Turkey: Voluntary Termination Of A Joint Stock Company And The Liquidation Process

Below explanations are provided for companies that are not in the state of bankruptcy (i.e. assets of such companies are sufficient to cover all of their debts and liabilities.) The Board of Directors of the companies that are in the state of bankruptcy must apply to the relevant court to commence the bankruptcy proceedings. Some stages of the liquidation process that is initiated due to bankruptcy are different than the liquidation based on voluntary termination and the said process is carried out according to the specific bankruptcy legislation (i.e. bankruptcy estate is formed, the proceeds of the liquidation are distributed first to those with preemption rights such as employees, etc.).

That said, even after the liquidation process starts based on a voluntary termination decision as mentioned below, the liquidators must convert the process to bankruptcy liquidation if it is determined in the balance sheet that the liabilities of the company exceed its assets.

All of the below stages should be followed with the assistance and strict guidance of legal and financial and legal advisors.

Step 1: General Assembly Decision (GAM No. 1) for Terminating the Company:

According to Article 529/d of the Turkish Commercial Code ("TCC"), the General Assembly of the company must first convene and decide to terminate and dissolve the company with the affirmative votes of the shareholders/proxies owning/representing shares which represent at least 75% of the capital of the company (required in all meetings until the required quorum is met).

In the said General Assembly resolution, the shareholders may appoint one or more independent liquidators (at least one of the liquidators having representation authority must be a Turkish citizen and reside in Turkey). Shareholders can also be appointed as liquidators. If no liquidator is appointed in the said General Assembly meeting, the Board of Directors of the company will automatically act as the liquidator according to Article 536 of the TCC. Therefore, the word "liquidator" used in our below explanations also refers to the Board of Directors.

Step 2: Registration of the Termination Resolution with the Trade Registry / Application to the Trade Registry:

The above-mentioned termination (dissolution) resolution of the General Assembly must be registered with the relevant Trade Registry by the Board of Directors of the company pursuant to Article 532 of the TCC and announced in the Trade Registry Gazette, in order to commence the liquidation proceedings. In this regard, an application must be made to the relevant Trade Registry with the copies of the above-mentioned General Assembly resolution and other related application documents.

If an independent liquidator is appointed in the above-mentioned General Assembly resolution, signature declaration and acceptance letter obtained from the liquidator must also be submitted to the Trade Registry in the same application.1

Immediate Effects of the Registration with the Trade Registry:

  • The trade name of the company will change and the word "in liquidation" (in Turkish, tasfiye halinde) will be added to the beginning of the trade name.
  • The legal entity (personality) of the company will continue and the company will still have the legal capacity to act and carry out its activities. However, as mentioned in detail below, during liquidation, the company's main purpose shifts from making profit for its shareholders to liquidating its assets, paying off the its debts and finalizing pending transactions.
  • The corporate bodies of the company will continue their existence, however their authorities will mitigate significantly (not applicable for the Board of Directors if it acts as the liquidator, however even in that case, most of the authorities will be used by the Board of Directors in the capacity of a liquidator) and the said corporate bodies will be permitted to use their powers only in relation to and to the benefit of the liquidation process.
  • The company's tax liability and liability towards other administrative and governmental institutions will continue.

Step 3: Notification to the Relevant Tax Authorities

According to the relevant tax legislation, the liquidator must notify the relevant tax authority about the liquidation process within 3 days following the registration of the above-mentioned termination resolution of the General Assembly.

Step 4: Preparation of the First Inventory and the Balance Sheet:

As the first action to be taken within the context of the liquidation procedures, the liquidator - immediately after taking office - must investigate and review the financial status of the company and accordingly prepare the first inventory and balance sheet. The liquidator may2 consult with experts if necessary in order to assess the value of the company assets. The period which the liquidator will take into account for reviewing the company's status starts on the day the above-mentioned termination resolution of the General Assembly is registered with the Trade Registry.

Step 5: Approval of the First Inventory and Balance Sheet by the General Assembly (GAM No. 2):

The liquidator must submit the first inventory and the balance sheet to the approval of the General Assembly. Accordingly, the General Assembly can be held with the presence of shareholders (or their proxies) owning/representing shares which represent at least 1/4 of the capital of the company. This quorum must be maintained throughout the entire meeting. If the quorum is not met in the first meeting, no meeting quorum will be required for the second meeting. The decision to approve the first inventory and the balance sheet may be adopted with the majority of the votes that are represented in the meeting. This General Assembly resolution must be registered with the Trade Registry and announced in the Trade Registry Gazette.

After the approval of the first inventory and the balance sheet by the General Assembly, the liquidator seizes all the assets, books and records of the company, that are indicated in the first inventory.

Step 6: Invitation to and Protection of the Creditors:

*THIS PROCESS MAY BEGIN RIGHT AFTER THE REGISTRATION OF THE TERMINATION RESOLUTION (GAM No. 1) WITH THE TRADE REGISTRY, BEFORE OR SIMULTANEOUSLY WITH STEP 5.

The creditors of the company, which are determined according to the books of the company or other related documents, must be invited to declare their receivables to the liquidator. The creditors whose addresses are known will be invited by registered letter. Other creditors must be invited to declare their receivables by an announcement made 3 times, one per week, in the Trade Registry Gazette. Said announcement is made by way of applying to the Trade Registry with the necessary forms signed by the liquidator under the stamp of the company.

Receivables of the creditors who do not notify their receivables despite the announcements must be deposited in a bank account which will be determined pursuant to the relevant communiqué published by the Ministry of Customs and Trade, provided that such receivables are due and not disputed. As for receivables that are not yet due or subject to a dispute, an amount which is sufficient to cover such receivables must be deposited to a notary public unless such receivables are guaranteed or distribution of the liquidation proceeds is preconditioned to the payment of such receivables.

Step 7: Sale of Assets of the company

The liquidator has the authority to sell the company's assets. However, in order to sell a significant amount of assets as a whole, a General Assembly resolution must be obtained with the affirmative votes of the shareholders/proxies owning/representing shares which represent at least 75% of the capital of the company (required in all meetings until the required quorum is met).

Unless otherwise mandated by a General Assembly resolution, the liquidator may sell the company's assets at a bargain price.

Step 8: Other Actions that will be taken by the Liquidator (before, simultaneously with or after Step 7)

  • Completion/finalization of the ongoing business activities of the company which started before the liquidation process.  Liquidator cannot engage in new transactions that are not necessary for the liquidation.
  • If the liabilities of the company do not exceed its assets; payment of the company's debts which are determined according to the balance sheet prepared by the liquidator and as a result of the announcements made to the creditors.
  • If the liabilities of the company exceed its assets; - as mentioned above - the liquidator is required to immediately notify this situation to the relevant court. If the court decides in favor of bankruptcy, the liquidation process will be carried out according to the provisions of the bankruptcy legislation.
  • Collection of the unpaid amounts of share subscriptions of the shareholders.
  • Liquidating the assets of the company (e.g. converting into cash) (Step 7).
  • Immediate payment of the debts that are not due, by applying a discounted interest rate as for a short-term loan as determined by the Central Bank of the Republic of Turkey. The creditors are obliged to accept such payments.
  • Keeping the necessary books and records related to the liquidation.
  • Depositing all the money collected the during the liquidation process to a bank account of the company after deducting the necessary ongoing expenses of the company.
  • Continuing and finalizing pending lawsuits of the company.
  • If liquidation process takes more than one year, preparation of the necessary financial statements for each calendar year.

Step 9: Preparation of the Final Balance Sheet by the Liquidator and Approval by the General Assembly (GAM No. 3)

*AT LEAST 1 YEAR MUST PASS FROM THE DATE OF THE LAST (THIRD) ANNOUNCEMENT MADE TO THE CREDITORS IN THE TRADE REGISTRY GAZETTE

At the end of the liquidation process, the liquidator must prepare (or have prepared) the final balance sheet and submit it to the approval of the General Assembly. Accordingly, the General Assembly can be held with the presence of shareholders (or their proxies) owning/representing shares which represent at least 1/4 of the capital of the company. This quorum must be maintained throughout the entire meeting. If the quorum is not met in the first meeting, no meeting quorum will be required for the second meeting. The decision to approve the first inventory and the balance sheet may be adopted with the majority of the votes that are represented in the meeting. This General Assembly resolution must be registered with the Trade Registry and announced in the Trade Registry.

In the said General Assembly resolution, it must be decided to finalize the liquidation processes, release of the liquidator from legal liabilities and determine how and by whom the corporate books and records of the company will be kept after the liquidation (as mentioned below).

Step 10: Distribution of the Proceeds Obtained from Liquidation

Article 543 of the TCC regulates how the distribution of the proceeds obtained as result the liquidation will take place. After the registration of the GAM No.3 with the Trade Registry, the remainder of liquidation proceeds of the company, following payment of all of its debts/liabilities and the refunding of the share value to the shareholders, must be distributed in cash to the shareholders in proportion to the capital share they paid for.

Step 11: Keeping the Company Books and Records

Following the completion of the liquidation, the ledgers and the documents including those related to liquidation must be kept pursuant to Article 82 of the TCC which regulates principles of keeping the documents and the term for such requirement.

Step 12: Application to the Trade Registry for the Deletion of the Company from the Trade Registry Records

After all the above procedures are finalized, the liquidator must apply to the Trade Registry with 2 copies of the GAM No. 3 and other application documents for the deletion of the name of the company from the Trade Registry Records.

Step 13: Notification to the Tax Authorities about the Finalization of the Liquidation Process

Footnote

1. Pursuant to Article 537/1 of the TCC, the General Assembly may always dismiss the appointed liquidators or the members of the Board of Directors who carry out the liquidation process, and re-appoint new liquidators.

2.Although not required by law, we strongly suggest that this process is carried out with the assistance of experts.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions