Ask the law: Business partner wants to liquidate his company shares
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Question:
A questioner asks: I am a partner in a limited liability company (LLC) with a percentage of 40 per cent, and for two years I have not received any profits from the company, and the manager states that the company does not achieve profits, but rather large losses. My question is, what are the procedures for liquidating the company, and does it require the approval of all partners? Please advise.
Answer:
I would advise the questioner that:
Based on Article 314 of the Commercial Companies law no. (32) Of 2021, unless the Memorandum of Association or Statute of the Company provides for the method of liquidation or the partners agree otherwise upon the dissolution of the Company, the provisions of the Federal Decree-Law no. (32) Of 2021 shall apply to the liquidation of the Company.
The liquidation shall be conducted by one or more liquidators appointed by the partners or under a decision by the general assembly or whomever is acting on its behalf, provided that the liquidator is not an auditor of the Company currently or has already audited its accounts within (5) five years preceding the appointment.
If liquidation is based on a judgment, the competent court shall point out the method of liquidation and appoint the liquidator. In all cases, the task of the liquidator shall not be terminated by the partners’ death, declaration of bankruptcy, insolvency, or interdiction order, even if the liquidator is appointed by the partners.
So, to liquidate the limited liability company, it needs the quorum stated in the memorandum of association or statue of the company and a decision issued by the general assembly. The dissolution decision shall be passed by the majority prescribed for amending the Memorandum of Association of the Company
If the partners as per the majority prescribed in the Memorandum of Association of the Company, agree to liquidate the company, they can appoint a liquidator for this purpose without filing a case in the court.
If there is no agreement and the losses reach three quarters of the capital, then the court will appoint a liquidator as per a request applied by the partners holding one quarter of the capital as per Article 308 of the Federal Decree Law no. 32 of 2021, which states that (If the losses of a Limited Liability Company reach half of the capital, the managers shall refer the dissolution matter to the general assembly of the partners.
The dissolution decision shall be passed by the majority prescribed for amending the Memorandum of Association of the Company. 2- If the losses reach three quarters of the capital, the partners holding one quarter of the capital may request to dissolve the Company).
