The Legal Status of a Former Member of A Business Entity: A Friend to Foes, a Foe to Friends

The paper is devoted to the analysis of the legal status of a former participant in a business entity as an independent category within corporate law. The study demonstrates that a former participant occupies an intermediate position between internal and external creditors in the context of corporate bankruptcy. The study examines current judicial practice concerning the payment of the actual value of a participant’s interest, the exercise of the right to obtain information regarding the corporation’s activities, the ability of a former participant to challenge transactions on both corporate and general civil law grounds, as well as the imposition of  subsidiary liability on persons controlling the company. The authors substantiate the need to expand the mechanisms for protecting the rights of former participants at the pre-bankruptcy stage, including through the contestation of transactions and management decisions capable of affecting both the amount and the recoverability of the actual value of the participant’s interest. The article further proposes a classification of methods for protecting the proprietary rights of former participants in a business entity.

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