Withdrawal of a Member from a Limited Liability Company

Conditions, procedure and market-value compensation of the share in the Federation of BiH

A member of a limited liability company is not a prisoner of his share, but the law itself does not give him a general right to leave a d.o.o. in the Federation of Bosnia and Herzegovina by a mere unilateral declaration, the way an employee terminates an employment contract. The effect of such a declaration may be provided for by the founding agreement or the articles of association of the company, within conditions and a withdrawal procedure regulated in advance. Anyone who wishes to leave the company and at the same time realise the value of his share must distinguish between the transfer of the share, withdrawal regulated by the founding agreement or the articles of association, and an action for withdrawal for justified reasons under Article 332 of the Law on Business Companies of the FBiH (“Official Gazette of FBiH” Nos. 81/15 and 75/21, hereinafter: the Companies Act). In published case law the action is described as a last resort where, owing to the nature and gravity of the violation, other legal remedies cannot produce a result. That is not a formal obligation to exhaust the same list of steps in every case. In this text from the field of corporate law we explain who may withdraw from a d.o.o. and when, what must be proven before the court, how the market-value compensation of the share is determined, and which remedies should be considered before filing suit.

Withdrawal of a member is the termination of membership in a limited liability company at the member's initiative, with the right to compensation of the market value of his share. Unlike a sale of the share, where the member looks for a buyer and negotiates the price with him, in the case of withdrawal the compensation claim is asserted against the company. Withdrawal can be an important protective mechanism for a minority member who proves one of the reasons under Article 332, paragraph 2 of the Companies Act. The mere fact that the share has no buyer is not a justified reason for withdrawal, which is expressly emphasised in the judgment of the Supreme Court of FBiH No. 65 0 P 329284 22 Rev.

How membership in a d.o.o. ends: three exit routes

Membership in a limited liability company can end in several ways, and for a member contemplating an exit three are of practical importance. The first is the transfer of the share. Under Article 320 of the Companies Act, the share is transferred by a written contract or by inheritance; for a share to which an agreed obligation of additional performance is attached, the express written consent of the company is required. When a member sells the share, the other members have a pre-emption right: the seller notifies them in writing, through the management, of the price and the other conditions, and if the offer is not accepted or the transaction with the interested member is not concluded within 30 days, the share may be sold to a third party on conditions no more favourable than those offered to the members (Art. 321 of the Companies Act). The second route is withdrawal regulated by the founding agreement or the articles of association: those acts may regulate in advance the conditions, procedure and consequences of withdrawal (Art. 332, para. 1). The third route is an action for withdrawal for justified reasons (Art. 332, para. 2); that right is not conditional on the silence of the founding agreement or the articles. A consensual solution is also possible, but it must be implemented in the appropriate written form, through the necessary decisions and registrations, and in compliance with the rules on the acquisition of the company's own share and the preservation of the share capital under Article 328 of the Companies Act.

Article 310, paragraph 3, item k) of the Companies Act prescribes that the articles of association must regulate the manner of joining the company and the termination of membership. Nevertheless, in a number of cases from practice one encounters articles of association that do not elaborate withdrawal sufficiently for the member to have a directly applicable contractual procedure. In that case such a mechanism cannot reliably be relied upon, but the member still retains the judicial right under Article 332, paragraph 2 if he proves one of the statutory reasons. In the event of withdrawal, the compensation is determined under Article 334 of the Companies Act.

The three statutory reasons for withdrawal under Article 332 of the Companies Act

Article 332, paragraph 2 of the Companies Act reads: a member of the company has the right to seek withdrawal from the company by court action if the other members or the company's bodies have caused him damage, or if he is prevented from fulfilling his obligations, or if the company imposes disproportionate obligations on him. The law therefore recognises exactly three justified reasons, and each of them has its own content.

The first reason is damage caused to the member by the other members or the company's bodies. Disputed profit distributions, related-party transactions without the required approval, or disposals of the company's assets can be relevant facts, but they do not automatically prove damage to the member. It is necessary to distinguish direct damage to the member from damage caused to the company itself, and to prove that the damage to the member was caused by the other members or the company's bodies. Where an independent claim for damages is raised alongside the withdrawal, its prerequisites are assessed under the rules of the law of damages. Under Article 330 of the Companies Act, profit is distributed in proportion to the shares only if not otherwise agreed. In assessing conduct, the rules on special duties towards the company are also important: due care (Art. 32), disclosure of a personal interest and prior approval (Art. 34) and the avoidance of conflicts of interest (Art. 36). Those duties are borne, among others, by a member of a d.o.o. holding at least 20% of the capital and by a controlling member. Breaches of those duties may primarily found claims in favour of the company under Arts. 33, 35, 37 and 346 of the Companies Act; for withdrawal under Article 332 the statutory reason on the side of the withdrawing member must be proven separately.

The second reason is the member being prevented from fulfilling his obligations. This wording is directed at a specific obligation of the member and at the obstacle preventing him from fulfilling it; the statutory text does not expressly determine from whom the obstacle must originate. The member's obligations in the narrow sense include in particular the payment of the contribution (Art. 311 of the Companies Act) and any additional performances determined by the founding act (Art. 308). A supervisory board is mandatory for a company with more than ten members, as well as for a company with share capital exceeding 1,000,000 KM and at least two members; in other companies it may be provided for by the founding agreement or the articles (Art. 340). In a company without a supervisory board its powers are exercised by the members (Art. 303, para. 2), and each member has the right to directly supervise the business operations, books, files, inventories and cash operations and to prepare a balance sheet for his own needs (Art. 341). However, the law expressly designates supervision under Article 341 as a right, so the denial of access should not automatically be equated with preventing the member from fulfilling obligations. It can be an important violation of a membership right and part of the overall factual picture, whereas for the second reason under Article 332 it must be specifically stated and proven which obligation of the member was made impossible.

The third reason is disproportionate obligations imposed on the member by the company: obligations which by their kind or scope exceed what the member undertook by his contribution, the founding agreement or the articles, or which are imposed on the member out of proportion with the other members.

It is equally important to say what a justified reason is not. Dissatisfaction with the business, loss of trust, disturbed personal relations or the loss of an economic interest in membership are not, in themselves, reasons under Article 332, paragraph 2 of the Companies Act; they acquire legal significance only if one of the three statutory prerequisites is proven through specific facts. In the case of the Cantonal Court in Novi Travnik No. 51 0 Ps 219379 24 Pž of 30 September 2025, a minority member with a 36.44% share initially justified his withdrawal claim by no longer having an economic interest in being a member of the company. He had previously sought a consensual withdrawal and the convening of the general meeting, and the decision on his withdrawal was placed on the meeting's agenda but was not adopted. His claim was nevertheless finally dismissed, because none of the reasons under Article 332, paragraph 2 of the Companies Act had been proven: those internal steps could not substitute for proof of a statutory reason for withdrawal. The decision did not address the question of whether there is a general obligation to exhaust other legal remedies before filing suit (more in our section on commercial-law case law).

Withdrawal is a last resort: what the courts actually require

An important published decision for understanding this institute is the judgment of the Supreme Court of the Federation of BiH No. 65 0 P 329284 22 Rev of 5 July 2022. The court took the position that the withdrawal action is a last resort where, owing to the nature and gravity of the violation of the member's rights, other legal remedies cannot produce results, and that the member seeking withdrawal bears the burden of proving the existence of a justified reason. The decision was rendered under the earlier Law on Business Companies of 1999, whose Article 340, paragraph 2 contained the same three reasons now prescribed by Article 332, paragraph 2 of the Companies Act, so the position is relevant to the interpretation of the provision in force. We have published a full presentation of the decision in the section reasons for the withdrawal of a company member, and a summarised position also in the overview of legal positions of BiH case law.

In that specific case the claimant did not challenge the decisions he considered unlawful, did not use the appeal in the registration procedure, nor the minority-protection and audit remedies that were available to him. The court added that the other members are not obliged to accept his offer to buy the share and that he may offer the share to third parties. The decision should therefore not be turned into a formal checklist that every claimant must exhaust regardless of the circumstances. The more accurate conclusion is that the member should use those remedies that are legally available to him and objectively capable of removing the specific violation, or explain in the claim why such a remedy was not available or could not have produced a result. The mere impossibility of selling the share is neither damage nor a justified reason under Article 332.

Legal remedies to consider before filing the claim

The law gives the member several protection mechanisms. Which of them should be used depends on the member's shareholding, the type of violation and whether a particular remedy can realistically remove the consequences. Their use, or their reasoned ineffectiveness, can be important for assessing whether the action truly was a last resort.

Convening the general meeting. The general meeting of the company is not convened only by the management: it may also be convened by a member or members whose shares make up at least 10% of the share capital (Art. 336, para. 1 of the Companies Act), without a prior request to the management. The management, a member of the management, the supervisory board or a member of it are obliged to convene the meeting at least once a year and during the year in which the company, according to the last annual accounts, records a loss exceeding one fifth of the share capital (Art. 336, para. 2), and the meeting mandatorily decides on the annual accounts, the distribution of profit and the covering of losses (Art. 335, para. 5). The invitation is delivered by registered mail, fax or e-mail at least 15 days in advance, unless the founding agreement or the articles provide otherwise, together with the agenda and the materials. Members holding at least 10% of the capital may supplement the agenda within eight days of receiving the invitation. A quorum of 50% of the capital is required for the first session; if it is not reached, the meeting is reconvened with the same agenda within 15 days at the latest and may then decide with 20% of the capital (Art. 337). A member with 10% up to less than 20% can therefore convene the meeting himself, but cannot secure even the repeated quorum without other members; a member below 10% has no independent statutory authority to convene it.

Challenging decisions of the general meeting. Under Article 338 of the Companies Act, a member who voted against a decision may challenge it by action within 30 days of its adoption. The law expressly ties this right to voting against and to an objective time limit running from the day of adoption, not from subsequent knowledge. Where the member did not take part in the decision-making, the applicability of Article 338 and possible other forms of judicial protection must be assessed according to the type of defect of the decision and the circumstances of the specific case.

Direct supervision and the member's own balance sheet. A member of a company that has no supervisory board has the right to directly supervise the business operations, books, files, inventories and cash operations and to prepare a balance sheet of the company for his own needs (Art. 341 of the Companies Act). A private analysis can help the member understand the situation and prepare his requests, but the law does not guarantee that an expert engaged by the member will have independent access to the documentation. Such an analysis does not replace a statutory audit or the findings of a court-appointed expert, and its evidentiary value in litigation is weighed by the court.

A court-appointed external auditor. A member or a group of members holding at least 10% of the share capital may ask the court to appoint an external auditor. The court appoints one if the applicants make plausible a serious violation of the law, the founding agreement or the articles; the costs are advanced by the applicants, unless the court orders the advance to be paid by the company (Art. 342 of the Companies Act). This is a judicial minority-protection mechanism, not a right of every member regardless of the size of the share. In case 65 0 P 329284 22 Rev, the failure to use the available audit remedy was one of the facts weighed against the specific claimant. A member who has requested the audit may not transfer his share during the audit without the company's consent (Art. 343).

The share register. The management is obliged to keep an accurate and complete share register, to establish it no later than eight days after the registration of the incorporation and to enter every change immediately (Arts. 318 and 319 of the Companies Act). The absence or improper keeping of the register constitutes a breach of the management's duties and may, together with other evidence, be a relevant indicator of the state of corporate governance; on its own it does not prove a reason for withdrawal.

A claim for compensation of damage to the company. If damage has been caused to the company by a violation of the law, the founding agreement or the articles by members of the management or the supervisory board, a member may demand that the company file a claim for compensation. If the proposal is rejected or not decided upon in good time, the member may within 90 days seek by action compensation of the damage to the company (Art. 346 of the Companies Act). This claim must be distinguished from proving direct damage to the member as a reason for withdrawal.

Compensation: the market value of the share on the day membership ends

A member who withdraws – just like a member who has been excluded – is entitled to compensation of the market value of the share on the day the membership ends (Art. 334, para. 2 of the Companies Act). Upon withdrawal, the rights arising from membership cease (Art. 334, para. 1), and if the member's contribution took the form of a right to use a specific asset, the asset is returned to the member upon expiry of the period determined by the founding agreement or the articles, which may not exceed three months; until the member's obligations towards the company are fulfilled, the company is entitled to continue using the asset (Art. 334, paras. 3 and 4 of the Companies Act).

Three things about the compensation should be understood before filing suit. First, the law sets the market value as the yardstick. It cannot automatically be equated with the book value. The Companies Act does not prescribe a mandatory valuation method; the court, as needed, orders a financial-economic expert examination, and the asset-based, income-based, market-based or combined approach is chosen according to the company's activity, the available data and the rules of the profession. Profitability in itself does not mean that the value of the share must be higher than the book value. Second, the valuation date is the day the membership ends. That date must be determined according to the manner and legal effect of the termination of membership; it is not necessarily the same as the day the violation arose or the day the claim was filed. If during the proceedings there is a concrete danger to the assets, the possibility of an interim measure is assessed against the statutory prerequisites for such a measure. Third, the claim must contain a specific demand. Article 53 of the Civil Procedure Act of the FBiH requires a specific demand as to the principal matter and the ancillary claims. If the expert examination shows a different amount, increasing it or otherwise amending it constitutes an amendment of the claim, whose admissibility the court assesses under the rules of civil procedure; it is not automatic.

On the question of maturity and interest, the position of the Supreme Court of FBiH in case No. 17 0 P 081744 25 Rev should be used with caution. In that decision, the claim for annulment of the decision on the exclusion of a member was finally dismissed, and the exclusion decision itself already ordered payment of the market value of the share; the Supreme Court concluded that the company's obligation falls due when the judgment becomes final. The published position does not establish a general rule for judicial withdrawal under Article 332. The starting point of maturity and default interest in withdrawal cases should therefore be determined according to the demand raised, the effect of the judgment and the rules of the law of obligations, and not categorically tied to a single date without analysing the specific case.

Withdrawal or sale of the share: which to choose

Where a buyer exists and the statutory and contractual conditions are met, a sale of the share can be a quicker and cheaper exit, because the price is agreed between the seller and the buyer, without a dispute over the grounds for withdrawal. In a closely held company with disturbed relations, a minority share can be difficult to market. Nevertheless, the Supreme Court expressly stated that the other members are not obliged to buy the offered share and that the rejection of the offer is not in itself damage or a reason for withdrawal. A duly conducted offer of sale under Article 321 of the Companies Act and proof that there was no interested buyer can describe the member's practical situation, but they do not replace proof of one of the three reasons under Article 332, paragraph 2 of the Companies Act.

Exclusion of a member: the other side of the same institute

The mirror image of withdrawal is exclusion. Under Article 333 of the Companies Act, a member may be excluded for reasons and in a procedure determined in advance by the founding agreement or the articles; the decision is delivered to him in written form with the reasons, and he may challenge it by action within 30 days of delivery. If the founding agreement and the articles do not regulate the reasons and the procedure, exclusion under Article 333 is not possible merely because relations have deteriorated. A special regime exists for an unpaid contribution: where a member fails to pay in the contribution even 60 days after the expiry of the agreed deadline, the management notifies him in writing that he is excluded, and Arts. 312 and 313 specifically regulate his lost rights, remaining obligations and the handling of the share. A member excluded under Article 333 is, under Article 334, paragraph 2, entitled to compensation of the market value of the share on the day the membership ends; a position on the maturity of that obligation has also been published in our section the excluded member's right to payment of the market value of the business share.

Procedure, duration and costs

The dispute over withdrawal is conducted against the company before the court with subject-matter and territorial jurisdiction, as a rule according to the company's registered seat. The member must prove the facts realising one of the reasons under Article 332, paragraph 2 of the Companies Act. Minutes and invitations to the general meeting with proof of delivery, requests for access and the responses, financial statements, profit-distribution decisions, bank statements and correspondence are often important, but the court weighs all admissible evidence, including witnesses where they have direct knowledge. Determining the market value may require a financial-economic expert examination, whose advance the court determines under the procedural rules. A complex case can last several years, especially with expert examination and legal remedies. Costs are decided according to the parties' success and the other rules of the Civil Procedure Act, so the unsuccessful party may be ordered to reimburse the necessary costs of the opposing party.

Practical advice for members and for companies

To a member contemplating withdrawal we advise building the evidentiary record in good time: taking legal steps in the prescribed form, preserving proof of delivery, requests and responses, and separating business dissatisfaction from the facts that can realise one of the reasons under Article 332. A meeting not held, denied access, disputed payments or related-party transactions can be important, but their legal relevance and consequences must be proven in the specific case. Exit negotiations – including mediation – should be conducted in a measured manner and in writing, without formulations that could later be misinterpreted.

For the company and the majority member, orderly corporate governance reduces the risk of a dispute: regular convening of the general meeting, the meeting's decisions on the annual accounts, profit and loss, keeping the share register, and prior approval of transactions involving a personal interest where required. Such orderliness does not exclude the possibility that a member proves another reason under Article 332, just as not every individual omission automatically justifies withdrawal. What is decisive is the nature of the violation, its consequences and proof of the statutory prerequisites.

When to seek the assistance of an attorney

The quality of preparation can significantly affect the outcome of the dispute: it is necessary to correctly choose the available remedies, preserve the evidence and realistically assess the value of the share. In these matters the Law Office Prnjavorac conducts a legal analysis of the case – of the founding agreement, the articles of association and the state of corporate governance – prepares the appropriate steps, from convening the general meeting to a proposal to the court for the appointment of an external auditor, cooperates with financial experts, conducts negotiations on a consensual exit and, where necessary, represents the member or the company in litigation and, after the judgment becomes final, in the enforcement procedure, for the collection of the awarded claim. Interim measures are proposed where the statutory prerequisites for them exist. Within the field of corporate law we represent both minority and majority members; a number of decisions on this subject are available in the section BiH case law, and the calculation of the fee and costs of representation is explained on the page attorney tariff of the FBiH. For an analysis of your specific case you can contact our office.

Withdrawal of a member from a d.o.o.: frequently asked questions

Q: Can I withdraw from a d.o.o. by a simple written declaration?
A: The law itself does not give a member a general right to leave the company by a mere unilateral declaration. Such a declaration can produce effect only if the founding agreement or the articles of association provide for that method of withdrawal and if the agreed conditions are met. Otherwise the member may transfer the share, reach a consensual solution implemented in the appropriate form, or seek withdrawal by court action, proving one of the reasons under Article 332, paragraph 2 of the Companies Act.

Q: Which reasons do the courts recognise as justified grounds for withdrawal?
A: The law recognises exactly three reasons: damage caused to the member by the other members or the company's bodies, the member being prevented from fulfilling his obligations, and disproportionate obligations imposed on the member by the company. Failure to hold the general meeting, denial of access to records, disputed profit distributions or related-party transactions can be relevant facts only if it is proven that in the specific case they realise one of those reasons. Damage caused to the company is not in itself the same as direct damage to the member. Dissatisfaction, disturbed relations and loss of interest in membership are not sufficient on their own.

Q: What does it mean that the withdrawal action is a “last resort”?
A: According to the position of the Supreme Court of FBiH (65 0 P 329284 22 Rev), the action is a last resort where, owing to the nature and gravity of the violation of the member's rights, other legal remedies cannot produce results. This is not a formal obligation to exhaust every possible remedy in every case. The court assesses which remedies were available to the member and appropriate to the specific violation, whether they were used and, if not, why they could not have provided effective protection. Failure to use a remedy that could objectively have removed the violation may weaken the claim.

Q: How much compensation am I entitled to and who determines it?
A: A member who withdraws is entitled to compensation of the market value of the share on the day the membership ends (Art. 334, para. 2 of the Companies Act). The law does not prescribe a single mandatory valuation method. The court, as needed, orders a financial-economic expert examination, and the choice of the asset-based, income-based, market-based or combined approach depends on the company's activity and the available data. The published position of the Supreme Court of FBiH in case 17 0 P 081744 25 Rev concerns the maturity of the claim in the case of a member's exclusion in a specific procedural situation; no general rule on maturity and interest in judicial withdrawal can be derived from it without further analysis.

Q: The majority member does not attend the general meeting I have duly convened. What do I gain by that?
A: A member or members holding at least 10% of the share capital may independently convene the general meeting (Art. 336 of the Companies Act). A quorum of 50% is required for the first session, and 20% of the capital for a repeated session convened with the same agenda within 15 days at the latest (Art. 337). A member with 10% up to less than 20% can therefore convene the meeting, but cannot hold it without other members even at the repeated session; a member below 10% has no independent statutory authority to convene it. Evidence of due convening and the absence of a quorum can be important for assessing the effectiveness of that remedy, but does not in itself prove a reason under Article 332.

Q: Can I get access to the business records if the management refuses to provide documentation?
A: In a company without a supervisory board the member has the right to directly supervise the business operations, the business books and files, the inventories and the cash operations, and to prepare a balance sheet of the company for his own needs (Art. 341 of the Companies Act). A member or a group of members holding at least 10% of the capital may ask the court to appoint an external auditor if they make plausible a serious violation of the law, the founding agreement or the articles (Art. 342). Denial of access constitutes a violation of a membership right, but for judicial withdrawal one of the three reasons under Article 332, paragraph 2 must nevertheless be proven.

Q: Can the company exclude me as a minority member?
A: As a rule only if the reasons and the procedure for exclusion are determined in advance by the founding agreement or the articles of association (Art. 333, para. 1 of the Companies Act); if those acts do not provide for them, exclusion under Article 333 is not possible merely because relations have deteriorated. A member who fails to pay in his contribution even 60 days after the expiry of the agreed deadline is subject to the special regime of Arts. 312 and 313: the management notifies him in writing that he is excluded, and the law specifically regulates his rights, remaining obligations and the handling of his share. A member excluded under Article 333 is entitled to the market value of the share on the day the membership ends and may challenge the decision within 30 days of delivery.

Q: How long do the proceedings take and what if I lose?
A: The duration depends on the complexity of the case, the scope of evidence, the need for expert examination and legal remedies, so the proceedings may last several years. The burden of proving a justified reason rests on the member seeking withdrawal. The court decides on costs under the rules of the Civil Procedure Act and according to the parties' success in the dispute; the unsuccessful party may be ordered to reimburse the necessary costs of the opposing party. Documentation preserved in good time is therefore very important, but the court weighs all admissible evidence.