Supreme Court: Distribution of Dividends to Only One LLC Member Violates the Rights of Others to a Proportional Share.

A vote by the members of a limited liability company (LLC) at a general meeting to distribute dividends to only one member cannot override the inalienable right of all members to receive profits proportionally. This was reported by the Supreme Court of Ukraine.

The Supreme Court concluded that the participation of all members in the general meeting during the dividend distribution does not nullify their inalienable right to a proportional share of profits.

In the case in question, one of the LLC members (owning 50% of the charter capital) filed a lawsuit over the non-payment of dividends, while the other member (who also served as company director) had received dividends. Courts of all three instances ruled that such a situation violates the principles of equality and proportionality, and the defendant’s actions were deemed discriminatory and an infringement of the plaintiff’s property rights.

The plaintiff had a legitimate expectation of a fair dividend distribution. His request was ignored, prompting him to independently initiate a shareholders’ meeting, which the other member failed to attend. The court confirmed that the plaintiff’s rights had been violated and ordered the company to pay the appropriate dividends.