Exit Right of Shareholders

Gárdos, Péter (2026) Exit Right of Shareholders. EUROPEAN COMPANY AND FINANCIAL LAW REVIEW, 22 (5-6). pp. 660-696. ISSN 1613-2548

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Abstract

This paper explores the legal framework governing shareholder exit rights, with particular emphasis on European Union law. It investigates how company law in England, Germany, and Hungary – as well as relevant EU directives – seeks to reconcile the principle of capital “lock-in” with the need to grant shareholders a right to exit in exceptional circumstances.Among the rules on cross-border mergers of limited liability companies, Directive (EU) 2017 / 1132 Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 relating to certain aspects of company law. (the ‘Company Law Directive’) introduced a notable exception to the lock-in principle. See Title II of the Company Law Directive. It provides that shareholders of merging companies who voted against the approval of the common draft terms of the cross-border merger must be offered the option to exit by receiving adequate cash compensation for their shares. Article 126a of the Company Law Directive. Such rights, allowing dissenting shareholders to receive cash consideration, are rare in company law. Typically, modern company law assumes that shareholders may only exit by transferring their shares to a willing buyer; a direct return of capital from the company is not permitted during its lifetime. This restriction stems from the fundamental rule that shareholders’ capital contributions remain locked in the company and are not returnable outside formal dissolution.This article identifies circumstances in which company law permits shareholder exit and the legal mechanisms used to facilitate it. These include takeover situations under Directive 2004 / 25 / EC on takeover bids (the ‘Takeover Directive’), which entitle shareholders to sell their shares at a fair price in response to a mandatory bid. Some national laws extend similar rights to minority shareholders in private companies where a shareholder acquires a qualified majority. Further, the Company Law Directive recognises an exit right in cross-border conversions, cross-border mergers and cross-border divisions, while certain domestic legal systems also provide exit options in the context of domestic conversions.The article argues that although the underlying purpose of these rules is to protect shareholders by facilitating the transfer of their stake, the detailed legal provisions vary significantly across jurisdictions and contexts. By analysing English, German, and Hungarian law, it contends that Hungary’s approach offers valuable insights for other jurisdictions seeking to refine their regulation of exit rights – both within the scope of the Company Law Directive and beyond. While Hungarian law serves as the primary case study, the article’s broader contribution lies in identifying doctrinal inconsistencies, interpretive ambiguities, and practical challenges that remain unresolved under EU law. Ultimately, the paper advocates for a more coherent and principled legal framework that aligns exit rights more closely with private law doctrines and enhances the protection of minority shareholders across the internal market.

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