Changes in procedure for paying the actual value of a share to a shareholder upon withdrawal from a limited liability company.

The Law On Limited Liability Companies allows for situations where a shareholder’s share may be transferred to the company for one reason or another, and the shareholder ceases to hold a share in the company. In such a case, the company must pay the shareholder the actual value of the shareholder’s share. For example, this situation arises in the following cases[1]:

• if a shareholder is permitted to withdraw from the company (as is expressly provided for in the company’s charter), and the shareholder has applied for withdraw;
• if a shareholder requires the company to acquire the shareholder’s share, provided that the company’s charter prohibits a shareholder from withdrawing from the company and from selling his share to a third party, and the other shareholders have refused to purchase the shareholder’s share;
• if the company’s charter provides that the heirs of a shareholder may not become shareholders of the company, or other shareholders’ consent is required to do so, and such consent has not been given; or
• if, at the request of creditors, the share, or a portion thereof, owned by a shareholder of the company becomes the subject of execution proceedings.

The actual value of the share corresponds to a portion of the value of the company’s net assets that is proportional to the size of the shareholder’s share. The value of the company’s net assets is calculated on the basis of the company’s financial statements. For this reason, the actual value of a share may differ from its market value. Often it may be lower.

There have been previously court disputes  in which the plaintiffs have attempted to bring the actual value of a share closer to its market value. The courts in a number of cases have argued that the market value of real estate, rather than its accounting residual value[2], should be used to calculate the value of the company’s net assets and the actual value of a share.

At the end of March 2025, a draft law was submitted to the Russian State Duma, according to which the actual value of a share is to be determined and paid at its market value, if the person, to whom the actual value of a share, or a portion thereof[3] is to be paid, so declares. An appraiser will be engaged to determine the market value of a share. At the same time, the draft law states that if the person, to whom the actual value is to be paid, requests that the market value of a share be paid, it will not be permitted to use any value, except the market value.

These changes could result in significant risks to joint ventures if a shareholder withdraws, as the market value of a share may be much higher than its actual value, which could create significant risks to the very existence of the company.

We recommend reviewing your company’s charter to determine whether it prohibits a shareholder from withdrawing from the company and making other changes to the charter that will protect your company’s activities if a shareholder decides to withdraw.

We will be happy to draft amendments to your company’s charter for you that will meet your needs and minimize the risks associated with the withdrawal of shareholders.

Do you have any questions or would like to discuss something? Please send an email to Anton Kabakov or Alexandra Yudina.

[1] Article 23 of Federal Law No. 14-FZ dated February 8, 1998 On Limited Liability Companies.

[2]Resolution No. 15787/04 of the Presidium of the Russian Supreme State Commercial Court dated June 7, 2005 in Case No. А53-15243/02-С4-11, Resolution No. 5261/05 of the Presidium of the Russian Supreme State Commercial Court dated September 6, 2005 in Case No. А50-10328/2004-Г25, Resolution No. 16191/11 of the Presidium of the Russian Supreme State Commercial Court dated April 17, 2012 in Case No. А40-18600/05-134-138, and Ruling No. ВАС-5228/13 of the Russian Supreme State Commercial Court dated May 6, 2013 in Case No. А54-329/2010.

[3] Draft Federal Law No. 876952-8 On the Introduction of Amendments to the Federal Law ‘On Limited Liability Companies’.