Withdrawal Of A Partner From Fixed-Term General And Limited Partnerships: Just Cause As A Prerequisite For Payment Of The Value Of The Partner’s Interest

This article examines the right of a partner to voluntarily withdraw from a general partnership (O.E.) and a limited partnership (E.E.), with particular emphasis on fixed-term partnerships. It analyses the concept of just cause for withdrawal and its significance in establishing the withdrawing partner’s claim for payment of the full value of his or her partnership interest. It also presents the main criteria for determining the value of that interest and the consequences of the absence of just cause for the financial claim of the departing partner.

Introduction

The personal relationship of trust between the partners constitutes the foundation upon which partnerships are built, primarily general partnerships (O.E.) and limited partnerships (E.E.). The preservation of that trust is decisive for the proper functioning of the partnership, without, however, excluding the need for a partner’s withdrawal where the continuation of the partnership relationship becomes particularly burdensome.

Law 4072/2012 recognises the right of each partner to withdraw voluntarily from a partnership by means of a unilateral declaration addressed to the partnership and the remaining partners. However, in the case of a fixed-term partnership, the legislature draws a material distinction as regards the financial consequences of voluntary withdrawal. In particular, although the partner’s withdrawal takes effect irrespective of the reason that gave rise to it — solely by virtue of the declaration of withdrawal addressed to the partnership and the remaining partners — the partner’s claim for payment of the value of his or her partnership interest depends on the existence of just cause, which is ultimately assessed by the competent court.

This distinction reflects the legislature’s attempt to strike a balance between the partner’s freedom to withdraw from the partnership and the need to protect the stability of the partnership relationship in fixed-term partnerships.

Voluntary Withdrawal of a Partner from a Partnership

Pursuant to Article 261(1) of Law 4072/2012, unless otherwise provided in the partnership agreement, each partner in a partnership may voluntarily withdraw from the partnership by means of a unilateral declaration addressed to the partnership and the remaining partners.

This declaration is constitutive in nature and produces its effects immediately, without requiring acceptance by the partnership or by the remaining partners. Once the declaration has reached its addressees, the partner ceases to hold the status of partner and the partnership continues to operate with the remaining partners.

The loss of partner status, however, does not automatically entail a right to receive the value of the partnership interest. This issue is treated differently in partnerships of indefinite duration and fixed-term partnerships, since only in the latter case does the legislature link the withdrawing partner’s financial claim to the existence of just cause.

The Concept of Just Cause

The law does not provide a definition of just cause for withdrawal, leaving its specification to legal doctrine and, primarily, to case law. It is an indeterminate legal concept, to be assessed on a case-by-case basis and by reference to the overall structure and organisation of the particular partnership, which serves as the main guide for evaluating the seriousness of the circumstances giving rise to the alleged just cause.

According to settled case law, just cause exists where, in accordance with good faith and commercial usages, the withdrawing partner’s continued participation in the partnership until the expiry of the agreed term becomes particularly onerous. As a rule, just cause must relate to the affairs of the partnership and not to the personal circumstances of the partners, unless, in the specific case, personal elements play a predominant role. In any event, the existence of just cause must carry particular weight and have significant consequences for the proper functioning of the partnership (Larissa Court of Appeal 243/2020).

By way of example, case law has recognised as just cause the serious disruption of personal relations, persistent disagreements, disputes and the absence of a spirit of cooperation and mutual understanding between the partners, the poor course of the partnership’s affairs and lack of profits, and breach of partnership obligations, always in conjunction with compelling economic reasons resulting either in the paralysis of the partnership’s operation or in the inability to achieve its purpose (Thessaloniki Single-Member Court of First Instance 62/2022; Larissa Court of Appeal 243/2020; Chios Single-Member Court of First Instance 212/2021; Supreme Civil and Criminal Court 473/2019). Temporary difficulties, mere business disagreements or incidents of limited intensity are not sufficient to establish just cause. The situation relied upon by the withdrawing partner must be of particular seriousness and permanence, so as to render the continuation of the partnership relationship objectively intolerable.

Finally, it should be noted that the existence of just cause does not require fault on the part of the remaining partners, nor the absence of fault on the part of the withdrawing partner. Any fault on the part of the latter may, however, lead to the application of Article 281 of the Greek Civil Code on the abusive exercise of rights.

Just Cause as a Condition for Payment of the Value of the Partnership Interest

The most significant consequence of the existence or absence of just cause concerns the proprietary right of the withdrawing partner.

In fixed-term partnerships, Article 261(3) of Law 4072/2012 provides that payment of the value of the partnership interest is conditional upon the existence of just cause. If the court finds that no such cause exists, the withdrawing partner does not acquire a claim against the partnership for payment of the value of his or her partnership interest.

This rule is intended to protect the stability of fixed-term partnerships and to prevent premature or abusive withdrawals that could disrupt their operation. In other words, the legislature distinguishes between the status-related and the pecuniary consequences of withdrawal: withdrawal takes effect solely by virtue of the partner’s declaration, whereas the partner’s financial claim depends on the existence of just cause.

The existence or absence of just cause is assessed by the competent court within the procedure prescribed by law, following an evaluation of all the factual circumstances of the case.

Determination of the Value of the Partnership Interest

Εφόσον διαπιστωθεί η ύπαρξη σπουδαίου λόγου, ο εξερχόμενος εταίρος αποκτά αξίωση καταβολής της πραγματικής αξίας της εταιρικής του συμμετοχής.

Η αποτίμηση πραγματοποιείται με βάση την πραγματική περιουσιακή κατάσταση της εταιρείας κατά τον χρόνο της εξόδου και δεν περιορίζεται στη λογιστική αξία των περιουσιακών στοιχείων της. Για τον σκοπό αυτό συντάσσεται ειδικός ισολογισμός, κατά το χρόνο εξόδου, στον οποίο αποτυπώνονται τόσο τα στοιχεία του ενεργητικού όσο και του παθητικού της εταιρείας, συμπεριλαμβανομένων της φήμης, της πελατείας, της υπεραξίας και κάθε άλλου περιουσιακού στοιχείου που επηρεάζει την πραγματική οικονομική αξία της επιχείρησης.

Σε περίπτωση διαφωνίας ως προς το ύψος της αποτίμησης, το σχετικό ποσό καθορίζεται από το αρμόδιο Μονομελές Πρωτοδικείο κατά τη διαδικασία της εκουσίας δικαιοδοσίας.

Παράλληλα, ο εξερχόμενος εταίρος δεν απαλλάσσεται από τη συμμετοχή του στις εταιρικές ζημίες. Εφόσον η εταιρική περιουσία δεν επαρκεί για την εξόφληση των υποχρεώσεων της εταιρείας, εξακολουθεί να ευθύνεται κατά το ποσοστό συμμετοχής του στις ζημίες, σύμφωνα με τους κανόνες που διέπουν τις προσωπικές εταιρείες.

Concluding Remarks

A partner’s withdrawal from a partnership constitutes a right that may be exercised at any time by means of a unilateral declaration addressed to the partnership and the remaining partners. In fixed-term partnerships, however, the exercise of that right is not, in itself, sufficient to establish a claim for payment of the value of the partnership interest.

Just cause operates as the critical filter distinguishing mere withdrawal from a financially justified exit by the partner. Its assessment is always carried out by reference to the specific circumstances of the particular partnership and through a balancing of the interests of all partners. For this reason, both the drafting of the partnership agreement and the timely legal assessment of the factual circumstances prior to withdrawal are of particular importance, as they may prevent lengthy court disputes and significant financial losses.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.