Judicial Dissolution of a General Partnership & Exclusion of a Partner: Legal Framework and Conditions
Greek law provides for the possibility of judicial dissolution of a General Partnership (O.E.) when no other solution is available. Alternatively, the law allows for the exclusion of a partner, ensuring the business’s viability and protecting the interests of the remaining partners.
Judicial Dissolution of a General Partnership
A general partnership is dissolved in the following cases:
- Upon the expiration of its duration
- By decision of the partners
- Upon its declaration of bankruptcy
- By court order upon a partner’s request, provided there is a compelling reason (Article 259 of Law 4072/2012).
Given the objective of business continuity, which is a core principle of Law 4072/2012, judicial dissolution is considered a last resort. Thus, the existence of a compelling reason is required for the court to grant dissolution. Therefore, dissolution is only permitted if no other resolution is possible.
To further promote business continuity, the law also provides for the exclusion of a partner as an alternative measure.
Compelling Reasons for Dissolution
The existence of a compelling reason is assessed based on the circumstances and the overall organization of the partnership. The compelling reason must be of significant weight, having a major impact on the company’s operations.
It generally relates to the partnership’s affairs, rather than the personal attributes of the partners, unless personal conflicts are so severe and persistent that they render the organization, financial stability, and operation of the business impossible, ultimately hindering the achievement of its purpose.
Compelling reasons may include:
- Poor financial performance and lack of profitability
- Breach of partnership obligations and mismanagement
- Continuous disputes and lack of cooperation
- Breakdown of trust among partners
Such issues must also have economic consequences, leading either to operational paralysis or inability to fulfill the company’s purpose (Greek Supreme Court rulings: ΑΠ 1313/2024, ΑΠ 1157/2022, ΑΠ 225/2022, ΑΠ 671/2020, ΑΠ 473/2019, ΑΠ 37/2019, ΑΠ 1085/2018).
The compelling reason must exist at the time the lawsuit is filed and during the court hearing.
Exclusion of a Partner in a General Partnership: Legal Framework and Conditions
The exclusion of a partner is a crucial legal measure aimed at ensuring the smooth operation of the business and protecting the remaining partners’ interests. If a partner’s conduct makes it difficult or impossible to continue the business, the other partners may file a court petition for exclusion, thereby preventing the dissolution of the company and ensuring its viability.
If a partner’s conduct would justify the dissolution of the partnership, the court may, at the request of the remaining partners, order the exclusion of that partner instead of dissolving the company. This safeguards both the business and the remaining partners.
Exclusion is a form of involuntary withdrawal, meaning that the affected partner is forced to leave against their will. A compelling reason is required, but the partner’s fault is not necessarily a prerequisite.
Additionally, for an exclusion request to be valid, continuing the business with the involved partner must be extremely burdensome for the other partners to the extent that it jeopardizes the company’s operations or existence (Greek Supreme Court rulings: ΑΠ 1313/2024, ΑΠ 225/2022, ΑΠ 671/2020, ΑΠ 473/2019).
Conditions for the Exclusion of a Partner
Compelling Reason for Exclusion
According to case law, compelling reasons for excluding a partner may include:
- Poor financial performance and lack of profitability
- Breach of partnership obligations and mismanagement
- Continuous disputes, lack of cooperation, and breakdown of trust
To be legally valid, the exclusion request must be submitted by all remaining partners.
Additionally, the court considers several factors when deciding whether to grant or deny an exclusion request, including:
- The nature of the compelling reason, especially if personal conflicts impact the company’s operations
- The principle of proportionality, ensuring the exclusion is justified and not excessive
- Balancing the interests of the applicant, the excluded partner, and the company
- The contribution and ownership stake of the partner being excluded
- If the applicant partner also has grounds for exclusion, the request may be denied
- The request must not be abusive or made in bad faith
This legal framework ensures that exclusion is used as a necessary and fair measure to protect the business and its remaining partners while preventing potential misuse.
Nothing in this publication shall be construed as legal advice. The publication is necessarily generalised. Professional advice should therefore be sought before any action is undertaken based on this publication.