Withdrawal of a member from a Limited liability company (LLC)
According to the Croatian Companies Act, membership in an LLC terminates in the following ways:
1. upon the death of a natural person member,
2. upon the dissolution of a legal entity member,
3. by transfer or assignment of the ownership interest,
4. by redemption (amortization of the ownership interest) or expulsion due to non-payment of the contribution (forfeiture),
5. by expulsion of a member for other reasons,
6. by voluntary withdrawal of a member,
7. upon the dissolution of the company.
One of the possible ways for membership in an LLC to cease is through the voluntary withdrawal of a member. A member may withdraw from an LLC either based on the provisions of the articles of association or directly under the law.venog ugovora te na temelju samog zakona.
Withdrawal based on the Articles of Association
By establishing or joining an LLC, a person voluntarily enters into a community formed to achieve certain objectives. However, withdrawal from this community is not entirely at the discretion of the member, unless specific grounds exist. A member always has the alternative of exiting the company by transferring their ownership interest to another party.
In order for a member to withdraw based on the articles of association, the articles must expressly regulate the conditions for withdrawal. Under the Companies Act, the articles of association must explicitly define:
a) the conditions under which a member may withdraw,
b) the procedure for withdrawal,
c) the compensation payable by the company to the withdrawing member, and
d) the consequences of withdrawal for the ownership interest and for the company.
The law does not specify the level of detail required for regulating withdrawal, only the minimum elements, leaving further elaboration to the will of the members. However, if the articles of association do not regulate all four elements, withdrawal under the articles will not be possible — a position confirmed by court practice.
Withdrawal based on law (lawsuit)
If the articles of association do not provide for withdrawal, or if a member does not use the withdrawal option stipulated therein, the member may still seek withdrawal by filing a lawsuit before the court.
Unlike withdrawal under the articles of association, where the conditions and procedure are predetermined, withdrawal by lawsuit is independent of the articles. A member cannot withdraw at will; legitimate grounds must exist. This does not involve termination by transferring or assigning the ownership interest to a third party, but rather a situation where the member, under certain conditions, effectively returns their interest to the company.
