The advantages of a VCC are far greater than those of an LLC. This is why many LLC owners want to convert their companies into VCC. This is possible through the so-called transformation procedure by changing the legal form.
Introduction
In the process of transformation, your company will cease to exist and the newly created VCC will become its legal successor. LLC will be terminated without the need for a liquidation procedure. By law, it should be at least 6 months (or 3 months in the case of fast-track liquidation process), so that time is saved in this case.
At the same time as changing the legal form, new partners cannot be admitted into the VCC. This can only happen once the LLC ceases to exist and the VCC takes its place.
Step 1
The transformation procedure begins with convening a general meeting of all partners in the LLC. A special document called the Transformation Plan is prepared, along with a draft of the company agreement for the new VCC. The Transformation Plan is notarized and published in the Commercial Register for a period of at least 30 days.
Step 2
The Transformation Plan is the most important document in this procedure. Therefore, it is reviewed by an auditor appointed by the manager of the LLC or by the Registry Agency ex officio.
The auditor's task is to prepare an Audit Report for the partners of the LLC. The report must contain an assessment of whether the proposed share exchange ratio in the Plan is adequate and reasonable. It must also include information about the partners in the LLC whose legal status in the VCC is changing. The auditor also checks whether the capital of the VCC is not greater than the net value of the LLC's assets.
Step 3
A second general meeting of the partners in the LLC is held. At this meeting, the partners are provided with the Transformation Plan, the draft company agreement for the VCC, the financial balance sheet as of the last day of the month before the date of the Transformation Plan, information about the appointed auditor, and other documents for review.
At this second meeting, a final decision is made to change the legal form from an LLC to a VCC. The decision must be made by a majority of 3/4 of the capital of the LLC. The Transformation Plan is also approved or amended. The new company agreement for the VCC is adopted, and a manager (board of directors) for the VCC is elected.
Step 4
The change of the legal form from an LLC to a VCC is registered in the Commercial Register no earlier than 14 days after the application. The following documents must be attached to the application:
- The decision for transformation;
- The articles of association of the VCC;
- Notarized consent of the manager of the VCC;
- The auditor’s report;
- A list of the partners in the VCC.
After the 14-day period, the registration becomes official. With this, your LLC is terminated, and in its place, your new VCC is created. The rights and obligations of the LLC are fully transferred to the VCC. The partners in the LLC become partners in the VCC. In general, the permits, licenses, or concessions of the LLC are transferred to the VCC. The LLC prepares a closing balance, which is presented to the VCC. The VCC prepares an opening balance based on the balance sheet values of the assets and liabilities received through the transformation or based on their fair value.
Protection of a Partner
A partner in an LLC whose legal status changes after the transformation and who voted against the decision for transformation can leave the newly established VCC. In this case, the termination of their participation is carried out with a notarized notification to the DPC within 3 months from the date of transformation. The departing partner has the right to receive the equivalent value of their share in the LLC before the transformation, in accordance with the exchange ratio provided in the Transformation Plan.
The departing partner may also file a lawsuit within 3 months from the notification of departure. The shares of the departing partner are taken over by the remaining partners, offered to a third party, or used to reduce the capital of the VCC.
If a partner is dissatisfied with the exchange ratio of shares from the LLC to the VCC, they can file a lawsuit in defense. The deadline for this is 3 months after the registration of the change in legal form. With this lawsuit, they have the right to receive a monetary adjustment if the exchange ratio in the Transformation Plan is not equivalent.
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