What does a change of shareholders mean in the case of an LLC?
A change of shareholders in the case of an LLC means that share portions are transferred from a previous shareholder to another person. The new person thereby becomes a shareholder of the LLC.
In the case of an LLC, not only the company itself and its company name are important, but also the persons behind it. LLC law is more personal than stock corporation law. Therefore, a share portion cannot simply be passed on at will like an ordinary physical item. The law requires the written form for the assignment of share portions (Art. 785 Abs. 1 OR). In addition, the assignment fundamentally requires the consent of the shareholders' meeting (Art. 786 Abs. 1 OR).
A change of shareholders can have various reasons. Often, it involves the sale of share portions, an internal restructuring, an exit, a succession or the entry of a new person. Legally, however, the same basic question is usually at the center. Who transfers which share portions to whom, under which conditions and with which corporate law consent?
How does a change of shareholders in the case of an LLC work?
The change of shareholders typically takes place in four steps. First, the articles of association and any shareholder agreements are reviewed. Then, the seller and buyer enter into a written assignment agreement. Subsequently, the shareholders' meeting consents, provided that the articles of association do not waive this consent. After that, the LLC updates the share register and registers the change with the commercial register.
The most important first step is the review of the articles of association. The articles of association can deviate from the legal basic model. For example, they can waive the consent of the shareholders' meeting, determine grounds for refusal, provide for a takeover offer at real value or even exclude the assignment (Art. 786 Abs. 2 OR). Therefore, no one should prepare a change of shareholders without reading the articles of association carefully.
This is followed by the assignment agreement. This is the central document for the transfer. The assignment of share portions and indeed the obligation to assign must be made in writing (Art. 785 Abs. 1 OR). The contract must include, in particular, the parties, the LLC, the number and nominal value of the transferred share portions as well as a clear declaration of transfer.
If special rights or obligations are provided for in the articles of association, the same indications must be included in the assignment agreement as in the case of the subscription of share portions, unless the acquirer is already a shareholder (Art. 785 Abs. 2 OR). Such indications may concern, for example, additional contribution obligations, ancillary performance obligations, non-compete clauses, rights of first refusal or purchase rights. In practice, precisely this point is prone to errors because parties think of the price and execution but forget the statutory indications.
If the articles of association do not exclude consent, the shareholders' meeting then decides. Consent is not merely a formality. If it is required, the assignment only becomes legally effective with this consent (Art. 787 Abs. 1 OR). The Federal Supreme Court has clearly confirmed this and at the same time held that, by contrast, the commercial register entry only has a declaratory effect (BGE 140 III 418 E. 6.2.2).
Is a contract required for the assignment of share portions?
Yes. For a change of shareholders in the case of an LLC, a written assignment agreement is fundamentally required. Without a written assignment, the transfer of the share portions is not properly implemented.
The contract should not only state that share portions are "sold". A clear assignment or transfer declaration is important. The document must show that the share portions are indeed to pass from the previous person to the new person. The mere intention to transfer later is not sufficient for the execution.
In practice, a distinction is often made between two levels. On the one hand, there is the obligational transaction, for example, the purchase agreement with purchase price, payment modalities, guarantees and other economic rules. On the other hand, there is the disposition transaction, meaning the actual assignment of the share portions. Both require the written form under the law (Art. 785 Abs. 1 OR). For the commercial register, however, the formally valid assignment is regularly and above all decisive as proof (Art. 82 Abs. 2 lit. a HRegV).
This has a practical advantage. Confidential information such as the purchase price, payment terms, earn-out rules, securities or guarantees can be regulated in a separate purchase agreement. It is not mandatory to disclose every economic detail to the commercial register, provided that the submitted supporting documents sufficiently prove the transfer of rights.
Public notarization is not generally prescribed by applicable law for the assignment. Nevertheless, it may be necessary in individual cases if the articles of association require public notarization. Older articles of association in particular still frequently contain such clauses. This is another reason why reviewing the articles of association before execution is central.
When is the consent of the shareholders' meeting required?
The consent of the shareholders' meeting is the statutory standard case. The assignment of share portions requires the consent of the shareholders' meeting, and this can fundamentally refuse consent without giving reasons (Art. 786 Abs. 1 OR).
However, the articles of association can adapt this rule. They can waive the requirement of consent, limit the grounds for refusal, provide for a takeover at real value, exclude the assignment or contain rules for cases with additional contribution or ancillary performance obligations (Art. 786 Abs. 2 OR).
If consent is required, it is crucial for effectiveness. The assignment then only becomes legally effective with consent (Art. 787 Abs. 1 OR). If the request for consent is not rejected within six months after receipt, consent is deemed to have been granted (Art. 787 Abs. 2 OR). This prevents an LLC from endlessly blocking a change of shareholders without making a formal decision.
Unless the articles of association provide otherwise, a qualified majority applies to the consent resolution. Consent to the assignment is considered an important resolution and requires at least two-thirds of the represented votes as well as the absolute majority of the entire share capital associated with an exercisable voting right (Art. 808b Abs. 1 Ziff. 4 OR).
What role does the commercial register play?
The commercial register makes the change of shareholders visible to the outside world. The shareholders must be entered in the commercial register with the number and nominal value of their share portions (Art. 791 OR). The LLC must register all transfers of share portions for entry, regardless of whether the transfer is based on a contract, succession, matrimonial property law, compulsory enforcement or another legal ground (Art. 82 Abs. 1 HRegV).
For the registration, the commercial register requires in particular proof that the share portion has been transferred to the new shareholder. Unless the articles of association waive the consent of the shareholders' meeting, proof of this consent is also required (Art. 82 Abs. 2 HRegV).
Continuous proof is important. The acquirer may only be entered if there is continuous proof that the share portion has passed from the registered shareholder to the new person (Art. 82 Abs. 3 HRegV). The commercial register therefore does not simply check whether a form has been filled out. It requires comprehensible evidence of the chain of transfer.
Nevertheless, the commercial register entry is not the moment when the change of shareholders materially arises. In the case of assignments requiring consent, the consent of the shareholders' meeting is constitutive. By contrast, the commercial register entry has a declaratory effect (BGE 140 III 418 E. 6.2.2). Simply put, this means: consent makes the change legally effective, the commercial register entry makes it publicly visible.
What needs to be done internally after the change of shareholders?
After the change of shareholders, the LLC must update its share register. The company keeps a share register of the share portions and must keep it in such a way that it can be accessed in Switzerland at any time (Art. 790 Abs. 1 OR).
The shareholders must be entered in the share register with their name and address. Also to be entered are the number, nominal value and, if applicable, categories of the share portions of each shareholder as well as usufructuaries and pledgees (Art. 790 Abs. 2 OR). The supporting documents on which an entry is based must be kept for ten years after the deletion of the registered person (Art. 790 Abs. 5 OR).
The share register is therefore the internal register of the LLC. It is not the same as the commercial register. The commercial register is public and serves publicity. The share register is internal to the company and shows who holds which share portions. Shareholders have a right of inspection into the share register (Art. 790 Abs. 4 OR).
In addition, it must be checked whether a notification of the beneficial owner is necessary. Anyone who acquires share portions alone or together with third parties and thereby reaches or exceeds 25 percent of the share capital or voting rights must report the beneficial owner to the company within one month (Art. 790a Abs. 1 OR). This is particularly relevant when a new investor or a holding company enters.
What mistakes often happen during a change of shareholders?
A common mistake is that the articles of association are reviewed too late. Anyone who only realizes after signing that there is a public notarization requirement, a consent requirement, a right of first refusal or a prohibition of assignment risks delays or ineffective execution.
A second mistake lies in unclear contracts. The assignment agreement should clearly identify the parties, the LLC, the transferred share portions and the declaration of transfer. Terms like "sold" can make economic sense but are not always sufficient as a clear declaration of assignment for execution.
A third mistake is the missing or incorrect consent. If consent is required, it must be correctly decided and proven. Without effective consent, the assignment does not become legally effective (Art. 787 Abs. 1 OR).
A fourth mistake concerns the commercial register. The commercial register requires the necessary supporting documents and a continuous chain of transfer (Art. 82 Abs. 3 HRegV). If documents are missing, names do not match or the signing authority is unclear, the application can be rejected.
If you need support with the topic of incorporation or corporate changes, Jurata will be happy to help you at any time, for example with mutations in the commercial register.
Conclusion
A change of shareholders in the case of an LLC is legally quite feasible but should be properly prepared. The articles of association, a written assignment agreement, the possibly necessary consent of the shareholders' meeting, the update of the share register and the registration with the commercial register are decisive.
The most important business distinction is: if the consent of the shareholders' meeting is required, it makes the assignment legally effective. The commercial register entry, on the other hand, is primarily important for publicity. Anyone who observes this sequence and carefully prepares the supporting documents avoids unnecessary queries, delays and legal uncertainties.
Frequently asked questions about the change of shareholders in the case of an LLC
Does the change of shareholders in an LLC always have to be registered in the commercial register?
Yes. The LLC must register all transfers of share portions for entry in the commercial register (Art. 82 Abs. 1 HRegV). This applies regardless of whether the transfer takes place by contract or by operation of law.
Is a purchase agreement sufficient for the transfer of share portions?
A purchase agreement alone is not always sufficient. The transfer requires a written assignment of the share portions (Art. 785 Abs. 1 OR). In practice, purchase agreement and assignment can be combined in one document or regulated separately.
Can the shareholders' meeting reject the change?
Yes. According to the basic legal model, the shareholders' meeting can refuse consent to the assignment without giving reasons (Art. 786 Abs. 1 OR). However, the articles of association can amend this rule.
When is the new shareholder truly a shareholder?
If consent is required, the assignment only becomes legally effective with this consent (Art. 787 Abs. 1 OR). The commercial register entry is important but, according to case law, fundamentally has a declaratory effect (BGE 140 III 418 E. 6.2.2).
