I. REASONS FOR DISSOLUTION

Under the Turkish Commercial Code No. 6102 ("TCC") the provisions on dissolution and liquidation are regulated under Article 529 and the following, and the reasons for dissolution are divided into two as general and special.

Accordingly, the general reasons for dissolution are listed below:

i. Expiration of the term stipulated on the articles of association: Pursuant to Article 529/1-a of the TCC, a joint stock company shall be terminated if the term stipulated in the articles of association expires, and at the same time, if the joint stock company fails to continue its business within the period stipulated in the articles of association. Accordingly, joint stock companies whose term has expired shall become indefinite if they continue their business.

ii. Realization or impossibility of the subject matter of the business: Pursuant to Article 529/1-b of the TCC, the realization or impossibility of the subject matter of the joint stock company, as stated in the articles of association of the company, is regulated as one of the reasons for the dissolution of joint stock companies, as it shall cause the disappearance of the fundamental reason stated by the shareholders.

iii. Realization of any cause of termination stipulated in the articles of association: Pursuant to Article 529/1-c of the TCC, the dissolution of a joint stock company is regulated upon the realization of any cause of termination stipulated in the articles of association. Examples of this situation include the continuation of the balance sheets at a loss for a certain period of time, loss of capital, failure to obtain or renew a license.

iv. General assembly resolution: Pursuant to Article 529/1-d of the TCC, the termination of a joint stock company may be decided by a general assembly resolution. In this case, the dissolution resolution may be taken with the affirmative votes of the shareholders of the shares constituting at least seventy-five percent of the capital or their representatives, and if this quorum is not reached in the first meeting, the same quorum shall be sought in the subsequent meetings. In addition, the power of dissolution is listed among the inalienable powers of the general assembly and cannot be delegated to another body.

v. Deciding on bankruptcy: Pursuant to Article 529/1-e of the TCC, joint stock companies shall immediately cease to exist upon a decision of bankruptcy, without the need for any decision or action by any organ or authority.

i Other cases stipulated by law: Pursuant to Article 529/1-f of the TCC, joint stock companies shall also be terminated in the event of other circumstances stipulated by law. Pursuant to the TCC, the other circumstances are (i) engaging in transactions and activities contrary to public order or the subject matter of the company's business according to the Article 210/3, (ii) unlawfulness in incorporation according to the Article 353 and (iii) loss of two-thirds of the capital according to the Article 376/2.

The special reasons for dissolution are listed below:

i. Lack of organs and failure to convene the general assembly: Pursuant to Article 530 of the TCC, in the event that one of the legally required organs of the company is absent for a long period of time, or the general assembly is unable to convene, upon the request of the shareholders, the company's creditors or the Ministry of Customs and Trade, the commercial court of first instance in the place where the company's head office is located shall set a deadline for the company to bring its situation into compliance with the law. If the situation in the company is not corrected within this period, the court may decide to dissolve the company. The TCC does not specify the length of the time period, and its evaluation is left to the discretion of the judge.

ii. Rightful termination: Rightful termination is regulated under the TCC by creating a new minority right and as a new reason for termination. Accordingly, pursuant to Article 531 of the TCC, in the presence of just cause, the shareholders of the shares representing at least one tenth of the share capital may request the commercial court of first instance in the place where the head office of the company is located to decide on the dissolution of the company. The court may decide for the dissolution of the company, or instead of dissolution, the court may decide for the payment to the plaintiff shareholders of the actual value of their shares as of the date closest to the date of the decision, and for the removal of the plaintiff shareholders from the company, or for any other acceptable solution that is appropriate to the situation.

II. LIQUIDATION

In joint stock companies, liquidation refers not to the direct termination of the company, but to the process leading to its termination. The liquidation process is completed with the deletion of the company title from the relevant trade registry directorate after the necessary procedures are fulfilled.

i. Effects of Liquidation

  • Continuation of legal entity and its organs: The legal entity of the companies entering the liquidation process shall not directly cease to exist, therefore, the existence of the organs of the legal entity will continue within the scope of the transactions required for the liquidation. In addition, with the commencement of the liquidation process, liquidators will operate in the liquidation procedures.
  • Title change: Pursuant to Article 533 of the TCC, the company in liquidation should use its title with the addition of the phrase "in liquidation" until the end of liquidation, including its relations with its shareholders.
  • Purpose change: Although joint stock companies may be established for any economic purpose and subject that is not prohibited by law, a change in the purpose of the company will occur if the company enters the liquidation process. The purpose of the company entering the liquidation process will be the liquidation and termination of the legal entity and the transactions regarding the evaluation of the assets.

ii. Appointment of the Liquidator

With the termination of joint stock companies, the company shall enter the liquidation phase, and in this process, a number of transactions and procedures to be carried out regarding the liquidation of the company shall arise, and liquidators shall carry out these transactions.

The liquidator shall be appointed by articles of association, general assembly resolution, statutory or court decision. Accordingly, the articles of association of the company may specify the liquidator, qualifications and/or number at the time of incorporation or after incorporation through an amendment to the articles of association. Furthermore, it is also possible to appoint a liquidator by a resolution of the general assembly of the company. Pursuant to Article 536 of the TCC, unless a liquidator is appointed by the articles of association or the general assembly resolution, the liquidation may be carried out by the board of directors. In addition, in cases where the court decides to dissolve the company, the liquidator will be appointed by the court.

Pursuant to the TCC, liquidators may be appointed from shareholders or third parties, and at least one of the authorized liquidators should be a Turkish citizen and reside in Turkey.

iii. Registration and Announcement

Pursuant to Article 532 of the TCC, if the termination arises from a cause other than bankruptcy or a court decision, the board of directors should register and announce the termination with the trade registry in the place where the company's head office is located.

The announcement shall be made in the Turkish Trade Registry Gazette; in addition, if other forms of announcement are stipulated in the articles of association of the company, the announcement should also be made by these means. It should be noted that the company shall be terminated as soon as the reason for termination is realized; therefore, the registration of the termination in the trade registry is explanatory rather than constitutive.

iv. Authority of the Liquidator

Pursuant to the TCC, the liquidators are authorized to represent the joint stock company during the liquidation of the company, until it is deleted from the registry. In this context, the liquidators act on behalf of the company before third parties and official authorities in matters related to the liquidation, and thereby incur rights and obligations.

Pursuant to Article 539/2 of the TCC, unless it is proved that the third party knew or could not have known that the transaction was outside the purpose of liquidation, the transactions of the liquidators with third parties outside the purpose of liquidation shall bind the company. TCC also states that the registration and announcement of the liquidation shall not be deemed sufficient evidence in terms of proof.

In addition, pursuant to Article 539/1 of the TCC, the powers granted to the liquidators by the law cannot be delegated; however, it is regulated that one of the liquidators may grant representation authority to the other or to a third party in order to carry out practical transactions.

Pursuant to Article 539/3 of the TCC, if the liquidators are more than one person, unless otherwise stipulated in the general assembly resolution or the articles of association, two liquidators authorized to sign should sign under the company title for the transaction to be valid.

v. Liquidation Transactions

The transactions to be carried out during the liquidation process are regulated under the TCC between Article 540 and 546.

Liquidation transactions include; notifications to the trade registry and necessary institutions, preparation of the first inventory and balance sheet by the liquidator, approval of the first inventory and balance sheet by the general assembly, seizure of goods and books by the liquidator, notification and call to the creditors, keeping additional books related to the liquidation, preparation of financial statements and holding the ordinary general assembly meeting if the process takes a long time, and completion of the ongoing works, collection of company receivables, collection of unpaid share fees if necessary, monetization of company assets, deposit of collected amounts to the bank, closure of branches, follow-up of tax transactions, return of share fees, calculation and distribution of the liquidation share, preparation of the final balance sheet, convening the last general assembly, deletion of the general assembly resolution from the trade registry and keeping the books and documents for 10 years.

vi. Additional Liquidation

In order for the liquidation of the company to be completed and its legal personality to be terminated, all of its debts should be paid and all of its assets should be distributed. However, in some cases, it may turn out that the company has receivables, debts or assets after the company is deleted from the trade registry. In this case, it is possible to temporarily restore the legal personality of the company by entering into additional liquidation.

Pursuant to Article 547 of the TCC, the additional liquidation has been regulated for the first time in Turkish law. Accordingly, additional liquidation is a temporary measure that is applied in the event that, although the liquidation procedures have been completed and the liquidation has been completed, it is later understood that further liquidation measures are mandatory.

Pursuant to the regulation, if it is stated that additional liquidation procedures are mandatory, the last liquidators, members of the board of directors, shareholders or creditors may request the re-registration of the company from the commercial court of first instance where the company's head office is located, until these additional procedures are finalized.

If the court is of the opinion that the request is appropriate, the court shall decide to re-register the company for additional liquidation and shall appoint the last liquidators or one or more new persons as liquidators to carry out these transactions and have them registered and announced.

The compulsory reasons requiring additional liquidation are not explicitly regulated in the TCC; however, in accordance with the grounds, doctrine and judicial decisions; the fact that some assets belonging to the company have been excluded from the distribution due to not being taken into account during the distribution, failure to comply with the relevant legal provisions during the distribution of assets, or the necessity to file a liability lawsuit against the organs may be given as examples.

vii. Revocation of Liquidation

The continuation of the activities of the joint stock company in liquidation without being limited to the purpose of liquidation, and its return to its former status after the liquidation process refers to the revocation of liquidation.

Pursuant to Article 548 of the TCC, the revocation of liquidation has been regulated for the first time in the Turkish law. Accordingly, it is regulated that the liquidation may be reversed by the resolution of the general assembly only if the company has been terminated by the expiration of the term or by the resolution of the general assembly, and the distribution of the company assets among the shareholders has not begun. In cases where these conditions exist, the general assembly should adopt a resolution to continue with the affirmative vote of at least sixty percent of the share capital, and this resolution should be registered and announced by the liquidator.

Furthermore, Article 548 of the TCC regulates the revocation of liquidation in case of bankruptcy. Accordingly, although the company has been terminated with the opening of bankruptcy, if the bankruptcy has been removed or if the bankruptcy has been terminated with the implementation of the concordat, the company will continue. Pursuant to this provision, the liquidator shall register the resolution regarding the removing of the bankruptcy with the trade registry.

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.