How to invalidate a contract for the transfer of shares in a limited liability company
Author of the article: ARROWS law firm (Mgr. Jan Medek, office@arws.cz, +420 245 007 740)
This article was written in 2020. If you are looking for up-to-date information on this topic, please do not hesitate to contact us at office@arws.cz or by phone at +420 245 007 740. We will be happy to advise you.
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The Supreme Court has repeatedly expressed its opinion (see the Resolution of the Supreme Court of the Czech Republic 27 Cdo 1552/2020) that (even under the new Civil Code) it is not possible to claim the invalidity of a transfer agreement in a limited liability company if it is possible to claim the existence of a right or legal relationship.
If the validity of the contract can be considered as a preliminary question as to the existence of a right or legal relationship, there will not normally be an urgent legal interest in the determination of such a preliminary question[1].
How, then, should we proceed in cases where the contract is alleged to be void?
It is necessary to bring an action for a declaration of the existence of a right or legal relationship or, alternatively, it is necessary to examine the legal question in the context of other proceedings to which the legal question is relevant.
For example: if the assessment of the validity of the contract for the transfer of the share in the limited liability company has an impact on the determination of whether the share is part of the matrimonial property, then the court will examine this question as a preliminary question directly in the proceedings for the division of the matrimonial property. [2]
Therefore, before bringing an action for a declaration that a contract for the transfer of a share in an LLC is void, it is always necessary to consider whether the existence of a right or a legal relationship can be claimed directly. The assessment of this question is quite complicated and it is advisable to contact a law firm experienced in this area of law.
From the point of view of the parties to a contract for the transfer of shares in a limited liability company, it is also advisable to consult experts in the field before concluding the contract, as this consultation may save the parties the costs of legal proceedings if they are brought by anyone.
If you are dealing with similar problems, either from the perspective of a future contract for the transfer of shares in an LLC or from the perspective of someone who wants to claim any performance under a void contract, do not hesitate to contact us.
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[1] For more details see e.g. the Supreme Court judgment of 2 April 2001, Case No. 22 Cdo 2147/99, the Supreme Court resolution of 31 May 2011, Case No. 29 Cdo 3161/2010
[2] For example, see the Supreme Court judgment of 31 March 2010, Case No. 22 Cdo 506/2008, the Supreme Court resolution of 23 October 2017, Case No. 27 Cdo 3664/2017, or of 27 May 2020, Case No. 24 Cdo 312/2020