Profit Distribution in General and Limited Partnerships

Legal Insight

April 2025

Katerina Zografou, LLM

Abstract: This article examines the process of profit distribution in General Partnerships (O.E.) and Limited Partnerships (E.E.). It analyzes the concepts of profit and loss, as well as the partners' rights to distribution as defined by law and the partnership agreement. The timing and manner of the claim for profit payment are discussed, emphasizing that, in the absence of an agreement to the contrary, this claim arises at the end of the fiscal year. Finally, the possibility of profit retention, i.e., non-distribution and carrying forward to subsequent years, is examined, highlighting that this requires explicit provision in the partnership agreement or unanimous decision by the partners.​

1. Introduction

Personal companies, namely General Partnerships (O.E.) and Limited Partnerships (E.E.), are among the most common forms of corporate structures in the realm of small and medium-sized enterprises. Their structure is primarily based on personal trust among partners, a fact that significantly influences their operation, particularly the method of profit distribution. The process of profit distribution in these companies is determined by Law 4072/2012, the company's articles of association, and agreements among partners.​

Understanding the principles governing profit distribution in personal companies is vital for safeguarding partners' rights, maintaining corporate cohesion, and avoiding legal disputes. This article examines the manner of distributing business profits in personal companies, presenting the fundamental principles and procedures applied, as well as the agreements that can affect this process.​

2. Concept of Profit and Partners' Rights to Distribution

In personal companies, profit or loss refers to the net result after taxation, as derived from the income statement of the company's fiscal year. The concept of profit or loss reflects the difference between the company's revenues and expenses, calculated based on the financial data of the current and previous management periods. Thus, profit or loss indicates the increase or decrease in the company's assets compared to the previous fiscal year, not the initial assets of the company. The distributable profit is the amount remaining available for distribution to partners after covering corporate needs and any stipulated reserves.​

The right to participate in the operating results constitutes a general property right of the partner, intrinsically linked to their corporate status, allowing them to share in profits throughout the company's duration. Concurrently, the specific claim of the partner for payment of their share of profits for a particular management period becomes judicially enforceable at the end of that period, provided the company has a duration exceeding one year and there is no contrary provision in the partnership agreement.​

The general right to participate in profits is founded on the partnership agreement and cannot be transferred independently nor be subject to seizure, even with the consent of the other partners, as it is an integral element of corporate status. In contrast, the claim for the payment of profits for a specific management period, even future ones, can be freely assigned and seized.​

In the absence of an agreement to the contrary, partners share in profits according to their participation percentage, while the partnership agreement may provide for a different allocation method. If there is no relevant provision and the gap cannot be interpretatively filled, profits will be distributed equally among partners. They can always agree on a different allocation for a specific fiscal year.​

3. Timing of Claim Arising and Manner of Satisfaction

In personal companies (such as General and Limited Partnerships), each partner's right to corporate profits arises upon the end of the fiscal year. The prevailing view in case law accepts that, absent an agreement to the contrary, profits are shared among partners at the end of each fiscal year. Therefore, prior preparation of annual financial statements or their approval by the partners' assembly is not a prerequisite for the claim to arise and be exercised.​

This position has also been adopted by our courts' case law. Specifically, the Supreme Court, in decision no. 1869/2022, confirmed that the preparation and approval of accounts by partners is not a prerequisite for profit distribution (unlike in capital companies). Only if otherwise stipulated in the partnership agreement (articles of association) does a different time or method of distribution apply—for example, partners may agree on profit distribution at different intervals or on retaining part of the profits as a reserve. However, in the absence of a contrary statutory provision, the time for exercising the partner's claim for profit distribution coincides with the end of the fiscal year.​

Therefore, upon the end of the fiscal year, each partner acquires an actionable claim (i.e., the right to judicial pursuit) against the company for their share of the profits. If the partner already knows the amount of net profits due to them, they can immediately demand it from the company (extrajudicially or judicially), as the claim is considered due from the end of the management period.​

If they do not know the exact amount, they have the option to ascertain it by exercising the information and accounting rights provided by law. Specifically, managers are obliged to provide full information to other partners and to account for their management. The preparation of financial statements for each fiscal year constitutes, after all, fulfillment of the managers' obligation to account to the non-managing partners.​

In any case, such as when exercising the right to accounting is not feasible because the corporate status has been lost and the former partner wishes to receive the dividends due to them until the loss of this status, in the absence of an account, the company's tax return becomes significant for asserting the claim to profits.​

4. Profit Retention in Personal Companies

As mentioned above, in personal companies (O.E., E.E.), each partner has a statutory right to their share of annual profits according to their corporate share. If the company has a duration exceeding one year, financial results are closed, and profits are distributed at the end of each fiscal year, unless otherwise stipulated in the articles of association.​

Non-distribution of profits ("retention," e.g., by carrying forward undistributed profits to form a reserve in subsequent years) is an exception to this rule and entails a limitation of partners' rights to profits. According to established case law, any decision not to distribute requires either an explicit provision in the articles of association or a unanimous decision by all partners in the assembly.​

In the absence of such an agreement, the manager is not authorized to unilaterally retain profits in the company—a unilateral decision to "carry forward" is invalid as an overreach of the manager's authority. According to the principle of the autonomy of fiscal years, partners must decide each year (and typically unanimously) whether the profits of the year will be distributed or retained. If a partner does not consent to non-distribution, they retain the right to judicially claim their share of the year's profits (with legal interest).​

Notably, the Supreme Court ruled that a managing partner in a General Partnership (O.E.) who unilaterally carried forward 50% of the annual profits without a unanimous decision of the partners’ assembly violated the rights of the other partners to their share of the profits. The latter were rightfully awarded those profits through court proceedings.

Similarly, the Court of Appeal of Thrace (Case No. 14/2023) confirmed that in the absence of a contrary provision in the articles of association, profits must be distributed annually. Any “carry forward” requires a decision by all partners. Likewise, the Court of Appeal of Thessaloniki (Case No. 1685/2011) ruled in favor of a partner who claimed undivided profits owed to them.

Therefore, profit retention in a personal company is only valid if all partners consent, or if it is explicitly stipulated in the partnership agreement. Otherwise, each partner can demand, either through legal or extrajudicial means, the distribution of their rightful share of the profits.

5. In Lieu of a Conclusion

The distribution of profits in personal companies is a fundamental right of the partners, regulated both by law and by the partnership agreement. Understanding the relevant provisions and clearly recording agreements in the articles of association is essential for the smooth functioning of the company and for avoiding conflicts between partners. Timely and fair distribution of profits, in accordance with the prescribed procedures, fosters trust and cooperation among company members, contributing to the achievement of business goals and the long-term sustainability of the enterprise.