Valuation of a Membership Interest in a Limited Liability Company

When the Value of a Membership Interest Is Disputed – Is the Court Required to Appoint a Forensic Accounting Expert?

When a shareholder’s participation in a limited liability company is terminated, one of the most frequently arising issues is how the value of their membership interest should be determined. In practice, this stage often becomes the subject of significant litigation, as the parties frequently have different views regarding the actual value of the company’s assets.

Typically, the company prepares an interim balance sheet as of the relevant date pursuant to Article 125(3) of the Bulgarian Commerce Act. However, it is not uncommon for the departing shareholder to challenge its accuracy, arguing that certain assets have been undervalued, liabilities have been incorrectly recorded, or the accounting entries do not reflect the company’s actual financial position.

What Did the Supreme Court of Cassation Hold?

In a decision issued at the beginning of 2026, the Supreme Court of Cassation provided a clear answer to an important procedural question – whether the interim balance sheet submitted by the company is sufficient when its accuracy has been challenged.

The Court held that it is not sufficient.

According to the Supreme Court, the interim balance sheet does not have binding evidentiary value. It constitutes evidence that is subject to judicial review. Where the accuracy or regularity of the accounting records is disputed, the court must establish the actual value of the membership interest through a specialised forensic accounting expert examination. This obligation exists even where such an expert examination has not been expressly requested by the parties.

Why Is This Decision Important?

The practical significance of this decision is substantial.

Until now, judicial practice included cases where courts accepted the balance sheet prepared by the company without conducting a sufficiently thorough review. Such an approach creates a risk that the value of a membership interest may be determined on the basis of accounting data that does not reflect the company’s actual financial condition.

With this decision, the Supreme Court of Cassation confirms that determining the value of a membership interest is not merely a formal accounting exercise, but a process aimed at establishing the actual value of the company’s assets as of the legally relevant date.

What Should the Expert Examination Establish?

Depending on the specifics of the dispute, the expert may examine:

* the proper accounting treatment of assets and liabilities;
* the correspondence between accounting records and primary accounting documents;
* the application of applicable accounting standards;
* the amount of shareholders’ equity as of the relevant date;
* the actual value of the membership interest in accordance with the requirements of Article 125(3) of the Commerce Act.

It is precisely the expert’s conclusions that enable the court to reach a decision based on objective accounting data, rather than solely on a document prepared by one of the parties to the dispute.

What Does This Mean for Shareholders?

For the departing shareholder, the decision provides an important safeguard that, where there are legitimate doubts regarding the interim balance sheet, the court will not be limited solely to its contents.

For the company, the decision serves as a reminder that the interim balance sheet must be prepared accurately, in good faith, and in strict compliance with accounting legislation, as its correctness may be subject to detailed expert review in litigation.

Practical Conclusion

Each dispute concerning the value of a membership interest must be assessed individually. An interim balance sheet submitted by the company should not automatically be regarded as final where there are well-founded doubts regarding its accuracy. In such cases, a forensic accounting expert examination is the primary procedural tool for establishing the actual value of the membership interest and ensuring a fair resolution of the dispute.

Decision No. 29 of 30 January 2026 of the Supreme Court of Cassation in Commercial Case No. 451/2024 represents an important step towards harmonising judicial practice by emphasising the need for a genuine, rather than merely formal, review of accounting data when determining the value of a membership interest.

If you wish to protect your rights as a shareholder, you can contact Atanasova & Atanasova Law Firm:

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