Enforcement of corporate rights of a debtor and the problems that arise in this case were discussed during a roundtable on November 30 in Odesa with the participation of the Odesa Regional Council for Justice Reform and experts from the EU Pravo-Justice Project.

The sale of a share in a limited liability company or additional liability company within the framework of enforcement proceedings is regulated by Article 10 of the Law on Enforcement Proceedings, and the specifics are set out in Article 53-1 of the Law on Limited Liability Companies and Additional Liability Companies.

The general scheme of the procedure looks like this:

• The enforcement officer seizes the debtor’s share, which is notified to the relevant company.
• Within 30 days, the company must provide the documents necessary to determine the value of this share in the company’s authorized capital.
• After determining the value of the share, the executor offers to buy it out to the other shareholders of the company, as they have the first right of redemption.
• In the absence of tenderers or timely payment, the contractor transfers the share for sale at an auction through the SETAM platform in the general manner.

At first glance, everything is simple. In practice, however, executors face a number of problems: both at the stage of seizure of corporate rights and during the state registration of the buyer’s ownership of a share in the company’s authorized capital.

In particular, it is the failure to provide the necessary documents or misrepresentation of information to reduce the valuation by the company’s management, which leads to difficulties in the process of valuation and further exercise of corporate rights.

There is an unresolved issue: which of the company’s co-founders should the executor give priority to if all the participants express such a desire?

The law also does not explicitly provide that a share purchase agreement is concluded between the executor and another company member who intends to exercise a preemptive right.

There are a number of problems at the stage of registration of the bidding results, since the decision of a private or public enforcement officer to seize a share of a company participant is not a basis for registration actions.

Solutions to these and other problems identified during the discussion will form the basis of proposals to address the current legislative shortcomings.

The event was organized by the Council of Private Enforcement Officers of Odesa Region in partnership with the Southern Interregional Department of the Ministry of Justice (Odesa) with the participation of representatives of the Ministry of Justice, the EU Project “Pravo-Justice”, SE “SETAM”, the State Registration Office, Odesa Regional Council for Justice Reform (RRJR), lawyers, scholars, insolvency receivers.