Terminating a general partnership (VOF) is often not a planned step, but the result of a conflict between partners. When cooperation breaks down, agreements are not honoured, or trust is lacking, continuing may become impossible. In this article, you will read about your options when terminating a general partnership (VOF), how to limit damage, and when legal action is necessary.
When does the desire to terminate a general partnership (VOF) arise?
The desire to terminate a general partnership (VOF) usually arises from structural problems in the cooperation. Common situations include:
- a conflict with your partner;
- agreements are not being honoured;
- unequal effort or contribution;
- differences of opinion about the direction of the business;
- personal tensions affecting the business.
What is a general partnership (VOF) from a legal perspective?
A general partnership (VOF – vennootschap onder firma) is a form of cooperation in which two or more persons jointly operate a business. Unlike a private limited company (BV), partners are personally liable for the debts of the business.
This is precisely why a conflict within a general partnership (VOF) can have significant financial and personal consequences.
What do the partnership agreement and arrangements say?
When terminating a general partnership (VOF), it is essential to review the partnership agreement.
This often contains arrangements regarding:
- distribution of profits and losses;
- powers of partners;
- withdrawal or termination;
- valuation of business assets;
- dispute resolution.
If a clear agreement is lacking, the law still provides starting points, but this often leads to disputes.
Terminating cooperation in a general partnership (VOF): what are the options?
1. Ending by mutual agreement
The least drastic way to terminate the cooperation within a general partnership (VOF) is through mutual agreement. In this case, the partners make arrangements regarding settlement, distribution of assets, and possible continuation by one partner.
2. Withdrawal of a partner
In some cases, only one partner wants to stop. Withdrawal is then possible, but this must be carefully arranged to limit liability risks.
3. Dissolution of the general partnership (VOF)
When cooperation has become impossible, the general partnership (VOF) can be dissolved. This means that the business is wound up and the assets are distributed.
4. Legal action
If the parties cannot reach an agreement, legal action may be necessary to enforce the termination of the general partnership (VOF) or to arrange the settlement.
What if your partner does not honour agreements?
A common problem is that a partner does not adhere to agreements. For example, by not making an effort, withdrawing money, or blocking decisions.
In such cases, there may be a breach of contract or unlawful conduct. This can be grounds for terminating the cooperation and recovering damages.
Personal liability when terminating a general partnership (VOF)
When terminating a general partnership (VOF), personal liability remains an important point of attention. Even after termination, partners may remain liable for existing debts.
A proper legal settlement is therefore essential.
International partnerships
In international partnerships within a general partnership (VOF), additional complications may arise, for example when a partner lives or operates abroad.
General information about forms of cooperation can be found at the Chamber of Commerce.
Common mistakes when terminating a general partnership (VOF)
- waiting too long to take action;
- failing to record clear agreements;
- underestimating personal liability;
- letting emotions take over;
- litigating without a strategy.
What can Arslan Advocaten do for you?
Arslan Advocaten assists entrepreneurs with the termination of a general partnership (VOF) and disputes between partners. We analyse your position, advise on the best course of action, and guide negotiations or legal proceedings.
Read more about our expertise in business law, our experience with disputes with business partners, and shareholder disputes.
Costs and litigation funding in general partnership (VOF) disputes
In disputes regarding the termination of a general partnership (VOF), we do not, in principle, work on a no cure no pay basis. Such cases require a careful legal and strategic approach.
However, this does not mean you have to bear these costs yourself. In many partnership disputes, it is possible to use litigation funding.
We work together with an independent litigation funder who – after a substantive assessment of your case – can decide to pay all litigation costs. This includes:
- legal fees;
- court fees;
- possible expert costs;
- costs on appeal.
If litigation funding is granted, you as a client do not have to pay these costs yourself. The litigation funder bears the financial risk of the proceedings.
The litigation funder only receives a fee in case of a positive outcome. For you, this means that litigation is possible without incurring costs in advance or during the proceedings.
About the author
This article was written by Onur Arslan, lawyer and founder of Arslan Advocaten. He specialises in business disputes, including conflicts within partnerships and general partnerships (VOFs).
Would you like to discuss how to legally terminate your cooperation within a general partnership (VOF)?