Court-Ordered Transfer of Partnership Interest Due to Breach of Fiduciary Duty – Article by Elli Thanassenari in NB Daily
We are pleased to announce that our partner, Elli Thanassenari, has published a new article in the esteemed legal journal Nomiki Bibliothiki Daily (NB Daily), titled:
“Court-Ordered Transfer of Partnership Interest Due to Breach of Fiduciary Duty”
The article addresses a critical issue in corporate law: protecting a company and its partners from the actions of a co-partner who competes directly with the partnership by participating in a rival business.
Intra-Partnership Competition Has Legal Consequences
Successful business partnerships are built on trust, shared goals, and professional responsibility. However, it is not uncommon for partners to violate these fundamental principles by engaging in competitive activities that jeopardize the cohesion and sustainability of the business.
Greek case law and modern corporate practice provide legal tools to protect the interests of the company and the non-offending partners.
Fiduciary Duty and Prohibition of Competition
Under Greek law, fiduciary duty arises from the principle of good faith (Article 281 of the Civil Code) and is specifically applicable to partnerships. A partner must refrain from any conduct that conflicts with the interests of the company.
This includes a clear prohibition against competitive behavior—such as founding or participating in a competing business or using an intermediary to engage in commercial activity that harms the original partnership.
Legal Framework
Key provisions regulating this issue include:
- Article 249(2) of Law 4072/2012,
- Articles 200, 288, and 747 of the Greek Civil Code.
These articles explicitly prohibit conflicts of interest and prevent partners from pursuing personal gain to the detriment of the company or for the benefit of third parties. Article 747 also specifically prohibits competition between partners.
Share Transfer Clauses as a Protective Mechanism
A practical and enforceable solution is to include a clause in the partnership agreement that mandates the transfer of a partner’s share in case of a breach of fiduciary duty. Such a clause:
- Safeguards the company’s purpose,
- Prevents conflicts of interest,
- Strengthens corporate governance, and
- Enables judicial enforcement if necessary.
Greek Supreme Court Ruling
The Greek Supreme Court (Areios Pagos), in decision no. 1438/2012, held that breach of fiduciary duty may result in liability for damages. Importantly, the Court upheld the validity of contractual clauses requiring a partner to transfer their share as a legitimate means of protecting corporate interests.
Conclusion
Fiduciary loyalty is essential for the smooth functioning of any partnership. Including appropriate protective provisions in the articles of association enhances legal certainty and internal stability. Awareness and enforcement of these rules help prevent internal disputes and safeguard the continuity of the business.
You can read Elli Thanassenari’s full article (in Greek) in NB Daily here.
Disclaimer: This publication is intended for informational purposes only and does not constitute legal advice. Professional legal guidance should always be sought before acting on any information contained herein.