Private Company (IKE)

21 Mar Private Company (IKE)

The Private Company (IKE) is the most recent form of capital company in Greece, introduced by Law 4072/2012. It has evolved into a particularly popular choice for new entrepreneurs and small to medium-sized enterprises, largely replacing the traditional Limited Liability Company (EPE). It is characterized by a flexible structure, minimal capital requirements, and limited liability for its partners. It is no coincidence that by 2018, over 50% of newly established companies in Greece were of the IKE type, highlighting its widespread acceptance across various sectors of the economy.

The following presents the current legal framework of the IKE, its establishment process, operation and management, as well as practical examples of its use.

Legal Framework of IKE (Law 4072/2012 and Amendments)

The IKE was established under Part Two of Law 4072/2012 (Articles 43-120) as part of efforts to improve the business environment. The original law defines the fundamental characteristics of the company, such as its name, registered office, duration, transparency, as well as all aspects of its formation, contributions, management, partners’ rights and obligations, and dissolution. In the years that followed, the legal framework of the IKE has been updated multiple times:

• Law 4155/2013: Introduced initial improvements, such as the abolition of the mandatory corporate seal.
  • Law 4441/2016: Introduced the One-Stop Service (YMS) to simplify company formation, providing for the creation of the Electronic One-Stop Service (e-YMS).
  • Law 4541/2018: Introduced significant corporate law changes. For example, it amended the duration of an IKE, abolishing the automatic dissolution of the company upon the expiration of the period specified in its articles of association. Now, the expiration of the initial duration is no longer a reason for dissolution, allowing for an indefinite lifespan (unless otherwise decided by the partners). This law also modernized provisions for other company forms (e.g., EPE).
  • Law 4601/2019: Established a unified framework for company transformations (mergers, conversions), replacing relevant articles of Law 4072/2012. The conversion of a General Partnership (OE), Limited Partnership (EE), or Limited Liability Company (EPE) into an IKE (and vice versa) is now governed by common rules, simplifying these procedures.
  • Law 4635/2019: Included supplementary provisions to improve the corporate framework.
  • Law 4712/2020: Digital Governance – This law replaced Article 51 of Law 4072/2012, making the establishment of an IKE exclusively through the e-YMS electronic platform mandatory. Since early 2021, every new IKE must be founded online (except in specific cases requiring a notary).
  • Law 4872/2021: Provided clarifications and minor modifications (e.g., regarding publicity in the General Commercial Registry (GEMI) and company operations).
  • Law 4919/2022: Introduced a new regulatory framework for GEMI and YMS, consolidating and modernizing company formation and registration procedures. The electronic one-stop service was fully integrated into gov.gr.
  • Law 4935/2022: Established incentives for business transformations, such as the favorable conversion of a sole proprietorship into an IKE or a Société Anonyme (AE) through the contribution of individual business activity to the new company, with tax neutrality. This facilitates sole proprietors in benefiting from the advantages of an IKE without significant costs or taxes during the transition.

Overall, the current legal framework of the IKE is the result of all the above legislative developments. The IKE continues to be governed by Law 4072/2012, as amended and codified to date (including the recent Law 5039/2023). This ensures that the corporate form remains modern, flexible, and adapted to market needs.

Procedure for Establishing a Private Company (IKE) via e-ΥΜΣ and G.E.MI.

The establishment of a Private Company (IKE) today has become fast, simple, and largely electronic. According to the law, the incorporation of a new IKE is carried out exclusively through the One-Stop Electronic Service (e-ΥΜΣ) of G.E.MI., unless a notary is required (e.g., special in-kind contributions such as real estate). The process is as follows:

• Initiation on the platform: One of the founders (or an authorized representative) logs into the e-ΥΜΣ application using their personal TAXISnet credentials.
• Preliminary name check: They select “Establish a new company” and conduct an electronic preliminary check to reserve the desired company name and distinctive title.
• Articles of Association: They complete the necessary details online in the standard articles of association. The use of the standard articles is mandatory for the e-ΥΜΣ, covering all basic provisions. There is an option to choose either the fully standardized articles or the standard template with additional content (with certain customizations) if needed. If the founders wish for a fully customized set of articles that deviates from the standard, then incorporation cannot be completed entirely electronically – a notary is required as a physical One-Stop Service (ΥΜΣ).
• Acceptance by partners: Once the details are completed, the platform sends the articles of association to all founders/partners for approval. Each partner accepts it electronically (either with their own TAXISnet credentials or with an approved electronic signature). In this way, all founders digitally co-sign the incorporation document without physical presence.

Once the above steps are completed, the platform automatically handles all necessary actions and issues the incorporation act. In real-time, the following are carried out: registration with G.E.MI., registration with the relevant Chamber of Commerce, issuance of a Tax Identification Number (TIN) for the company, and notification to the EFKA (social security fund). The founder immediately receives the Incorporation Certificate and the Registration Code Number (ΚΑΚ) in G.E.MI. electronically, making the company officially active.

Minimum Capital

One of the most attractive features of an IKE is that no minimum initial capital is required – €1 is sufficient for incorporation. Partners may contribute a higher amount if they wish (e.g., for credibility reasons towards third parties), but from a legal perspective, the corporate capital can be freely determined (even zero, except for the €1 for formality). This allows the establishment of a company even with minimal own funds, significantly facilitating startups and small businesses.

Types of Contributions

The contributions of partners in an IKE can be of three types, offering great flexibility in structuring the corporate capital:

(a) Capital Contributions, meaning contributions in cash or in-kind that constitute the company’s capital (expressed in corporate shares of value).
(b) Non-Capital Contributions, meaning contributions in kind or services that do not form part of the capital (e.g., a partner providing labor or know-how), which are valued but do not increase the capital – they, however, entitle the partner to profit sharing.
(c) Guarantee Contributions, meaning commitments by partners to guarantee the company’s debts up to a specific amount.

This provision for various types of contributions is an exclusive innovation of the IKE compared to other forms (in SAs/Ltds, only capital contributions exist). Thus, partners can participate with whatever they can provide – money, assets, labor, or guarantees – and receive corresponding corporate shares and rights.

Operation and Management of an IKE

The internal organization of an IKE offers flexibility but also clear limits of liability for partners and the administrator. Below, the key aspects related to the rights/obligations of partners and the role of the administrator of the company are analyzed.

Rights and Obligations of Partners

The partners of an IKE enjoy limited liability and specific rights of participation in the company:
• Limited Liability: Unlike personal companies (OE/EE) where partners are liable with their entire personal assets for the company’s debts, in an IKE, partners are not personally liable for corporate debts – only the company itself is liable with its assets. The only exception is any guarantee contributions: if a partner has undertaken a guarantee up to an amount in the articles of association, they are liable up to that amount. Otherwise, the personal assets of members are not at risk from corporate debts, offering significant protection.
• Corporate Shares & Voting: Each partner’s participation is expressed in corporate shares. By law, all shares provide equal rights unless otherwise specified in the articles of association. Decisions are generally made by a simple majority of shares (unless an increased majority is required for special matters). There is no complex double-majority rule as in the traditional EPE – thus, the partner with the largest percentage can effectively make decisions if they hold more than 50%. This flexibility was one of the incentives for establishing the IKE, as the EPE required a majority in both the number of partners and the percentage (double-majority rule), often making decision-making difficult.
• Right to Profits & Assets: Each partner is entitled to a share of the company’s profits (dividends) according to their corporate shares. Also, in case of company dissolution and liquidation, they are entitled to part of the remaining assets. Note that profit distribution is not mandatory every year – profits can be retained for development or reserves.
• Management & Control: The partners collectively form the Partners’ Assembly, which is the supreme body and decides on significant matters (e.g., amendment of the articles of association, increase/decrease of capital, admission of a new partner, appointment or dismissal of the administrator, approval of balance sheets, etc.). Each partner has the right to participate and vote in the Assembly (according to their shares). The law also grants partners the right to information: they can access corporate books and documents and request information about company affairs. The articles of association can regulate how this right is exercised (e.g., at regular intervals). Additionally, partners representing 1/10 of the corporate shares can request a court-appointed independent auditor if they suspect serious violations, to review the management.
• Partners’ Obligations: The main obligation is to pay the contributions undertaken in the articles of association (capital, non-capital, and/or guarantee contributions). Partners must fully and timely fulfill these contributions. They must also comply with the statutory provisions and the Assembly’s decisions. There is no personal liability for debts, as mentioned, but if criminal or administrative liabilities are imposed (e.g., in cases of money laundering or tax violations), all partners must act legally. In general, the status of an IKE partner entails much milder responsibilities compared to a general partner in an OE/EE, which is a key advantage.

Management and Representation – The Role of the Administrator

The management of an IKE is exercised by one or more Administrators, as defined in the articles of association. The IKE does not have a board of directors; the administrator is the sole body that legally represents and manages the company in daily affairs. They may be a partner or a third party (outside the company), a natural or legal person. Often, in small companies, the main partner also assumes the role of the administrator. The main responsibilities and duties of the administrator include:
• Representation & Administrative Actions: The administrator acts on behalf of the company towards third parties. They sign contracts, make business decisions, handle corporate funds, and generally “run” the business. They have the power of representation and can bind the company with their signature within their authority. If there are multiple administrators, the articles of association define the method of joint decision-making or the division of responsibilities.
• Duty of Good Faith & Legality: The administrator must act in good faith and in the company’s best interest. The law (Article 67 of Law 4072) states that they are liable to the company for any violation of the law, the articles of association, or partner decisions, as well as for any managerial fault (negligence). This means that if they harm the company through intent or negligence (e.g., mismanagement, actions beyond authority, failure to comply with partner decisions), the company may claim damages. This liability is limited only in cases where the administrator followed binding partner decisions or made decisions in good faith for the company’s interest. The company’s claim expires 3 years after the act. If multiple administrators exist, they are jointly liable if they acted together.

• Keeping Records & Financial Management: The administrator ensures the maintenance of the required accounting books and records (partner book, minutes, accounting records, etc.). They prepare the annual financial statements (balance sheet, results) and submit them to the partners for approval. After approval, they arrange their publication in GEMI. They also ensure the timely payment of taxes, social security contributions, and other corporate obligations.
  • Liability to the State (Tax & Social Security): Greek law imposes personal liabilities on company representatives for debts to the State. Specifically, the Tax Procedure Code states that administrators (and those effectively exercising management) are jointly and personally liable for the company’s tax debts (income tax, VAT, withholding taxes, property tax, etc.), including interest and penalties, if these debts became overdue during their tenure and were not paid due to their fault. Practically, this means that if an IKE leaves taxes unpaid, the administrator may be called upon to pay them personally (unless they prove they were not responsible). Similarly, the law provides for administrator liability regarding unpaid social security contributions of employees/partners. Therefore, the administrator must be particularly careful in settling all tax and social security obligations of the company.
  • Liability to Third Parties: The administrator is also liable to third parties (suppliers, customers) only if they act personally beyond their authority or illegally. Normally, obligations are created in the company’s name. However, if they sign a contract as a representative without authority or intentionally cause damage to a third party, they may face personal claims. Generally, though, the administrator’s personal assets are not at risk from company contracts made lawfully.
  • Appointment & Dismissal: The first administrator is appointed in the articles of association upon incorporation. Partners can replace them at any time by decision (unless they are the sole partner in a single-member IKE). Also, a partner with a high stake may be exclusively entitled to appoint/dismiss the administrator (if the articles of association provide for it). In cases of serious reasons, the court may also dismiss the administrator at the request of partners.

In summary, the administrator is the “key person” in an IKE, holding broad powers but also significant responsibilities. Partners assuming this role should be aware that, although they avoid the unlimited liability of general partners, they still have legal obligations (especially to the company and the State) that require diligence and consistency in management.

Social Security Treatment of Members

A special issue in IKE operation concerns the insurance of its members. In personal companies (OE/EE), all partners were traditionally mandatorily insured with the former OAEE (now EFKA) as self-employed individuals. However, for IKEs, the law provides something different: partner insurance is optional, while only the administrator of the IKE is mandatorily insured with EFKA. This means that simple partners (who are not administrators) are not required to pay contributions as non-salaried individuals for their shareholder status. They can opt for voluntary insurance to build pension rights, but there is no legal obligation.

The administrator, on the other hand, is treated as a freelancer and must be insured. Since 2020, contributions are no longer linked to income but to predefined insurance categories. Thus, an IKE administrator pays a fixed contribution each month, depending on the selected category. If they are also employed elsewhere or retired, special parallel insurance rules apply. Importantly, the IKE itself is not insured with EFKA – meaning dividends received by partners are not subject to social security contributions, unlike net profits of sole proprietorships, which are burdened with contributions. This is an attractive advantage of the IKE, allowing an entrepreneur to participate as a partner without additional insurance costs, paying contributions only if they manage the company or receive a salary.

Practical Examples and Uses of IKE

The flexibility of IKE makes it suitable for a wide range of business activities. Some practical examples where IKE is utilized in practice:

• Startups: Many technology startups choose IKE due to its low startup costs and flexibility in contributions (e.g., they can allocate shares to co-founders as non-monetary contributions for their work instead of immediate cash payments). The limited liability protects founders if the venture fails. Additionally, investors (angel investors, VCs) accept IKE in the early stages. Later, if easier share transferability or larger funding is required, an IKE startup can be converted into an S.A. (Société Anonyme).
• Small and medium-sized retail or hospitality businesses: For a new store, a café, a restaurant, or a service business, IKE offers the right mix of protection and simplicity. Entrepreneurs do not expose their entire personal assets to risks (e.g., customer lawsuits, supplier debts), while the establishment process is fast. Many family businesses that were previously General Partnerships (O.E.) are now incorporated as IKE, ensuring that only the company is liable to third parties.
• Freelancers / Consultants: Two or more professionals (e.g., consultants, engineers, programmers) can establish an IKE as an “umbrella” for their activities. This way, they gain a corporate brand, share expenses, and benefit from taxation – profits are taxed at 22% in the company instead of up to 44% if declared personally. They can also retain profits within the company for reinvestment at a lower tax rate. The non-mandatory insurance for non-managing partners means that, for instance, a partner who does not participate in management is not required to pay social security contributions (EFKA), unlike a situation where they would all be freelancers.
• Online service businesses (e-shops, software startups): Particularly, young entrepreneurs operating digitally choose IKE. The reasons include flexibility in founder relations, ease of investor entry (through capital increases and issuance of new shares), and the credibility image towards international audiences – a “Private Company (IKE)” with limited liability presents a professional reputation to foreign partners. Many technology companies are established as IKE and maintain this form until reaching significant revenue.
• Social Enterprises – Startups aiming for funding programs: IKE, due to its fast establishment process, is also used for participation in funded programs (NSRF, Horizon EU, etc.). A team can quickly set up a company to submit a proposal with minimal cost. If they secure funding, they operate through the IKE.
• Foreign companies seeking a presence in Greece: Many foreign businesses choose to establish a subsidiary or branch in the form of an IKE in Greece. They are attracted by its simplicity (instead of requiring a notary and significant capital for an S.A.) and the possibility of a single-member structure – for example, a foreign parent company can be the sole partner of a single-member IKE in Greece. This allows them to enter the Greek market more quickly.

The above examples are not exhaustive – IKE is truly a multi-purpose tool used in all sectors: from commerce and manufacturing to tourism, education, agricultural businesses (e.g., producer groups forming IKE), and even real estate holding (Real Estate SPVs). Statistics show that entrepreneurs across all industries prefer it: according to G.E.MI. data, since 2018, IKE has been the most popular company form, accounting for 53% of new incorporations, a percentage that remains high. This practically means that in every sector – whether it is a small retail store or an innovative startup – IKE is considered suitable.

Conclusions

The Private Company (IKE) has been established as the dominant corporate type for the majority of Greek businesses starting up or restructuring. Its flexible legal framework (Law 4072/2012 with subsequent improvements) provides a modern “canvas” on which entrepreneurs can build their company without high costs or complex requirements. The establishment process is now fast and digital, reflecting the shift towards the state’s digital transformation. In its operation, IKE emphasizes internal organizational flexibility (with minimal statutory obligations, leaving much to the autonomy of the Articles of Association) while also protecting partners through limited liability.

Compared to other forms (General Partnership, Limited Partnership, Limited Liability Company, S.A.), IKE stands out by combining the advantages of both personal and capital companies, without many of their disadvantages. It is no coincidence that within a few years of its introduction, it became the most popular form – filling a clear gap for a company type that is “flexible, cost-effective, and with limited liability.”

Ultimately, IKE is now a comprehensive and flexible choice, offering the security and structure of a capital company combined with the simplicity and adaptability of a small business. Entrepreneurs can fully leverage its advantages to implement their business plans or transform existing corporate structures, taking advantage of a dynamic and modern corporate framework. At Karpouzis-Lianou & Associates Law Firm, we provide specialized legal guidance and full support on matters of incorporation, management, and transformation of IKE, ensuring that every business decision is made with the utmost security and growth potential.