The Calculation of the Value of the Share of an Exiting or Excluded Partner from a Partnership – Legal Insight

Legal Insight

March 2025

Giorgos Kefalas, LL.M. mult., MSc

Summary: Under the law governing partnerships (Law 4072/2012), a partner who exits or is excluded from the partnership (in addition to the right to have returned in kind the assets contributed for use) is, in principle, entitled to receive the full value of his or her share. The application of this provision raises a range of issues, which this article endeavors to address.

1. Introduction

In our previous articles, we have analyzed both the right of a partner to exit a partnership and the right of the other partner(s) to seek the exclusion of their co-partner from a partnership. Pursuant to paragraph 1 of Article 264 of Law 4072/2012, “In the event of the exit or exclusion of a partner, the partnership shall return in kind the assets that were contributed by that partner for use.” At the same time, paragraph 2 of the same Article provides that, unless otherwise stipulated in the partnership agreement, the exiting or excluded partner has a claim against the partnership for payment of the full value of his or her share.

An exception applies if a partner exits a partnership of fixed duration without there being a substantial reason. In this scenario, the exiting partner is not entitled to receive the value of his or her share (see Article 261(3) of Law 4072/2012). Consequently, a partner is entitled to receive the full value of his or her share when exiting a partnership of indefinite duration (regardless of whether a substantial reason for exit exists or not), exiting a partnership of fixed duration if a substantial reason for exit exists, and, finally, when a partner is excluded from the partnership.

However, how exactly do the courts calculate the share value owed to the exiting or excluded partner, and against whom may the partner assert a claim to recover it? Furthermore, which point in time is critical for determining the value of the share, and when must it be paid to the exiting or excluded partner? We will attempt to answer these questions in the sections below.

2. Calculating the Share Value of the Exiting or Excluded Partner

First, paragraph 2 of Article 264 states that:

“In the absence of an agreement among the partners regarding the share value, the value to be paid shall be determined by the court referred to in paragraph 2 of Article 259, following the procedure of voluntary jurisdiction.”

Hence, initial importance is placed on any agreement among the partners. If the exiting or excluded partner and the other partners agree on the sum reflecting the share’s value, then the exiting or excluded partner will receive this sum upon exit or exclusion.

Moreover, the provisions of the partnership agreement itself are crucial. The partnership agreement may specify a particular method of calculating the share value of the exiting or excluded partner—e.g., it may provide that the partner is entitled only to the accounting (book) value of his or her share, or that determination of the share value will be carried out by an independent expert. The partnership agreement may also specify the manner in which the share value is to be paid to the exiting or excluded partner—e.g., immediately or in installments, in cash or in kind, etc.

However, in most cases, the partners do not agree on the share value of the exiting or excluded partner, nor are there relevant clauses in the partnership agreement. Consequently, the exiting (or excluded) partner is forced to resort to the competent courts (or to arbitration, if the partnership agreement so provides).

Case law has held that in calculating the value of the exiting or excluded partner’s share, one must take into account the entire financial situation of the partnership at the relevant point in time—i.e., the partnership’s assets (including its claims against third parties and the monetizable value of intangible property acquired, such as goodwill, clientele, valuable distinguishing features, etc.), as well as its liabilities, i.e., its debts to third parties. The current and expected economic performance of the partnership business must also be considered.

Therefore, in determining the partnership’s value and thus the value of the exiting or excluded partner’s share, both the value of the partnership’s tangible assets and the value of its intangible assets are considered—often the most significant assets for many businesses—along with the partnership’s debts to third parties.

Relevant court decisions typically note that “the main factor in determining the value of the departing partner’s share is, in principle, its market value at the date the partner exits.” For instance, Athens Single-Member Court of Appeals decision no. 3292/2018 concluded that the value of the partnership at the time the partner exited amounted to 480,000 euros, because 14 months prior, a prospective buyer had offered 120,000 euros to acquire a 20% stake in the partnership (thus the total value of the partnership at that time would have been 600,000 euros). However, in the intervening period, market conditions in the sector in which the partnership operated had deteriorated, leading to the conclusion that the partnership’s value at the partner’s actual exit date was 480,000 euros. Consequently, the exiting partner, who held 37% of the partnership, was entitled to 177,600 euros (i.e., 37% of 480,000 euros).

In another case, the court based its determination of the partnership’s value (and therefore of the exiting partner’s share) on a private agreement entered into by the partners. Specifically, in decision no. 570/2017 of the Thessaloniki Single-Member Court of Appeals, the partners had agreed in a private contract dated August 3, 2009, that the partnership’s value stood at 800,000 euros. The court reduced this value to 375,000 euros due to the intervening economic crisis and other special circumstances that took place until the partner’s exit on October 25, 2013—i.e., four years after the agreement—as well as considering a penalty that was imposed on the partnership by the Social Insurance Institute (IKA).

Cases such as the above are exceptions rather than the rule. In the majority of instances, there is neither a prospective purchaser’s offer to acquire the entire partnership or specific shares thereof, nor any prior agreement among the partners regarding the partnership’s value. Consequently, the court typically must determine the partnership’s value (and thus the share value of the exiting or excluded partner) from the ground up.

In earlier times, exiting or excluded partners from partnerships who brought legal proceedings often relied on POL 1055/2003, which provided a specific method for calculating the taxable value of a business. However, since the entry into force of the Income Tax Code (ITC) in 2013, that circular no longer applies. Under the ITC, Article 42 and interpretative circular POL 1032/2015 are significant. With regard to determining the equity of partnerships (personal companies), POL 1032/2015 states:

“For businesses keeping single-entry (simplified) accounting records, ‘equity’ shall be the capital arising from the partnership’s articles of association and any amendments thereto. In addition, any acquisitions of fixed assets, subsidies not included in the acquisition cost of fixed assets or in covering other expenses, and any other supporting documents evidencing an increase in capital (in respect of which the partnership has not proceeded to amend its articles of association) shall also be taken into account.”

However, the above calculation method can only serve as an indicative measure, as it does not capture the intangible value of the business. This is precisely why, even if the partnership’s taxable value is determined, courts will generally order a forensic accounting (an expert report) to calculate the partnership’s value based on the factors noted above (see, for example, Thessaloniki Single-Member Court of First Instance decisions no. 25229/2013 and 6422/2018, as well as Athens Single-Member Court of First Instance decision no. 2806/2017).

3. Against Whom May the Exiting or Excluded Partner Assert the Claim for Payment of the Share Value?

Until recently, the prevailing view in court decisions was that an exiting or excluded partner could only claim payment of the value of his or her share from the partnership itself, not from the partners who are personally liable. In other words, only the partnership assets were considered liable for that claim, and not the personal assets of the remaining partners. This view, however, had been subject to considerable criticism in legal theory and was not undisputed.

Nonetheless, the Supreme Court of Greece (Areios Pagos), in its recent decision no. 1703/2023, adopted the opposite perspective—namely, that for payment of the full value of the share of the exiting or excluded partner, not only is the partnership’s legal entity liable, but so are its general partners, who bear unlimited and joint liability for the debts of the partnership.

Specifically, as stated in the Supreme Court’s decision:

“Therefore, the claim of the departing partner, who has lost the status of partner, to receive the value of his or her partnership share falls under the ambit of Articles 249(1) of Law 4072/2012 (previously Article 22 of the Commercial Code, in the case of a General Partnership) and Article 271(2) of the same law (in the case of a Limited Partnership). These provisions establish the personal, unlimited, and joint liability of the general partner for the debts of the general or limited partnership to third-party creditors, simultaneously converting the obligations of the partnership into obligations of its general partners (Supreme Court 115/2020). Consequently, the exiting partner of a partnership acquires a corresponding monetary claim not only against the partnership, but also against his or her co-partners, who are jointly and severally liable for the partnership’s debts.”

4. The Critical Time for Payment and Determination of the Exiting or Excluded Partner’s Share Value

According to paragraph 2 of Article 261 of Law 4072/2012:

“In a partnership of indefinite duration, the share value is paid to the exiting partner at the end of the financial year.”

Thus, if the exiting partner and the remaining partners agree on the share value of the former, the relevant amount must be paid to the exiting partner at the end of the financial year in which the exit notice was given. The same applies to partnerships of fixed duration, provided that all partners agree on the presence of a substantial reason for the exit and on how to calculate the share value. Of course, it is not uncommon for the exiting partner and the remaining partners to disagree on the share value, which leads them before the courts (or to arbitration, if provided by the partnership agreement). In those instances, the exiting partner may claim payment of the corresponding amount once the relevant judgment (or arbitral award) is issued.

By analogy, in cases of partner exclusion from a partnership—where a judicial decision ordering the exclusion is always required—the payment of the share value presupposes the issuance of the court decision ruling on the exclusion.

On the other hand, the value of the share must be established as of the date on which the exit or exclusion takes effect. In the case of an exit, the relevant time for valuing the partnership and, consequently, the partner’s share, is when the partnership and the other partners receive the exiting partner’s exit declaration. In the case of exclusion, the critical time is the date the first-instance court decision ordering the partner’s exclusion is issued.

5. In Lieu of a Conclusion

As with most matters of private law, the calculation of the partnership’s value and of the share of the exiting or excluded partner primarily depends on the agreement reached between that partner and the remaining partners, as well as any relevant provisions in the partnership agreement. However, if no agreement exists between the partners and no provision is made in the partnership agreement—which is likely the usual scenario—the court (or arbitral tribunal, if arbitration has been agreed upon) will be called upon to determine the share value of the exiting or excluded partner in light of the factors discussed above.