18 Feb Exclusion of a Partner in a General Partnership
According to Article 263 of Law No. 4072/2012, if there exists a circumstance related to a partner that would justify the dissolution of the company as per clause δ’ of paragraph 1 of Article 259, the Single-Member Court of First Instance may, upon application by the other partners, order the exclusion of the partner instead of dissolving the company. This provision applies both to personal commercial companies for a definite period and to those for an indefinite one, clearly aiming to replace the regulation of Article 771 of the Civil Code, which applied to civil companies and was, until recently, also applied to personal commercial companies. With the explicit provision now for the exclusion of a partner from personal companies, the differentiation of the law becomes clear on two points.
Specifically, from the comparison of the two provisions, namely Article 771 of the Civil Code and Article 263 of Law No. 4072/2012, it emerges that the newer provision of Article 263 lacks the element of fault in the partner being excluded, while the concept of a serious reason leading to exclusion is expanded, as Article 771 requires the serious reason to relate to the breach of corporate obligations by the partner being excluded, whereas under Article 263, it requires a circumstance that would justify the dissolution of the company per Article 259, para. 1, clause δ’ (serious reason), present in the person of the partner being excluded. The purpose of this provision is to protect the other partners and to maintain the business. A substantive condition for excluding a partner from the company is the existence of a serious reason for exclusion.
Under the new legislative framework, fault is not required for the partner involved in the aforementioned serious reason, provided it relates to the person of the partner being excluded and is such that it makes it impossible to continue the company with their participation, under the further condition that they do not voluntarily withdraw. Therefore, circumstances that can substantiate a serious reason for the dissolution of the company, such as the partner’s prolonged absence (without it being due to indifference to the company’s progress) or the inability of the partners to collaborate with them, can also lead to the exclusion of a partner, as a milder measure compared to dissolution [MpChalkidikis 43/2018 TNP NOMOS, MpThess 18918/2014 EpiskEmpD 2014.629].
The exclusion of a partner consists of their involuntary exit from the company and constitutes a forced departure from it, against their will. The serious reason must exist, moreover, not only at the time of filing the lawsuit but also at the time of its discussion [E. Alexandridou, Commercial Company Law, Legal Library 2nd ed., page 131, marginal note 18]. Furthermore, continuing the company with the partner being excluded, due to their (culpable or not) behavior, must be unbearable for the other partners, thus endangering the smooth operation or existence of the company. Additionally, a prerequisite for exercising the right to exclude a partner is that the application must be submitted by the other partners. The exclusion can involve one or more partners, an interpretation that was also valid with the previously applied provision of Article 771 of the Civil Code.
Moreover, from the grammatical articulation of Article 263 of Law No. 4072/2012, it is primarily inferred that a prerequisite for exclusion is the existence, apart from the partner being excluded, of at least two other partners who will petition the Court by submitting an application. This, combined with the functionally related provisions of Articles 259, 261, and 267 of Law No. 4072/2012, under the principle of maintaining the business enterprise, allows the right to exclude to be exercised even by the “other partner,” given that with the introduction of the institution of the sole proprietorship general partnership [according to the latest Article 267 replaced by Article 27 of Law No. 4403/2016], this is accepted regardless of the cause (“for any reason”) of the departure “of one or more partners” (I. Gerontidis, Exclusion of a Partner and Denunciation of the Company in a Bipartisan OE under Law No. 4072/2012, EpiskEmpD 2014.691). Thus, it is possible even in a bipartisan general partnership, in case of the exclusion of a partner, to avoid the dissolution of the company if within four months from the departure (the exclusion) a partner enters the company and is registered in the GEMI [MpAth 2889/2018 TNP ISOCRATES, MpChalkidikis 43/2018 TNP NOMOS, MpKerk 863/2010 TNP NOMOS, E. Alexandridou, op. cit., page 132, marginal note 19].
The provision of Article 263 of Law No. 4072/2012 also applies in the case of a sole proprietorship general partnership, where the partner seeks the exclusion of most, given that this provision, which is part of those that determine the fate of the company after the occurrence of incidents subsequent to its establishment that occur in the persons of the partners (e.g., 260 to 263 and 265 of Law No. 4072/2012), embodies the principle of maintaining the business enterprise and is offered as an alternative to the “ultimum refugium” of judicial dissolution of the company, per Article 259, para. 1, clause δ’, which even the only partner of a multi-partner general partnership can request. Thus, with the aim of rescuing the general partnership and within the framework of the principle of maintaining the business enterprise, the Legislative Drafting Committee of Law No. 4072/2012 deemed it appropriate to provide that in the event of departure for any reason (thus including exclusion) of all partners except one, there is the possibility of temporarily continuing the operation, until the entry of a new partner, which must be carried out within a short period, specifically four months, and the entry of the new partner must be registered in the GEMI [MpAth 2889/2018 TNP ISOCRATES, MpChalkidikis 43/2018 TNP NOMOS, MpKerk 863/2010 TNP NOMOS, E. Alexandridou, op. cit., page 132, marginal note 19].
Karpouzis – Lianou & Associates Law Firm
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