The Commerce Act provides for a significantly more relaxed regime for the transfer of shares in a DPK compared with the rules that apply to an OOD. At the same time, the law allows additional conditions to be included in the articles of association of the DPK, on compliance with which the validity of the transfer vis-à-vis the company itself may depend. In practice, these arrangements may make the procedure longer and more complex, but their purpose is to provide greater protection for the interests of the partners.
The transfer of company shares in a DPK is, as a rule, free.
Unlike in an OOD, in a DPK it makes no difference whether the shares are transferred to an existing partner or to an outside person. It is not necessary for the General Meeting or the management body of the company to adopt a special decision to admit a new partner.
As a general rule, the contract for the transfer of a company share in a DPK is concluded in written form with notarised signatures.
The articles of association may, however, provide for a lighter regime – for example, that the contract be concluded merely in ordinary written form. In such a case, the parties may also sign the contract with electronic signatures.
The articles of association of the DPK may impose a requirement that certain procedures or conditions be observed upon a transfer of shares. These may relate to any disposal of company shares or may be provided for only upon a transfer of shares to third parties. For example, the articles of association may provide that a decision of the General Meeting is required in order to admit a third party as a new partner.
The articles of association may also include special clauses relating to the transfer of shares in a DPK, such as:
Right of first refusal
This clause obliges a partner who intends to transfer to a third party all or part of the shares he holds in the DPK first to offer those shares to the other partners. Only if they refuse to acquire them does the partner acquire the right to transfer them to an outside buyer.
Right to join in a sale ("tag along" clause)
The "tag along" clause is intended to protect minority partners. Under it, when a partner wishes to transfer his shares in the DPK to a third party, the other partners acquire the right to sell their shares as well to the same buyer and on the same terms.
If any of the partners exercises this right, the selling partner may transfer his own shares to the third party only if the latter also acquires, on identical terms, the shares of the partner who has requested to join the transaction.
Right to require others to sell ("drag along" clause)
This clause is usually agreed together with the "tag along" clause, thereby achieving a balance between the interests of the majority partner and the minority partners.
The "drag along" clause may provide that, if a third party makes an offer to acquire all the shares in the capital of the DPK, the majority partner has the right to require the other partners to sell their shares as well.
On the one hand, the drag-along right is advantageous for the majority partner, because it allows him to exit the company more easily. On the other hand, it is also favourable for the minority partners, since it gives them the opportunity to sell their shares at the same price and on the same terms as the majority partner – for a small shareholding it is usually difficult to negotiate a better price.
Prohibition on disposing of company shares for a specified period
Such a prohibition may be provided for either in respect of all shares or only in respect of shares of a particular class – for example, it may cover ordinary shares but not apply to preferred ones.
The prohibition may apply for a specified term. For example, it may be agreed that disposal of the shares is not permitted for a period of one year from the date of their acquisition.
IMPORTANT!!! The transfer of company shares in a DPK is not entered in the Commercial Register.
The transfer itself must be recorded in the register of partners. If this is not done, the transaction will not take effect vis-à-vis the company.
The entry in the register of partners is made by the manager of the DPK within a period not exceeding 7 days from the submission of the documents for the transfer.
It should be borne in mind that, as a result of the transfer of the shares, an obligation may arise to record changes in the beneficial owners of the DPK in the Commercial Register.
If you need legal advice or assistance with the registration of a DPK/EDPK or with making changes to a variable capital company, contact us by telephone: 0887550706 or by e-mail: [email protected]
