Liquidation of a Turkish LLC or JSC

Table of contents

Introduction

If the shareholders of a Turkish limited liability company (LLC) or joint-stock company (JSC) no longer see any sense in continuing the company or if it is to be dissolved for some other reason, the limited liability company or joint-stock company must be wound up. The corporate dissolution of a limited liability company or joint-stock company is called liquidation, whereby the liquidation procedure and the duties and powers of the organs are identical for both Turkish LLCs and JSCs.

What are the grounds for the dissolution of a Turkish LLC or JSC?

As a rule, a limited liability company or joint-stock company is established for an indefinite period. If the shareholders no longer wish to continue the business of the company, they must pass a resolution to dissolve the company and initiate liquidation. The resolution to dissolve the company must be passed by a qualified majority of 75% of the voting share capital.

However, a Turkish limited liability company or joint-stock company can also be dissolved for other reasons, namely if

  • the company was established for a fixed term and the company ceases to conduct business after the date specified in the articles of association or statutes for the dissolution of the company;
  • the company's purpose has been achieved, or the achievement of the company's purpose has become impossible;
  • another reason for dissolution provided for in the articles of association or statutes has occurred;
  • the company has been declared insolvent;
  • the company's dissolution has been ordered by a court.

What are the effects and legal consequences of the dissolution?

The dissolution marks the beginning of the liquidation process of the company. The company name is changed to ‘In Liquidation...... LLC/JSC’ and the company is no longer allowed to take on new business activities but must wind up the business and company assets that have not yet been completed. However, the company continues to have full legal capacity.

How is the process of the liquidation?

Liquidation takes place in several stages and begins with dissolution, i.e. the decision that the company is no longer of use in its current form and that liquidation should therefore be initiated.

The shareholders must decide on the dissolution, which must be registered in the commercial register and announced in the trade registry gazette, unless the dissolution occurs as a result of insolvency or a court order. The liquidator(s) must also be appointed with the resolution to dissolve; their powers of representation are also registered in the trade register and announced in the trade registry gazette. The managing directors or members of the board of the company, the shareholders or even external third parties can be appointed as liquidators.

At least one of the liquidators must be a Turkish citizen and reside in Turkey.

After the registration of the shareholders' resolution, the trade registry gazette publishes three notices at weekly intervals to the creditors of the company. These notices also appear in the trade registry gazette. The notices request that the creditors of the company report their claims to the company.

The next step is to collect the company's claims and pay its liabilities, as well as to sell the company's assets. With the deletion of the company from the commercial register, the liquidation is complete, and the company formally no longer exists.

What are the main tasks involved in a liquidation?

The key tasks in the liquidation phase include the following activities:

  • Termination of the company's current business
  • Collection of the company's claims
  • Settlement of the company's liabilities
  • Disposal of all the company's assets

What are the tasks and powers of the liquidators?

The liquidators are responsible for conducting the liquidation and representing the company externally.

If necessary, the liquidators prepare an inventory and, if applicable, a liquidation opening balance sheet immediately after their appointment. If such an inventory and opening balance sheet are prepared, they must be confirmed by the general assembly.

The main tasks of the liquidators include the winding up of current business, in other words, the termination of the company's business activities. In addition, the liquidators must collect the company's claims, which may also be claims against the shareholders, and settle the company's liabilities. Furthermore, the company's assets are to be sold. New business that does not serve the liquidation may not be concluded. The liquidators must take the necessary measures to protect the company's assets and rights with the diligence of a prudent business person and complete the liquidation as quickly as possible.

If the liquidators determine that the company's liabilities exceed its assets, they must immediately file for insolvency with the competent insolvency court.

The liquidators are also obliged to store the company's books for a period of ten years.

Can the liquidators be dismissed?

Liquidators appointed by articles of association or partnership agreement or by shareholder resolution may be dismissed at any time by the shareholders' meeting, which may also appoint new liquidators in their place. Furthermore, upon application by at least one shareholder, the court may dismiss liquidators and appoint new liquidators, provided that there are legitimate reasons for the dismissal.

What is the liability of the liquidators?

The liquidators are personally liable to the company, the shareholders and the creditors of the company for all damages that they have culpably caused in the performance of their legal and contractual duties arising from the articles of association or the statutes.

When is the liquidation completed?

The blocking period for the completion of the liquidation proceedings is three months from the date of publication of the third and final call to creditors in the trade registry gazette. This means that the liquidation may not be completed before the expiry of this three-month blocking period.

If assets remain after the creditors‘ claims have been fulfilled, the claims of creditors and the partners’ contributions have been secured and repaid, these may also only be paid out to the shareholders after the three-month blocking period has expired. Payment to the shareholders is made in proportion to their shares, unless otherwise provided for in the articles of association or the statutes. The claim for payment of the remaining assets shall be in cash, but the articles of association or the statutes or the general assembly may provide for the distribution of other assets.

The liquidation proceedings are terminated when the blocking period has expired, no further liquidation measures have to be taken and the company assets have been distributed to the shareholders, provided that there are assets left to be distributed.

After the liquidation proceedings have been concluded, the final balance sheet is drawn up and the shareholders decide by shareholder resolution to conclude the liquidation proceedings. This shareholder resolution is registered in the trade register; upon registration, the company is deleted from the trade register.

What is a supplementary liquidation?

If, after the company has been struck off the trade register, it is found that the company still has distributable assets or that further liquidation measures are necessary, a subsequent liquidation takes place. In this case, the last liquidators, board members or managing directors, shareholders or creditors file a motion before the commercial court for the company to be re-registered in the trade register until the supplementary liquidation is completed.

In this case, the commercial court appoints the last liquidators or new liquidators to carry out the supplementary liquidation.

Can the liquidation procedure be reversed?

If the liquidation proceedings were initiated because the duration of the company has expired or the shareholders‘ meeting has decided to dissolve the company, the shareholders’ meeting may decide that the company should continue to exist, provided that the distribution of the remaining assets to the shareholders has not yet begun.

The decision of the shareholder’s meeting to reverse the liquidation procedure requires a qualified majority of at least 60% of the voting share capital, unless a higher quorum or other measures have been provided for in the articles of association or partnership agreement.

The relevant shareholders' resolution is registered by the liquidator in the trade register and published in the trade registry gazette.

Legal support during the liquidation

The above points only provide an insight into the liquidation process. For individual advice on the liquidation of a Turkish limited liability company or joint stock company, please contact our law firm directly. We will also be happy to assist you in appointing a liquidator.

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