Turkey: Dissolution And Liquidation Of Joint Stock Companies

The New Turkish Commercial Code numbered 6102 ("New TCC") entered into force on July 1, 2012 without any postponements, as amended by the Law on Amendment of the Turkish Commercial Code and the Law on Entry into Force and Application of Turkish Commercial Code numbered 6335.

The dispositions of the New TCC pertaining to termination and liquidation are regulated considering the needs which occurred under the Turkish Commercial Code numbered 6762 ("TCC"). The New TCC adopted the possibilities of termination with justified reasons, additional liquidation and revocation of liquidation.

Dissolution

Article 529 of the New TCC regulates the grounds for dissolution of joint stock companies. Pursuant to sub-paragraph (a) of this article, joint stock companies shall be dissolved at the end of the term stipulated under the articles of association unless the company has implicitly become a company for an undetermined term by continuing its activities despite the fact that the term expired. This disposition clarified a debate under the TCC. As a matter of fact, the status of the companies which continued their activities although their term expired was not regulated under the TCC. The Turkish Court of Cassation stated that the company which continued its activities despite the fact that its term expired would become a company for an undetermined term and the articles of association of the company should be amended accordingly. The New TCC ended the said controversy.

Pursuant to sub-paragraph (b) of Article 529 of New TCC, realization of the purpose of the company or the fact that its realization becomes impossible is also accepted as ground for dissolution. The phrase "purpose of the company" under the TCC is replaced by "scope of operation" under the New TCC.

Articles 530 and 531 of the New TCC regulate specific types of dissolution. Pursuant to Article 530, in case of non-existence of one of the legally required organs of the company or in case the general assembly ("GA") cannot be convened, the commercial court of first instance located at the registered office of the company shall allow a cure period in order to render this situation compliant with the law. If the compliance is not achieved within such time, the company will be dissolved. Since joint stock companies can be established with only one shareholder under the New TCC, the fact that the number of shareholders is less than five is no more a ground for dissolution.

Article 531 of the New TCC regulates dissolution due to justified reasons, which was not regulated under the TCC. Pursuant to this article, shareholders representing at least one tenth of the capital or one twentieth of the capital of the public companies may request the dissolution of the company before the commercial court of first instance located at the registered office of the company. This right is regulated as a minority right. The article does not define which circumstances may be classified as justified reason. However, the court may, instead of dissolution of the company, rule on squeeze-out of the claimant shareholder through payment of the real value of its shares on the closest date to the date of decision, or decide on another convenient and acceptable solution.

Pursuant to Article 532, the dissolutions will be registered and announced by the board of directors ("BoD") to the trade registry in case the dissolution resulted from reasons other than bankruptcy or court decision. The dissolved company shall undergo liquidation proceedings; notwithstanding certain legal exceptions. Article 533/2 of the New TCC clearly stipulates that the competences of the organs shall continue limited to realizing the liquidation. The liquidation and the status of the company organs in case of bankruptcy are regulated similarly with the provisions of the TCC.

Liquidation

Article 536 and following articles of the New TCC regulate the liquidation. Pursuant to Article 536 pertaining to liquidators, the liquidation shall be conducted by the BoD unless other liquidators are nominated under articles of association or by a GA resolution. The BoD shall register to trade registry and announce the liquidators. Pursuant to the third paragraph of the said article, the liquidator shall be appointed by the court in case the court decides on the liquidation of the company. The liquidation proceedings were conducted by the BoD, even in the event of a court decision, prior to the New TCC. At least of the liquidators having representative authority must be a Turkish citizen and reside in Turkey.

Pursuant to Article 537/1 of the New TCC, the GA may always dismiss the appointed liquidators or the members of the BoD who conduct the liquidation. Pursuant to the second paragraph of the same article, a court decision is sufficient for the registration and announcement of the liquidators which are appointed by the court. In case none of the liquidators are Turkish citizens or reside in Turkey, the court may appoint a person fulfilling such qualities as a liquidator upon the request of shareholders, creditors of the company and Ministry of Customs and Trade.

Article 539 of the New TCC regulates limitation and extension of the authorities of the liquidators. The authorities of the liquidators cannot be transferred; however, they may grant another liquidator or a third person representative authority for realizing certain transactions. The transactions which the liquidator realizes with third persons apart from the liquidation proceedings shall be binding on the company unless the third person is aware or it is impossible that the third person to not be aware that the relevant transaction is not within the scope of liquidation. The registration and announcement of liquidation is not sufficient for proving the said circumstance.

First inventory and balance sheet within the scope of the liquidation proceedings shall be immediately prepared by the liquidators once they take office. The New TCC, unlike the TCC, stipulates that the experts may be requested in order to evaluate the value of the company assets, if necessary.

Article 541 of the New TCC includes provisions regarding the convocation and protection of creditors. The creditors whose addresses are known shall be invited by registered letter. Other creditors shall be invited to declare their receivables by an announcement to be made three times per week in the Trade Registry Gazette and on the website of the company as stipulated under the articles of association. The second paragraph of this article states that the receivables of the creditors who did not notify their receivables shall be deposited in a bank account to be determined by the Ministry of Customs and Trade.

Article 543 of the New TCC regulates how the distribution following the liquidation shall take place. Pursuant to this article, the remainder assets of the company in liquidation following payment of its debts and the refunding of the share value to the shareholders, shall be distributed to the shareholders in proportion to the capital share they paid for and their privileges, unless stipulated otherwise under the articles of association. In case a privilege for liquidation share is stipulated, the provisions of the articles of association shall apply. Thus, the New TCC regulates that firstly the paid-up share values shall be reimbursed, and consequently, the remaining asset shall be distributed in proportion with the paid-up capital and privileges of the shareholders, unless regulated otherwise under the articles of association.

Following the completion of the liquidation, the ledgers and the documents including those related to liquidation shall be kept pursuant to Article 82 of the New TCC which regulates principles of keeping the documents and the term that the documents shall be kept. Upon the completion of liquidation, the trade name shall be deleted from the trade registry upon the request of the liquidators and, upon request; this deletion shall be registered and announced.

Pursuant to Article 546 of the New TCC, the disputes between the shareholders and liquidators shall be resolved under simplified proceedings. The court shall resolve within 30 days. Thus, the disputes shall be resolved quickly and the decision will be available within a determined term.

Additional Liquidation

New TCC introduces two new concepts with regard to liquidation. Article 547 of the New TCC regulates the additional liquidation. Pursuant to this article, in case an additional liquidation is deemed necessary following the closing of the liquidation proceedings, the last liquidators, BoD members, shareholders or creditors may request from the commercial court of first instance located at the registered office of the company, to re-register the company until the additional liquidation proceedings are completed. Thus, it is possible to request the registration of the company anew even it was deleted from the register if additional measures are necessary even after the completion of the liquidation. The justification of the article states that certain situations, such as some of the assets not being taken into account during the liquidation, violation of certain the legal requirements during the distribution of the assets filing a lawsuit for liability against the organs of the company may be considered as situations which necessitate an additional liquidation. The justification of the article also stipulates three conditions for additional liquidation: the request of re-registration shall be based on a justified interest to be protected, the re-registration should be the only way to resolve the problem and a lawsuit should be filed in order to cancel the decision to delete the registration provided that existence of a receivable or asset of the company is sufficiently proven by documents.

Pursuant to Article 547/2, in case the court deems the request appropriate, it will rule on re-registration of the company, it will appoint the last liquidators or one or more other persons as liquidators and procures the registration and announcement.

Revocation of Liquidation

Another concept introduced by the New TCC is the revocation of liquidation, which is regulated under Article 548 of the New TCC. With this possibility of revocation of liquidation which will be exercised by a GA resolution, the company will no longer be in liquidation process and will transform back to being a company having the purpose of obtaining profit. The GA may resolve on the continuation of the company, as long as the process of distribution of assets did not commence, in the event the company is dissolved due to the lapse of the term stipulated for the company expired or by a GA resolution. This resolution must be adopted by the votes representing at least sixty percent of the capital. However, this quorum may be increased or other measures may be stipulated under the articles of association. The resolution for revocation of liquidation shall be registered and announced by the liquidator.

Conclusion

The dispositions of New TCC concerning dissolution and liquidation of joint stock companies are regulated bearing the needs and deficiencies under the TCC in mind. It is clearly stipulated that the company whose term has expired shall not be dissolved in case the company continues its activities. The New TCC adopted the possibility of dissolution under justified reasons, which was not foreseen under the TCC. Additional liquidation and revocation of liquidation are foreseen as new possibilities for joint stock companies in the phase of liquidation. We hope that the New TCC, which is in force as of July 1, 2012 shall facilitate the dissolution and liquidation procedures.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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