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Forced Sale of Shares

  • 2010-08-18
  • By Andrius Gabnys, Assistant to the Attorney at Law

ECOVIS Miskinis, Kvainauskas ir partneriai advokatu kontora

The Civil Code of the Republic of Lithuania gives the right to the members of a legal person to file an application with the court with the request that shares (interest, contributions) of a legal person which are in possession of a legal person’s member whose actions contradict the goals of the legal person’s activities, and where there are no grounds to expect any changes in the said actions, be sold to the applying member of a legal person.

The claim for the forced sale of shares has to be filed with the district court according to the location of the registered office of a legal person. The court must inform the legal person, whose shares have to be sold in the forced manner, about the claim and the decisions. Participation of a lawyer in the process of litigation of the parties to the given cases is compulsory. The member of a legal person who has filed a claim for forced sale must apply to other members of a legal person to become co-claimants.

Only the following members of a private legal person have the right to file an application for forced sale of shares:
1)    one or some shareholders of a private company whose face value of shares accounts for no less than 1/3 of the authorized capital;
2)    one or some members of a partnership whose interest accounts for no less than 1/3 of all interest of jointly owned assets;
3)    one or some members of an agricultural partnership or co-operative society whose contribution accounts for no less than 1/3 of all contributions.

A member of a legal person does not have the right to file an application for the forced sale of shares under the circumstances laid down above if incorporation documents of a legal person or contracts concluded by its members provide for different rules of forced sale of shares, and the said rules may be applied. Member of a legal person does not have the right to file an application for forced sale of shares if he is controlled by a legal person, the shares whereof have to be sold in a forced manner. The member of a legal person does not have the right to file an application for forced sale of shares if he himself is the legal person, the shares whereof have to be sold in a forced manner.

After an expert report on the price of shares has been submitted, the court passes a judgement on the setting of a price and establishes the person who will have to reimburse the experts’ work and other expenses borne. The court may decide that a legal person has to reimburse the given expenses.

After the court judgement on setting a price has become res judicata, the defendant has, in two weeks time, to transfer title to his shares to the plaintiff and the plaintiff has the right to accept the shares and pay the established price. The price has to be paid upon the transfer of title to the shares to the plaintiff. Transfer takes place in the registered office of a legal person whose shares are sold or in some other place agreed upon by the plaintiff and the defendant.