Expelling a Partner from a Russian LLC

Russian law allows participants of a limited liability company to ask a court to expel a partner who grossly breaches duties or makes the company's work impossible or much harder. The expelled participant loses the share but receives its actual value in money. Expulsion is a court procedure only. A general meeting cannot remove a partner by vote.

Attorney Elena Petrova handles expulsion claims and defends participants facing them, including foreign investors based in California.

Legal Grounds for Expulsion

Article 10 of the LLC Law gives this right to participants who together hold at least ten percent of the charter capital. The Civil Code adds a general rule for all business companies: a participant may seek expulsion of another participant who seriously damages the company.

Courts accept these grounds most often:

• repeated, unjustified absence from meetings that blocks key decisions;
• actions against the company's interests, such as transferring assets to a competing firm;
• abuse of powers as director, causing substantial harm.

A single conflict or disagreement about strategy is not enough. The breach must be gross and linked to the participant's role.

Filing the Claim Step by Step

Corporate disputes fall under the exclusive jurisdiction of the arbitrazh court at the company's registered address. The claimant first notifies the company and other participants of the intention to sue, then files the claim.

Interim measures matter. Without a ban, the defendant may sell or pledge the share during the case.

Valuing the Expelled Partner's Share

After expulsion, the share passes to the company. The company must pay the actual value, which equals the proportional part of net assets. Accounting data for the last reporting period before the judgment takes effect is used. The payment deadline follows the LLC Law unless the charter sets a shorter one.

Valuation is a separate battleground. The expelled participant may argue that the statements understate assets, especially real estate. A court-ordered appraisal can then change the result significantly.

How a Partner Can Resist Expulsion

The defendant can show that absence from meetings was due to improper notice, illness or valid business reasons. It can also be shown that decisions were adopted without the defendant's vote, so no harm arose.

Another strong line is to prove that the claimant is misusing the procedure to squeeze out a minority partner. Courts refuse relief where the claim is an abuse of rights. In a company with two equal partners, courts are cautious, because expelling one side would hand full control to the other.

Patterns in Court Practice

The highest court has published reviews on expulsion disputes. They stress that harm must be proven and that expulsion is an extreme measure used when other tools fail.

A typical case involves a former director who signed unfavourable contracts with a related firm and then stopped attending meetings. Courts in similar situations have examined whether the losses were real and whether the director acted in bad faith. The outcome turns on evidence, not on the size of the conflict.

Alternatives to Litigation

Expulsion takes months and ends with a payout the company must finance. Before filing, partners often consider a negotiated buyout, a deadlock clause in a corporate agreement, or a claim for damages against the director.

Mediation can also help when both sides want to keep the business running.

Preparing Your Position

Gather the charter, meeting notices, minutes, proof of losses and correspondence between partners. Check the share structure and any corporate agreement. A written assessment of grounds and risks helps decide whether to sue or negotiate.

The main channel of communication with the attorney is email: attorneypetrova1@gmail.com.