Capital companies (Private Companies – I.K.E., Limited Liability Companies – E.P.E., and Sociétés Anonymes – A.E.), as dynamic legal entities, are inevitably affected by the natural, economic, political and social environment. This dynamism often leads to changes in the company’s composition, i.e. the identity of the partners/shareholders, either by law or pursuant to the Articles of Association (AoA), with the ultimate goal of ensuring adaptability and smooth operation of the company. Such changes include the exit or removal of a member/partner.
Specifically, exit is defined as the voluntary departure of a partner from the company, at their own will. Removal (or exclusion), on the other hand, refers to the involuntary departure of a partner from the company, without their consent.
I. Exit Options
A. In the Private Company (I.K.E.)
According to Article 92 of Law 4072/2012 on Private Companies, each partner may exit the company for a significant reason, by means of a court decision issued upon their application. A significant reason is considered any objective or subjective circumstance that makes the partner’s continued presence in the company intolerable, such as, indicatively, prolonged illness, inability to cooperate among partners, or a sudden adverse financial situation of the company.
Additionally, the company’s AoA may include further provisions on the right of exit, setting specific conditions (e.g., sending an out-of-court declaration to the company), and may also provide for the exit of a partner with non-capital contributions through a declaration by the company, in case the partner is unable to fulfill their obligation corresponding to such contribution, particularly due to illness, retirement or inheritance of company shares.
Following the exit, the administrator is obliged to promptly cancel the exiting partner’s shares and, if necessary, reduce the capital, adjusting the number of shares accordingly and registering the change in the General Commercial Registry (G.E.MI.). However, the AoA may stipulate that, instead of cancellation, the shares will be acquired by a person designated by the company. Furthermore, it is permissible to include a provision in the AoA granting existing partners pre-emption rights for the acquisition of shares, in proportion to their participation in the Private Company.
The exiting partner is entitled to receive the full value of their shares, while the company may claim compensation under Article 78(4) of the same law.
B. In the Limited Liability Company (E.P.E.)
Pursuant to Article 33(1) of Law 3190/1955 on E.P.E., any partner may exit the company by submitting a declaration to the administrator, unless otherwise provided in the AoA (for example, a provision that the share will be acquired by a person designated by the company, either at a mutually agreed value between the exiting partner and the company or at real value as determined by a court in interim measures proceedings). According to paragraph 1a of the same article, the right of every partner to exit the company by submitting a declaration within the three-month period prescribed by the said provision cannot be restricted by any provision in the AoA. The exiting partner’s share is acquired as stated above.
In any case, under paragraph 2 of the same article, every partner can exit the E.P.E. for significant reasons, following a court decision which determines the value of the exiting partner’s share, by analogous application of Article 29(1) and (4).
II. Removal Options
A. In the Private Company (I.K.E.)
According to Article 93 of Law 4072/2012, if there is a significant reason, a partner may be excluded from the Private Company by court decision, following a resolution by the remaining partners, under Article 72(4) of the same law, and upon application by any administrator or partner within sixty days from the adoption of the said resolution. The court may issue a provisional order, for example, suspending the voting rights of the partner subject to exclusion.
Upon the finality of the court decision and payment to the excluded partner of the full value of their shares, as provided in Article 72(3), the company continues with the remaining partners. In any case, the company may claim compensation pursuant to Article 78(4), and Article 92(4) applies mutatis mutandis regarding the possible cancellation of shares.
B. In the Limited Liability Company (E.P.E.)
A similar regulation is found in Article 33(3) of Law 3190/1955, according to which, if a significant reason exists and a relevant resolution has been adopted by the general meeting, the court may, upon application by any administrator or partner, exclude one or more partners from the company. Upon payment to the excluded partner of the value of their share, determined under Article 29(1) and (4), the company continues with the remaining partners.
III. The case of the Sociétés Anonymes (A.E.)
The acquisition of shares and the principle of their free transferability are established rights of corporate participation in the A.E., especially safeguarding minority shareholders. Therefore, company law provides no statutory right of exit or removal of shareholders, except in the cases specified in Articles 27, 80, and 130(4) of Law 4601/2019 on corporate transformations. The principle of free transferability is limited in the case of restricted shares, meaning those subject to AoA restrictions concerning their transferability, such as prior approval required by the board of directors or the general meeting (Article 43 of Law 4548/2018).
Moreover, minority shareholders have the right to request the company to purchase their shares (sell-out), for specific reasons listed in Article 45 of Law 4548/2018 (e.g., in the case of restricted shares – paragraph c). They can also request the purchase of their shares by the majority shareholder holding at least 95% of the share capital (Article 46), or by intervening shareholders in the event a court petition is filed for the company’s dissolution (Article 166(5)). Conversely, the majority shareholder may acquire the minority shares (squeeze-out), which is not a true removal though, since the exit here is not triggered by the company itself (Article 47).
Conclusion
As the business environment continues to evolve and intra-company relationships are challenged by complex legal and factual circumstances, the need for flexible mechanisms for the exit and removal of partners is becoming increasingly imperative. When economic interests are harmed or conflicting, and when relationships become strained to the point of making further cooperation unbearable, altering the company’s composition becomes a necessary means for achieving functional coexistence among individuals and maximizing corporate stability and efficiency.