Step-by-Step Legal Process
As we know, relations concerning limited liability companies in the Republic of Armenia are regulated by a variety of legal acts, among which the key ones are the Civil Code of the Republic of Armenia, the Law of the Republic of Armenia “On Limited Liability Companies,” and the Law of the Republic of Armenia “On State Registration of Legal Entities, State Registration of Separate Divisions of Legal Entities, Institutions, and State Registration of Individual Entrepreneurs.”
It is noteworthy to examine changes in the composition of participants of limited liability companies, as well as the legal relations associated with their withdrawal from the company, the admission of new participants, and the exclusion of participants from the company.
In Armenia, the admission or removal of a participant of a limited liability company generally requires amendments to both the company’s internal documents and the state registration records. The procedure depends on whether the participant’s share is transferred, a new investor joins the company, or an existing participant withdraws from the company. Naturally, the provisions established in the company’s charter are considered first, as they are decisive in resolving any related issues.
Thus, changes in the composition of participants of a limited liability company may occur in the following cases:
- Sale of a participant’s share to another person;
- Donation of a share or transfer of a share by inheritance;
- Admission of a new participant through an increase in the charter capital;
- Withdrawal of an existing participant from the company (provided that such withdrawal is permitted by the charter and applicable legislation);
- Exclusion of an existing participant from the company.
The Civil Code of the Republic of Armenia stipulates that a participant of a limited liability company has the right to sell or otherwise transfer his/her share or a part thereof in the charter capital of the company to one or more participants of the same company. The alienation of a participant’s share (or a part thereof) to third parties is permitted unless otherwise provided by the company’s charter. The same Code provides that the remaining participants of the company have a pre-emptive right to purchase the share being sold. In cases where the transfer of a participant’s share (or a part thereof) to third parties is not possible, and the other participants of the company refuse to purchase it, the company is obliged to acquire such share.
The Civil Code of the Republic of Armenia also stipulates that a participant of a limited liability company has the right to withdraw from the company at any time, regardless of the consent of the other participants. A participant who withdraws from a limited liability company shall be paid the value of the property corresponding to his/her share in the charter capital, unless otherwise provided by the company’s charter. Furthermore, in the event of the death of a company participant, his/her share is transferred by inheritance to the heirs of the deceased participant, unless the company’s charter provides for compensation of the value of the share instead.
According to the Law of the Republic of Armenia “On Limited Liability Companies,” a participant (or participants) of the company who, in aggregate, owns at least 10 percent of the company’s shares has the right to apply to the court and demand the exclusion of another participant from the company if that participant, through his/her actions or inaction, makes the normal operation of the company difficult or impossible. The share of a participant excluded from the company is transferred to the company. The company is obliged to pay the participant the value of his/her share.
With regard to the admission of a new participant to a limited liability company, it may be carried out through an increase in the company’s charter capital funded by a contribution made by a third party. In such a case, the general meeting of participants adopts a decision on increasing the charter capital and admitting a new participant to the company. Following this, the relevant amendments are made to the company’s charter and submitted for state registration.
Thus, as we have understood, relations concerning changes in the composition of company participants are regulated in considerable detail by legal acts. Such changes also involve the preparation and signing of the necessary corporate documents, which are subsequently submitted to the Agency of the State Register of Legal Entities of the Republic of Armenia. These documents include:
- an application for state registration;
- a decision or minutes of the general meeting of participants;
- a share transfer agreement or other supporting documents;
- the amended charter of the company;
- proof of payment of the state duty, where required;
- identification documents in cases prescribed by law;
- a power of attorney and an identification document of the authorized person, in cases where the registration of the change with the State Register Agency is carried out through an authorized representative.
If the complete set of required documents is submitted, state registration is often completed within several working days. However, the applicable timeframes may vary depending on the specifics of the transaction and the relevant administrative procedures.
It should also be noted that the legislation of the Republic of Armenia allows both citizens and legal entities of the Republic of Armenia, as well as foreign individuals and legal entities, to be participants of a limited liability company. In general, the procedure for admitting a foreign participant is the same as in the case of Armenian residents; however, in practice, additional requirements may apply.
In particular:
• identification or registration documents of a foreign person may be subject to notarization, apostille certification, or consular legalization, depending on the country of issuance and the international treaties in force between that country and the Republic of Armenia;
• documents prepared in a foreign language are generally required to be submitted together with a notarized Armenian translation;
• if the participant is a foreign legal entity, documents confirming its registration and the authority of its representative may also be required.
Thus, the admission or removal of a participant of a limited liability company is not merely a formal registration procedure; it is a legally significant action that may affect the company’s governance, decision-making processes, and the rights and obligations of its participants. Therefore, it is necessary to ensure that all corporate decisions, agreements, and state registration documents are prepared and submitted in compliance with the requirements of applicable legislation.
Legal Disclaimer
This article is for general informational purposes only and does not constitute legal or tax advice. Armenian laws and registration procedures may change, and their application depends on the specific circumstances of each case. Professional legal advice should be obtained before making decisions or taking action based on the information provided in this article.