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ArticlesMarch 14, 20240

Exclusion of associates from a Limited Liability Company

According to Art. 222 of Law 31/1990, the following may be excluded from the limited liability company:

1. The associate who, being in default, does not contribute the agreed upon share
Even if the associate has not fulfilled their obligation to contribute, the proceedings to exclude them from the company can only be initiated after putting them in default, a mandatory legal requirement that serves to warn the associate about the seriousness of failing to make their contribution.
The associate can be excluded regardless of the value of the contribution they are required to make, even a small amount can trigger the sanction of exclusion (Supreme Court decision No. 2416/April 18, 2003)

Even if the associate cannot be blamed for not fulfilling their contribution obligation in bad faith, the possibility of their exclusion is necessary to protect the company and the other associates (Supreme Court decision No. 2416/April 18, 2003). Consequently, failure to meet the contribution obligation can lead, regardless of the reason for non-fulfillment, to their exclusion from the company under Art. 222 para (1) lit. a) of the Companies Law.

2. The associate with unlimited liability who is bankrupt or has legally become incapacitated

The case for exclusion provided by Art. 222 para (1) lit b) of Law 31/1990 applies only to associates with unlimited liability, namely associates from general partnerships, limited partners from simple limited partnerships, and limited partners from partnerships limited by shares, being excluded from limited liability companies due to the limited nature of their liability.

3. The associate with unlimited liability who interferes without right in administration or contravenes the provisions of Art. 80 and 82
This case for exclusion, which encompasses three distinct situations, applies only in the case of general partnerships, simple limited partnerships, and partnerships limited by shares, but only concerning limited partners. Thus, it is inapplicable to associates of limited liability companies, who have liability limited to the subscribed capital (High Court of Cassation and Justice decision No. 3590/October 29, 2013).

4. The associate who is also an administrator and commits fraud against the company or uses the company’s signature or social capital for their own benefit or the benefit of others

This situation can only occur if the associate is also an administrator of the limited liability company.

Over time, the prevailing opinion has been that the cases for exclusion of associates (provided in Art. 222 of Law 31/1990) are limited, with decisions recognizing an illustrative character being isolated. Also, according to the decision of the High Court of Cassation and Justice No. 28/2021, it is established that the hypotheses for the exclusion of the associate provided by Art. 222 of Law 31/1990, do not complement the provisions of Art. 1928 NCC, which stipulates (“At the request of an associate, the court, for valid reasons, may decide the exclusion from the company of any of the associates”).

Thus, “there are no hypotheses left outside the regulation, where the law would allow an associate to be excluded from the limited liability company; therefore, it cannot be considered that, in such a situation, the special norm would be complemented by the general one.”

Exclusion of the associate from companies with two associates

The remaining associate may expressly decide to continue the company in the form of a single-member limited liability company, this possibility being granted to preserve the entity of the company.

If the remaining associate does not decide on the continuation of the company’s existence, it is dissolved.
The Companies Law referring to the associate remaining in the company leads to the conclusion that they must express their will after the final decision of exclusion remains, and not during the litigation concerning the exclusion of the other associate, being thus subsequent to the exclusion.
It is not necessary for the company’s statute to include a clause indicating the possibility of continuing the existence of the company in the event of excluding one of the two associates.

Exclusion of associates from a company in dissolution or liquidation

Both in doctrine and jurisprudence, it has been argued that the exclusion of the associate is possible until the dissolution of the company, and once it has entered into liquidation, the action for this purpose is inadmissible, because the associates no longer carry out any activity related to this capacity, and their rights are limited only to what pertains to the liquidation of the company, a phase in which the company’s activity no longer continues, the operations performed aiming at the liquidation of the assets in the company’s patrimony.

In a thoroughly reasoned decision, the High Court of Cassation and Justice reaffirmed the inadmissibility of excluding the associate from the dissolved company, noting that the legal provisions regarding the modification of the constitutive act (among which exclusion) cannot be applied concurrently with those regarding the cessation of the company, that the provisions of Art. 222 are applicable only in the case of a normally operating company, excluding the associate is not a liquidation operation for which the company retains its legal personality.

For further information or any additional inquiries, please do not hesitate to contact us:

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📧 Email: office@grecupartners.ro

We are here to assist and provide legal support for all your needs. We look forward to discussing with you.

Bianca Dan – Attorney at Law

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