Winding up a company in Turkey is a complex yet essential legal procedure undertaken when a business ceases operations. This process, also known as liquidation or dissolution, involves settling all debts, distributing remaining assets, and deregistering the company from the Trade Registry. Understanding the steps and legal framework is crucial for ensuring a smooth and compliant closure. This guide covers the complete process, key considerations, and requirements for company winding up in Turkey.
What is Company Winding Up in Turkey?
Company winding up refers to the formal process of dissolving a business entity, either voluntarily by the shareholders or compulsorily by a court order. During this procedure, the company stops operating, its assets are liquidated, debts are settled, and any surplus is distributed among shareholders. Once the process is completed, the company is removed from the Turkish Trade Registry and ceases to exist as a legal entity.
Who Needs a Tax Number in Turkey?
- Turkish Citizens: Automatically receive a Turkish Identification Number (T.C. Kimlik Numarası) that also serves as their TIN.
- Foreigners: Foreign nationals who conduct taxable activities in Turkey must apply for a TIN.
- Companies and Legal Entities: Corporations, partnerships, and other legal entities operating in Turkey must also obtain a TIN for tax registration.
Types of Company Liquidation in Turkey
- Voluntary Winding Up
This occurs when shareholders decide to dissolve the company, often due to:- Business objectives being completed
- Prolonged financial difficulties
- Shareholder disputes or disagreements
- Compulsory Winding Up
This is initiated by a court, usually due to:- Insolvency or inability to pay debts
- Violations of Turkish commercial law
- Failure to comply with regulatory requirements
Key Steps in the Legal Entity Liquidation Process
1. Shareholder Resolution
- In the case of voluntary winding up, the process begins with a General Assembly meeting of the shareholders.
- A formal resolution to dissolve the company must be passed, typically requiring a qualified majority as per the company's Articles of Association.
- The decision must be notarized and filed with the Trade Registry Office.
2. Appointment of a Liquidator
- A liquidator is appointed by the shareholders
to oversee the dissolution process. This person is responsible for:
- Selling the company's assets
- Settling all outstanding debts
- Filing required documents with the Trade Registry
- In a compulsory winding up, the court appoints the liquidator.
3. Notification of Creditors
- The liquidator is required to notify creditors of the company's dissolution.
- A public notice must be published in the Turkish Trade Registry Gazette, allowing creditors to make claims.
- The liquidator must ensure that all claims are resolved before finalizing the process.
4. Asset Liquidation
- The company's assets are sold, and the proceeds are used to settle debts.
- If there are surplus assets after paying off all debts, the remaining amount is distributed among shareholders according to their shareholding ratio.
5. Filing the Liquidation Balance Sheet
- A liquidation balance sheet must be prepared and submitted to the Tax Office and the Trade Registry Office.
- This document details the company's financial status, showing all assets, liabilities, and the final distribution of funds.
6. Finalizing Tax Obligations
- All tax obligations, including VAT, corporate tax, and other relevant taxes, must be settled before the winding up can be finalized.
- The company must file its final tax return and obtain clearance from the Tax Office.
7. Completion of Liquidation
- Once all debts are settled, assets are liquidated, and tax obligations are cleared, the liquidator submits a final report to the Trade Registry Office.
- The company is then removed from the Trade Registry, officially marking the end of its legal existence.
Timeframe for Legal Entity Winding Up in Turkey
The timeframe for completing the winding up process varies depending on the complexity of the company's financial situation, the number of creditors, and the thoroughness of document submission. Typically, it takes between 4 to 6months to finalize the winding up process.
Costs Involved in Company Winding Up in Turkey
The costs associated with company winding up in Turkey include:
- Notary Fees: For notarizing the General Assembly resolution and other legal documents.
- Trade Registry Fees: Filing and publication fees for notices in the Turkish Trade Registry Gazette.
- Liquidator Fees: If a professional liquidator is appointed, their services will incur a fee.
- Legal and Consultancy Fees: If legal or financial advisors are involved in managing the process.
- Tax Clearance: There may be additional costs associated with obtaining tax clearance from the Tax Office.
Common Reasons for Company Liquidation in Turkey
- Insolvency: When a company is unable to meet its financial obligations.
- Voluntary Exit: When the company has achieved its objectives or the shareholders wish to dissolve the business.
- Regulatory Violations: If the company violates Turkish commercial laws or fails to meet compliance requirements.
- Business Disputes: Shareholder conflicts or deadlocks can lead to a decision to wind up the company.
What Happens After the Company is Wound Up?
Once a company is officially wound up, it no longer exists as a legal entity. The company is removed from the Trade Registry, and it cannot engage in any further business activities. Shareholders receive their portion of the remaining assets (if any), and the company's records are archived with the Trade Registry for legal purposes.
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.