In Turkey, setting up a company is a well-known and straightforward procedure whilst liquidation of a company is a long and complicated procedure with challenges. Due to the long and challenging nature of the liquidation process, the number of inactive companies in Turkey has increased substantially in recent years, which complicates determining the scope of business activity. Accordingly, the Turkish Commercial Code No. 6102 ("TCC"), which entered into force on July 1, 2012, introduced simplified liquidation procedure for inactive joint stock and limited liability companies as well as cooperatives in order to delete their commercial title from the trade registry records. Within the scope of Temporary Article 7 of the TCC and the provisions of the Communiqué on Liquidation and De-registration of Joint Stock and Limited Liability Companies and Cooperatives that They Are or Deemed as Dissolved From the Records of the Trade Registry ("Communiqué"), it has become easier to liquidate and delete the trade registry records of inactive companies which cannot enter into liquidation for several reasons. Following these regulations, commercial titles of 124,142 companies and cooperatives have been deleted from the trade registry records as of today.
As per Temporary Article 7 of the TCC and the Communiqué, joint stock and limited liability companies and cooperatives that meet at least one of the criteria set forth under Temporary Article 7 may benefit from the simplified liquidation procedure within two years as of the enforcement date of the TCC (July 1, 2014) without following the liquidation methods set out in the relevant laws.
In practice, the main criteria enabling companies to be evaluated within the scope of Temporary Article 7 of the TCC are as follows: (i) joint stock companies and cooperatives which failed to hold ordinary general assembly meetings for the last five years consecutively for whatsoever reason and (ii) joint stock and limited liability companies which are dissolved before the enactment of the TCC (July 1, 2012) or within two years as of the enactment of the TCC.
In addition, as per the relevant provisions of the TCC, the minimum capital amount is determined as TRL 50,000. for joint stock companies and TRL 10,000. for limited liability companies. Consequently, companies, capitals of which are below such amount, should realize a capital increase until February 14, 2014. Otherwise, companies failing to realize capital increase until such date shall be considered as dissolved within the scope of Temporary Article 7 of the TCC.
Companies and cooperatives that are considered within the scope of Temporary Article 7 cannot benefit from the simplified liquidation procedure if they are acting as party in pending lawsuits as plaintiffs or defendants.
SIMPLIFIED LIQUIDATION PROCEDURE
As per Article 6 of the Communiqué, the relevant trade registry office shall determine the companies and cooperatives that may be considered within the scope of the simplified liquidation procedure through an ex officio investigation on trade registry records and it shall send a warning to their registered addresses and the persons authorized to represent and bind the company or cooperative according to their trade registry records. Such warning shall also be sent to the Directorate of Turkish Trade Registry Gazette for announcement. If the warning is not received by the addressee, the announcement shall be deemed as notification as of the thirtieth day following such announcement. In addition, the said announcement shall be published on the website of the relevant trade registry.
As per Article 7 of the Communiqué, the warning to be sent to the dissolved companies due to their failure to realize capital increase to the amount indicated above should state that the executives/auditors/managers of the company must inform of the liquidators within two months as of the notification date, otherwise the commercial title of the company shall be deleted from the trade registry records and the assets of the company shall be transferred to the Treasury after ten years following such deletion and this situation should be written to the warning.
Liquidators may be elected among the shareholders or executives of a company or cooperative or a third party may be appointed as a liquidator. If a third party is appointed as a liquidator, a written declaration regarding his/her acceptance of such duty must be submitted to the relevant trade registry office. As per Article 536 of the TCC, at least one of the liquidators must be a Turkish citizen and reside in Turkey.
DELETION FROM THE TRADE REGISTRY
Liquidators and liquidation address of companies and cooperatives which appoint liquidators within due time, shall be registered by the relevant trade registry office and announced in the Turkish Trade Registry Gazette and on the website of the relevant trade registry. In this announcement, the creditors of the company or cooperative shall be invited to notify liquidators of their receivables with evidence within two months as of the announcement date. The announcement should also state that the existing assets of the company or cooperative and the list indicating receivables and debts shall be submitted to the relevant liquidator with documents by the member (s) of the board of directors, auditors of the joint stock company or cooperative or the manager(s) of the limited liability company within one month as of the announcement date.
If companies and cooperatives fail to reply the warning and announcement within due time, notify of their liquidators, comply with the laws or provide information that they are conducting activities, these companies and cooperatives' commercial title shall be automatically deleted by the relevant trade registry office. Companies and cooperatives, the commercial titles of which are deleted automatically, shall be announced in the Turkish Trade Registry Gazette and the website of the relevant trade registry office.
DEBTS AND RECEIVABLES
In case that the records of a company or cooperative have been deleted from the trade registry, creditors and persons having legal benefits may apply to the court within five years as of the deletion date and demand to re-create the company or cooperative based on justifiable grounds.
As per Temporary Article 7, the assets of a company or cooperative shall be transferred to Treasury after ten years following the deletion date provided that the commercial title of such company or cooperative has been deleted without following the liquidation process. Treasury shall not be held liable for the debts of such companies and cooperatives. The provisions of the TCC or the Law on Cooperatives shall be applied to the liabilities of the liquidators provided that the provisions in specific laws are reserved.
The debts of the company or cooperative shall not prevent the deletion of commercial title from the trade registry records automatically. Legal representatives of joint stock companies and cooperatives and shareholders of limited liability companies shall continue to be liable from public debts regarding the period before the deletion date within the scope of the Law on the Procedure of Collection of Public Receivables No.6183.
Companies and cooperatives that meet at least one of the criteria set forth under Temporary Article 7 of the TCC may benefit from the simplified liquidation procedure until July 1, 2014. In practice, the most common reason for deletion of commercial title from the trade registry records is not to hold ordinary general assembly meetings for the last five years consecutively. Such situation is of a crucial importance especially for foreign capital companies which failed to hold general assembly regularly.
Since these companies generally do not have representatives in Turkey, the abovementioned warning cannot be delivered to the addressee and thus, companies cannot be informed of the deletion of commercial titles from the trade registry. Therefore, trade registry records of companies which may be considered within the scope of Temporary Article 7 of the TCC should be controlled in order to determine their current status.
In line with the foregoing, the tax dimension of the simplified liquidation procedure should also be considered. Having said that, there is no explicit regulation as to how the tax records of the companies, which are considered within the mentioned scope, shall be deleted. Since the automatic deletion to be realized within the framework of the TCC and Communiqué shall not be binding in terms of Tax Procedural Law No.213, the transaction before the relevant tax office shall be realized in accordance with the provisions of Tax Procedural Law No.213.
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.