The Grand Chamber of the Supreme Court has defined the procedure for terminating the powers of a company director on his own initiative

In both cases - where the company and a person have established management relations and an employment contract (established employment relations), and where there are only management relations without an employment contract - it is the management relations, in which the director has the relevant powers and is legally responsible for exercising them, that form the basis of the relationship between the company and that person.

In order to terminate his powers as the sole executive body, the company's director must, on his own initiative, convene a general meeting of the company's shareholders (Article 31(1)(1) and (7) of the Law of Ukraine "On Limited Liability Companies and Additional Liability Companies") and include on the agenda the issue of terminating his powers by electing a new director or a new interim director (Article 39(13) of the said Law), since the resolution of this issue is the exclusive competence of the general meeting of the company's shareholders.

At the same time, the director must comply with the requirements of Art. 32 of this law regarding the procedure for convening the general meeting of shareholders, in particular: at least 30 days before the meeting, by sending a letter with a list of annexes, notifying each shareholder of the agenda, date, time and place of the meeting, as well as providing the shareholders with the opportunity to examine the documents and information necessary for the consideration of the items on the agenda, and ensuring adequate conditions for the examination of such documents and information at the company's offices during working hours.

If there are no circumstances established by the court regarding the conclusion of an employment agreement (contract) with the director, the provisions of labour legislation, in particular Article 38 of the Labour Code of Ukraine, which regulates the procedure for terminating an employment agreement concluded for an indefinite period of time at the initiative of the employee, are not applicable.

In this case, the director of a limited liability company filed a lawsuit against the company and the state registrar seeking recognition of his voluntary dismissal from the position of director of the limited liability company pursuant to Article 38 of the Labour Code of Ukraine and the obligation of the limited liability company to change the director and submit an application for state registration of changes in the information on the legal entity contained in the Unified State Register.

The court of first instance dismissed the claim in its entirety. Instead, the court of appeal overturned the decision of the first instance court and issued a new decision partially satisfying the claim, in particular by recognising the plaintiff as a voluntarily dismissed director of the company under Article 38 of the Labour Code of Ukraine.

The Grand Chamber of the Supreme Court held that the courts had not established the circumstances of the conclusion of an employment agreement (contract) with the plaintiff in the manner prescribed by part 12 of Article 39 of the Law of Ukraine "On Limited Liability Companies and Additional Liability Companies". The participants in the case did not allege the existence of such circumstances and did not refer to the failure of the courts to investigate evidence that might confirm this.

Therefore, since the limited liability company did not enter into an employment agreement (contract) with the plaintiff, the Grand Chamber of the Supreme Court concluded that there was no dispute between them regarding the termination of such a transaction. Therefore, the conclusions of the courts of previous instances and the arguments of the parties to this case on the need to apply the provisions of the Labour Code of Ukraine, in particular Article 38 of this Code, in the disputed legal relations are incorrect.

At the same time, according to the circumstances established in this case, on 11 October 2019 the director sent applications to the shareholders of the limited liability company, in which he asked to remove him from this position and to convene a general meeting by 24 October 2019 to appoint a new director of the company, which does not comply with the provisions of part 3 of Article 32 of the Law of Ukraine "On Limited Liability Companies and Additional Liability Companies" and clause 8.6.4 of the company's articles of association, which stipulate that the shareholders of the company must be notified of the general meeting at least 30 days before the scheduled date.

In this regard, the Grand Chamber of the Supreme Court considers that the director's claim is not subject to satisfaction, since his failure to comply with the procedure for convening the general meeting of the limited liability company on his own initiative, as provided for by the law and the company's articles of association, does not give rise to the conclusion that the plaintiff's rights have been violated by depriving him of the possibility of terminating his powers as director of the company for reasons beyond his control.

The Resolution of the Supreme Court of 6 September 2023 in case No. 127/27466/20 (proceedings No. 12-10гс23) - https://reyestr.court.gov.ua/Review/113430105.

This and other legal positions of the Supreme Court can be found in the Database of Legal Positions of the Supreme Court - https://lpd.court.gov.ua.