January 6, 2021
The moment of transfer of rights to participant interest in LLC
1. Civil Code of the Republic of Uzbekistan;
2. Law No. 310-II of 06.12.01 “On Limited and Additional Liability Companies”;
3. Appendix No. 1 to the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan dated 09.02.17 No. 66 “Regulations on the procedure for state registration of business entities”.
It remains an open question at what point the transfer of rights to participant interest in LLC occurs in the event of alienation of it.
First of all, it is important to clarify that participant interest is not regarded as a thing. Participant interest – property right, which is expressed in the right of its owner to demand payment of profits and other payments provided for by law. Since we are talking about participant interest in a legal entity, this means that the buyer of such participant interest will deal with corporate rights and obligations, namely, when purchasing participant interest, he eventually receives corporate rights and obligations. Thus, in order to determine the moment of transfer of rights to participant interest purchased, we will refer not only to the regulation of purchase-sale contracts, but also, and to a greater extent, to the corporate nature of transactions for the purchase and sale of participant interest.
As a General rule in purchase-sale contracts rights to the goods shall be transferred not at the time of conclusion of the contract, but at the time of transfer of goods, namely from the moment of signing the act of transfer and acceptance, unless otherwise provided by the contract or law and unless the law provides for state registration of the contract. The legislation does not stipulate the state registration of the participant interest purchase-sale contract, but there are other requirements. Law No. 310-II of 06.12.01 “On Limited and Additional Liability Companies” establishes the procedure according to which changes made to articles of association are subject to state registration. When selling participant interest, the composition of the company’s participants changes, which, according to Appendix No. 1 to PCM No. 66 of 09.02.2017, is a change that is subject to mandatory re-registration. These changes become effective for third parties from the moment of such state registration. Thus, the buyer of participant interest will be considered as a member of legal entity and will be able to enjoy the rights it will receive as a result of the purchase, after making appropriate changes in the articles of association and their registration. The legislator thus provided protection for third parties from fraud, as well as access and recording of transactions for the purchase and sale of participant interest. This fact once again supports the argument that the rights to participant interest are transferred at the moment of state registration of changes related to the transfer of participant interest.
The buyer of participant interest could not affect the decision of the society on amendments to the articles of association concerning the transfer of participant interest, as long as he’s not got the rights to participant interest, it has not yet become a member of a legal entity to vote when deciding on changes due to the transfer of participant interest in the legal entity. Thus, it is the active actions of the seller that influence the company’s decision to make appropriate changes to the articles of association.