Why partner disputes happen
Many Romanian limited liability companies (SRL) are set up between friends or relatives, using standard articles of association. While business is good, nobody reads them. Problems start when one partner wants to leave, when profit distribution is discussed, when one partner works more than the other, or when the director makes decisions without consulting the others.
The hardest situation is deadlock: two partners holding 50% each who can no longer pass any resolution. The company cannot approve its financial statements, change its director or take major decisions. Romanian Companies Law no. 31/1990 provides several ways out, each with its own conditions and consequences.
Withdrawal of a partner
Withdrawal means that a partner leaves the company and receives the value of their shares. For an SRL, the law allows withdrawal in the cases set out in the articles of association, with the consent of all the other partners or, failing that, by a court decision for well-founded reasons.
The law does not give an exhaustive list of well-founded reasons; the court assesses each case. A serious and lasting disagreement that makes cooperation impossible may qualify. If the parties cannot agree on the price, the value of the shares is usually set by an expert. Withdrawal is often the most balanced solution, because the company continues and the departing partner is paid for their stake.
Exclusion and challenging general meeting resolutions
Exclusion works the other way round: one partner is removed from the company by court decision. The law allows it only in limited cases, such as failure to pay the contribution after formal notice, fraud, or the unlawful use of company assets by a partner who is also director. Simple dissatisfaction with a partner is not enough; one of the statutory grounds must be proven.
If the majority passes a resolution at the general meeting that breaches the law or the articles of association, a partner who disagreed can challenge it in court. The deadline for an annulment action is short, while an absolutely null resolution can be challenged under wider conditions. That is why you should act promptly once you learn of a resolution you disagree with.
Dissolution as a last resort
Where disagreements are so serious that the company can no longer operate, a partner may ask the court to dissolve it. Dissolution leads to liquidation: assets are sold, debts are paid and the remainder is shared among the partners. It is a drastic step, since the business ends, so it should be considered only after the other options have been explored.
In practice, a well-prepared negotiation backed by a fair valuation often ends with a transfer of shares to the remaining partners. This is usually faster and less costly than litigation and preserves the value of the business.
Preventing disputes through the articles of association
The right time to resolve a dispute is before it starts. The articles of association can include clear rules tailored to your situation. Useful clauses include:
- when a partner may withdraw and how the price of their shares is calculated;
- a pre-emption right for the other partners if shares are sold;
- a deadlock procedure for 50/50 situations, such as mediation or a buy-sell mechanism;
- rules on appointing and removing the director and the limits of their powers;
- a dividend policy and the obligations of partners who work in the business;
- what happens to the shares if a partner dies.
What to do now
If you are already in a dispute, gather the documents: the articles of association and amendments, general meeting resolutions, notices of meetings, correspondence and financial statements. Avoid impulsive moves, such as withdrawing money from the company account or blocking the other partner's access to records, as these may have legal consequences. Note the deadlines running from the date of any resolution you want to challenge.
The information in this article is general. Every company has different articles of association and its own facts, so the right solution can only be identified after an individual analysis.
If you are facing a dispute with your business partners or want to review your company's articles of association, the law office of Mr. Bocse Marian-Mihaita can assist you. We analyse the company documents, explain your options and represent you in negotiations or before the courts in Romania.
This article is for information only and does not constitute legal advice. For an analysis of your specific situation, contact a lawyer.
