What happens when a partner dies in a general or limited partnership?

Dissolution as the legal default

Under the Belgian Code of Companies and Associations (CCA), a general or limited partnership is automatically dissolved upon the death of a partner. However, in many cases, this outcome is undesirable. Fortunately, the company’s articles of association can provide solutions to deviate from this legal default.

You can include in the articles that the company will continue with:

• a continuation clause, allowing the business to continue with the heirs (or legatees) together with the remaining partners; or

• a survivorship clause, meaning only the surviving partners continue the business.

Rights of the heirs

Heirs do not automatically become partners in a general or limited partnership. This is only possible if explicitly stated in the articles of association and if the remaining partners agree.

• If the heirs are admitted to the partnership, they become full partners, inheriting the same rights and obligations linked to the shares. In the case of multiple heirs, they must appoint a representative who acts on behalf of the group.

• If the articles stipulate that only the surviving partners may continue, those partners must compensate the heirs fairly for the value of the deceased’s shares.

• If only one partner remains, the partnership must be liquidated.

The CCA does not specify how to value the shares. The parties may agree on a valuation method or entrust it to an independent expert, such as an accountant or statutory auditor. To avoid disputes with heirs, it is advisable to include clear valuation and succession clauses in the articles of association in advance.

Obligations of the partnership

It often takes time before the estate of a deceased partner is fully settled and distributed. During this period, it’s crucial to safeguard the continuity of the company.

The partnership must still meet its ongoing obligations, including:

• Contractual obligations: ongoing contracts, leases, loans, etc.

• Fiscal and accounting obligations: tax and VAT filings, bookkeeping, etc.

• Corporate obligations: holding the annual general meeting, approving the financial statements on the statutory date, etc.

• Employment obligations (if applicable): ensuring timely salary payments and HR administration.

Timely follow-up and, if necessary, the appointment of a new manager help ensure that the partnership remains both legally and operationally compliant.

Ensuring business continuity

In a general partnership (VOF)

In a general partnership (VOF), the situation is usually straightforward. All partners are typically actively involved in the business, jointly and severally liable, and have management authority. Therefore, all partners are generally appointed as managers. The surviving manager(s) can continue operations as long as at least two partners remain.

In a limited partnership (CommV)

In a limited partnership (CommV), several scenarios are possible. This legal form includes at least one general partner and one limited partner. The general partner is actively involved in the company, bears unlimited liability, and is responsible for management. If this partner dies, it’s advisable to appoint a (temporary) new manager as soon as possible. This person ensures continuity, protects the business activities, and manages the estate’s interests while decisions are made regarding the future of the company.

The limited partner contributes capital but is not involved in management. If they do take part in management, they lose their limited liability protection. Therefore, the death of a limited partner generally does not affect daily management, though the manager must identify the heirs and verify their rights under the articles of association.