The voluntary exit of a partner from a partnership

17Nov

The voluntary exit of a partner from a partnership

Commercial Law, Information

By Alexandra Giaki, lawyer at Supreme Court, managing partner

Novemrber 2025

I. Introduction

Partnerships – general partnerships and limited partnerships – continue to be the backbone of the Greek economy, thanks in part to their simpler accounting requirements. Relationships between partners in these companies are based primarily on trust and cooperation. But what happens when that trust is broken or when a partner, for their own reasons, no longer wishes to participate in the company’s activities? What happens to the company and what are the partner’s rights? In such cases, the law gives the partner the option to leave the company by exercising their right to withdraw, while also providing for the continuation of the commercial enterprise after their departure. In this article, we will take a closer look at the conditions for exercising the right of exit of a partner and the consequences of this, both for the partner and for the company.

II. The right of voluntary exit of a partner – Method of exercise and conditions

According to Article 261(1) of Law 4072/2012, “a partner may withdraw from the company by notifying the company and the other partners, unless otherwise provided for in the partnership agreement.”

A partner may withdraw from the company at any time, whether it is a fixed-term or indefinite-term company. This right is exercised by means of a declaration addressed to the company and the other partners, without any specific form being required. This means that it can also be done informally. In practice, however, the declaration is made in writing (e.g., service of an extrajudicial declaration of withdrawal—sending an email, letter, etc.) so that it can be proven. This declaration is formative and takes effect immediately, without requiring court approval. In other words, the law does not impose any conditions for exercising the right of exit, such as the existence of a valid reason or the issuance of a court decision. The legislator’s aim is to preserve the commercial enterprise and move away from the strictly personal nature of personal companies, so that the company is not dissolved due to events relating to the person of a partner.

However, as this is non-mandatory law, the articles of association may lay down more specific conditions for exercising the right of exit:

With regard to companies of indefinite duration in particular, it is possible to regulate in the articles of association the terms for exercising the right, the method of calculating the value of the shareholding, etc., which, however, cannot go so far as to completely restrict the right of exit, as this would mean that the partners in companies of indefinite duration would remain trapped in the company for their entire lives. Such a term is contrary to the provision of Article 178 of the Greek Civil Code. Similarly, clauses that make exit so difficult as to effectively preclude it, such as those that provide for the payment to the exiting partner of a minimum amount (in relation to the full value of the company share) or completely prohibit the payment of any amount or make the exit conditional on the consent of all other partners, are contrary to Article 178 of the Greek Civil Code and are therefore invalid.

– With regard to limited-term companies, it is possible, under the terms of the articles of association, to completely exclude the exercise of the right of exit or to allow it only for specific reasons, e.g.  when the value of the outgoing partner’s shareholding does not exceed a certain amount (e.g., 10% of equity capital) or that the exit requires a decision by the other partners. In such cases, the partner’s exit statement shall invoke the statutory reason for withdrawal. The burden of proof for the existence of a reason precluding withdrawal lies with the company. The claim brought in the event of a dispute over the existence of a reason for withdrawal permitted by the articles of association is a declaratory claim to determine whether or not the exit took place.

III. Rights of the departing partner

In accordance with the provisions of Article 264 of Law 4072/2012, “1. In the event of the exit or exclusion of a partner, the company shall return to him the items he had contributed during his term of office. 2. Unless otherwise provided in the partnership agreement, the departing or excluded partner, subject to the second subparagraph of paragraph 3 of Article 261, shall have a claim against the company for payment of the full value of his participation. In the event of disagreement between the partners as to the value of the share, the value to be paid shall be determined by the court referred to in paragraph 2 of Article 259 in accordance with the voluntary jurisdiction procedure. 3. If the company’s assets are insufficient to cover its debts, the departing or excluded partner is obliged to cover them in proportion to his share in the losses.”.

The outgoing partner (as well as the excluded partner), in accordance with the provision of Article 264(2) of Law 4072/2012, has a claim against the company for payment of the full value of his participation. In this case, if the company is of indefinite duration, the value of the departing partner’s participation is paid to him at the end of the financial year [Article 261(2) of Law 4072/2012)], while in case of a disagreement as to its amount, this is determined by the Single-Member Court of First Instance, which rules in accordance with the voluntary jurisdiction procedure [Article 264(2) of Law 4072/2012].

The contribution of a valid reason for the departure of the outgoing partner is indifferent in the case of companies of indefinite duration. However, its contribution is essential in the case of companies of definite duration, because the provision of Article 261(3) of Law 4072/2012 makes the payment or non-payment of the outgoing partner’s share dependent on the existence of a valid reason justifying the exit. Therefore, in companies of indefinite duration, the departing (as well as the excluded) partner, regardless of whether there is a valid reason justifying his departure from the company, is entitled to claim from the company the payment of the full value of his share (company participation) if he terminates his company participation, while, in addition, from the provision of paragraph 3 of Article 264 of Law 4072/2012, it is stipulated that if the company’s assets are insufficient to cover its debts, the outgoing or excluded partner is obliged to cover them in proportion to their share in the losses.

Summarizing:

–    In a company with indefinite duration, it is irrelevant whether the right was exercised without valid cause, while the notice of withdrawal takes effect immediately. Simply, for the convenience of the company, the claim for participation is paid to the outgoing member not immediately, but at the end of the corporate use.

–    In a fixed-term company, however, if the court finds that there was no valid reason, the departing partner does indeed leave the company upon delivery of his notice to the company and his partners, but he has no claim for payment of the value of his participation.

According to the above, the outgoing partner, provided that the above conditions are met, is entitled to:

–    take over the items he had contributed during for use

– receive the value of his share in the company of indefinite duration, but at the end of the corporate use

– receive the value of his share in the company of fixed duration, only if there is a valid reason.

How is the value of the outgoing partner’s share in the company assessed?

In practice, the value of the outgoing partner’s share in the company is determined by an expert appraiser, who draws up a relevant report.

In order to determine the value of the share, the decisive factor is the value that could be achieved for its transfer on the market at the time of the partner’s departure, i.e. on the date of his exit, which takes place upon delivery of the relevant declaration to the company and the other partners (Articles 167 of the Greek Civil Code and 261 of Law 4072/2012). The overall financial situation of the company must be taken into account, i.e. its assets at that specific point in time and, in particular, its assets (and its existing capital, which is not reduced by the exit or exclusion of a partner), including its claims against third parties and the monetary value of the intangible assets it has acquired (reputation, clientele, value of distinctive features, etc.) from its operation up to that point, as well as its liabilities, i.e. its debts to third parties, while the current and expected financial performance of the company should also be taken into account. The payment of the contribution by the departing partner or special circumstances relating to his participation in the company’s affairs as provided for in the partnership agreement shall also be taken into account. In particular, in order to calculate the value of the outgoing partner’s participation, a special balance sheet is drawn up, reflecting the actual financial situation of the company at the time of loss of partnership status, that is at the time of submission of the declaration of exit. The need to determine the actual value of the company’s assets requires the search for both the goodwill of the company’s assets and the apparent or hidden reserves.

To whom can the outgoing partner turn against to satisfy his claim?

The claim of the outgoing partner, who has lost his partnership status, for the value of his partnership interest, falls within the scope of Articles 249(1) of Law 4072/2012 (previously, Article 22 of the Greek Commercial Code) for general partnerships and Article 271(2) of the same law for limited partnerships, which establish the personal, unlimited and joint and several liability of the general partner for the debts of the general or limited partnership vis-à-vis third-party creditors, while at the same time converting the obligations of the company into obligations of its general partners (Supreme Court 115/2020). Consequently, the outgoing partner of a personal company acquires a relevant monetary claim, both against the company and against his partners, as jointly and severally liable for the company’s debts (Supreme Court 1703/2023).

Consequences regarding the liability of the outgoing partner for corporate debts

According to Article 269 of Law 4072/2012: “1. In the event of the dissolution of the company, claims against the partners for corporate debts shall be time-barred five years after the registration of the dissolution of the company in the General Commercial Registry (G.E.M.I.), unless the claim against the company is subject to a shorter limitation period. 2. If the creditor’s claim against the company becomes due after the registration of its dissolution in the GEMI, the limitation period shall commence from the time when the claim becomes overdue. 3. The two previous provisions apply mutatis mutandis in the event of a partner’s exit or exclusion from the company.”.

According to the above, after a partner leaves a partnership, which occurs after notification to the partners and the company, that partner remains liable for the company’s debts for five years from the date of registration of the dissolution of the company with the General Commercial Registry (GEMI).

In conclusion A partner in a general or limited partnership may freely withdraw from the company. However, it is important to know how to exercise the right of exit, as well as the rights that one has from participating in the company at the expense of the latter and one’s partners.