10 Exit of Shareholders
10.1 Introduction
In a limited-liability company, the exit of shareholders is constrained by a large
number of mandatory provisions of company law. In Community law, many of
such provisions belong to the core of the European legal capital regime. However,
there can only be piece-meal harmonisation of exit-related questions in the EU be-
cause of the wide range of different ways to exit a company.
At a very general level, the forms of the exit of shareholders can be divided into
four standard categories: cash payments made by the company; cash payments or
consideration other than in cash made by a third party; mergers and divisions; and
a combination generally known as refinancing.
In addition, there are existential questions at the level of the company and at the
level of its shareholders. Payments can be made to shareholders when a company
is liquidated. Where a shareholder ceases to exist or becomes insolvent, that
shareholder’s assets may be liquidated. Such existential questions will not be dis-
cussed here.
10.2 Cash Payments by the Company
10.2.1 General Remarks
Cash payments to shareholders are generally constrained by the legal capital re-
gime and the Second Company Law Directive.
Core constraints. There are four core constraints: the distribution of funds must
not be made when the net assets are lower than the subscribed capital or minimum
capital or when the net assets would fall below that threshold;^1 there must be equal
treatment of all shareholders who are in the same position;^2 the acquisition, re-
demption and withdrawal of shares requires a resolution by the general meeting
and usually a majority of at least two-thirds^3 and may require class consents when
(^1) Articles 8 and 34 of Directive 77/91/EEC (Second Company Law Directive).
(^2) Articles 19(1) and 42 of Directive 77/91/EEC (Second Company Law Directive); Article
17(1) of Directive 2004/109/EC (Transparency Directive).
(^3) Article 40 of Directive 77/91/EEC (Second Company Law Directive).
P. Mäntysaari, The Law of Corporate Finance: General Principles and EU Law,
DOI 10.1007/ 978-3-642-03058-1_10, © Springer-Verlag Berlin Heidelberg 2010