342 10 Exit of Shareholders
10.2.6 Withdrawal of Shares Otherwise
It would be legally more difficult to withdraw shares unless it is done following a
share buy-back or through the use of redeemable shares. For public limited-
liability companies, the most important legal constraints are based on the Second
Company Law Directive:^71
- Member States have a right but not a duty to authorise the reduction of subscri-
bed capital by compulsory withdrawal of shares. - If they do, the conditions set out in Article 36 of the Second Company Law Di-
rective must be complied with. - Compulsory withdrawal must always be prescribed or authorised by the articles
of association before subscription of the shares which are to be withdrawn. - Where the compulsory withdrawal is merely authorised by the articles of asso-
ciation, it shall be decided upon by the general meeting unless it has been una-
nimously approved by the shareholders concerned. There are no special requi-
rements as to quorum and majority under Community law.^72 - Where the compulsory withdrawal is prescribed by the articles of association,
the internal distribution of power is determined by the provisions of national
company law. The company body deciding on the compulsory withdrawal will
fix the terms and modalities of the withdrawal to the extent that they have not
already been fixed through the articles of association. - The creditor protection provisions set out in the Second Directive will usually
apply.^73
10.3 Third Party as a Source of Remuneration
10.3.1 Introduction
A shareholder can release capital that he has invested in the company by selling
shares to a third party. A shareholder can sell shares for cash. Alternatively, the
third party can offer to pay for the shares by issuing its own shares to the share-
holder.
Cash. The sale can be transacted at a stock exchange or otherwise, and it can be
a private sale or a public offering. For many investors such as private equity spon-
sors, obtaining a clean exit on favourable terms is an absolute requirement.
Sometimes the sale of shares for cash is not free or not voluntary. The share-
holders may have agreed on how the shares can be bought or sold. This is particu-
larly important in family-owned companies and companies with few shareholders
(^71) Articles 35–40 of Directive 77/91/EEC (Second Company Law Directive).
(^72) Compare Articles 40 and 38 of Directive 77/91/EEC (Second Company Law Directive).
(^73) See Articles 36(1)(d) and 32 of Directive 77/91/EEC (Second Company Law Directive)
replaced by Article 1(9) of Directive 2006/68/EC.