Agency the right to appeal the decisions of the court, issued under Art. 25 of the Commercial Register and Non-Profit Legal Entities Act. Furthermore, another interesting element is that the Court of Appeal emphasizes that the decision of the Court of First Instance cannot even be the subject of an appeal by the Agency, as it has no legal interest in challenging the acts of the Court ruling on the lawfulness of its refusals laid down in the registration procedure, as the purpose of the security proceedings is to support the exercise of civil rights and, in particular, the right to register. In this case the interest of the Registry Agency is completely absent and the decision corresponds to the instructions provided by the prevailing case law. In this sense are the most recent rulings of the Court of Appeal on the issue: Ruling № 526 / 17.08.2021 of the Sofia Court of Appeal, Ruling №243 / 20.04.2021 of the Sofia Court of Appeal, Ruling № 503 / 18.08.2021 of the Sofia Court of Appeal. The end result is the entry into force of the first instance decision revoking the Agency’s refusal and entering the deletion of the partner by the registration officer, as requested by our client from the outset.