Turkey: Evaluation Of The Decision The Secret Partnership In A Limited Liability Company

INTRODUCTION

Secret partnership; is defined as the participation of the secret partner in the business activity carried out by the active partner in whole or in part or only in some legal transactions with a certain capital within the framework of the partnership agreement for the common purpose of carrying out the activities of the company together and making profit. In practice, since the secret partnership may be used to avoid tax liabilities such as trading false invoices through the use of shell companies, the Law on the Procedure for Collection of Public Receivables ("LPCPR") includes interim injunction and interim accrual regulations regarding the secret partnership and aims to prevent this situation.

The determination of secret partnerships in limited liability companies was subject to the decision of the 14th" Regional Court of Justice dated 11.01.2018 and numbered 2017/1006 E. 2018/34 K. ("Decision"), and in the Decision, the determination case filed before the Court of First Instance with the request to determine that the defendant is the secret partner of the limited liability company in accordance with the tax technique report prepared by the tax inspectors and to impose an interim injunction to prevent the transfer and assignment of the movable immovable properties and the rights and receivables of the limited liability company, which is alleged to be the secret partner, to third parties and to determine that the defendant is the secret partner of the defendant company, was examined.

In the Regional Court of Justice's examination, the plaintiff's application for appeal was dismissed on the merits due to the lack of "legal interest" in filing this determination case since the order for tax proceedings or precautionary attachment will be issued by the bookkeeper and/or the head of the tax office upon the written request of the relevant group manager, and the tax office manager will immediately execute this order in the event that "evidence is obtained that the undertaking is collusive and actually belongs to someone else" pursuant to the Article 17 of the LPCPR and therefore this regulation, there is no need for any court decision for the implementation of these measures.

THE CONCEPT OF SECRET PARTNERSHIP IN LIMITED LIABILITY COMPANIES AND THE LIABILITY OF SECRET PARTNERS

Although secret partnership has not been regulated under the Turkish Commercial Code No. 6102 ("TCC"), Turkish Code of Obligations No. 6098 ("TCO") and other relevant legislation, a secret partnership is accepted as an ordinary partnership in accordance with the predominant opinion in the doctrine and the established case law of the Court of Cassation. Pursuant to Article 620 of the TCO, ordinary partnership is defined as;

"An ordinary partnership agreement is an agreement whereby two or more persons undertake to combine their labour and property to achieve a common purpose.

A partnership shall be deemed an ordinary partnership subject to the provisions of this chapter if it does not have the distinctive characteristics of partnerships regulated by law."

and since it is a type of partnership that arises when two or more persons combine their labor and property in accordance with the principle of common purpose known as "affectio societatis" and is not subject to any written contract or registration requirement, it is necessary to accept that there is an ordinary partnership relationship between the active partner of the company and the secret partner.

The most important consequence of recognizing a limited partnership as an ordinary partnership is whether the debts of the limited partnership can be referred to the secret partner. When the liability of the shareholders of limited liability companies for the debts of the company is examined, it is seen that, pursuant to the provisions of the TCC, the shareholders of limited liability companies are only obliged to pay their subscribed capital shares and to fulfil the additional payment and ancillary performance obligations stipulated in the company agreement, and therefore, assets of the shareholders cannot be enforced due to the debts of the company. The exception to the prohibition of enforcement against the assets of the shareholders due to the debts of the company is the uncollectible public receivables pursuant to Article 35 of the LPCPR.

In secret partnerships, since the secret partner performs transactions on its own behalf and on account of both itself and the secret partner, the active partner is considered as the active representative of the secret partner in all transactions made on behalf of the company and the secret partner has no liability for the transactions made by the company. Therefore, the liability of the limited liability company partners does not extend to the hidden partner. The secret partner shall be unlimitedly and jointly and severally liable for the debts of the ordinary partnership with all his/her assets in accordance with the principle of joint ownership.

EVALUATION OF THE DECISION ON THE DETERMINATION OF THE SECRET PARTNERSHIP

Within the scope of the relevant Decision, an interim injunction is requested on the movable and immovable properties of the defendant limited liability company and its rights and receivables from third parties, and in accordance with the principle of single debt in limited liability companies, it is not possible to enforce shareholders assets for the debts of the limited liability company. If there is a request for an interim injunction regarding the public receivables, which is the only exception to the principle of single debt and allows the enforcement of the shareholders assets, the relevant provisions of the LPCPR should be applied to the dispute.

Within the framework of Article 17 of the LPCPR, it is the responsibility of the relevant tax office to carry out interim injunction and a ancillary attachment procedures if the plaintiff is of the opinion that he is a secret partner in the company, that is, if he is of the opinion that the company belongs to other third parties and has obtained evidence of this belonging. As a matter of fact, in the wording of the relevant article, it is clearly stated that there is no need for any judicial decision for the determination of the evidence by saying "if evidence is obtained about the fact that it actually belongs to someone else", and it is implicitly stated that the authority that will appreciate the value and strength of the evidence is the relevant tax office. Moreover, it should be accepted that the plaintiff will have reached a sufficient conviction in this direction by filing a lawsuit for the determination of secret partnership. As there is no need for a judicial decision in order to determine the evidence and to issue a interim injunction and an ancillary attachment decision pursuant to the LPCPR, in the event that a lawsuit is filed in this direction, even if the secret partnership is determined with the lawsuit filed, there will be no difference in terms of the application of the preliminary injunction, and as clearly stated in the Decision, the "legal interest" condition, which is accepted as a condition of a case under the Code of Civil Procedure, will not be met.

In addition, it should be noted that in the case of a secret partnership in limited liability companies, since this situation will constitute an ordinary partnership and the liability of the limited liability company partners will not extend to the ordinary partnership partners, it will not be possible to enforce assets of the ordinary partnership in any case.

CONCLUSION

In the Decision subject to the appeal review of the Regional Court of Justice, the plaintiff requested the determination of the secret partnership and the imposition of a precautionary measure on the assets of the limited liability company, and in accordance with the provisions of the TCC, in accordance with the principle of single debt accepted in limited liability companies, the receivable must be in the nature of a public receivable in order to enforce to the limited liability company partners assets. Regarding the public receivables, the state of secret partnership is expressed as "obtaining evidence that the undertaking is collusive and actually belongs to someone else" pursuant to Article 17 of the LPCPR, and it is regulated that in case of obtaining evidence that the undertaking belongs to someone else, the relevant tax administration may decide on interim injunction and ancillary attachment.

In line with the said provision, since no judicial decision is required for the issuance of interim injunction and ancillary attachment in the event that evidence is obtained to determine the ownership of the undertaking by another person, there will be no legal interest in the filing of this action for the determination of secret shareholding, which is accepted as a condition of a case. Moreover, since secret partnership in limited liability companies constitutes an ordinary partnership in accordance with the jurisprudence of the Court of Cassation and the doctrine, the secret partners can only be held liable for the debts of the ordinary partnership, and it will not be possible to enforce ordinary partnership's partner assets for the debts of the limited liability company.

In the relevant Decision and in many other decisions issued by the Regional Court of Justice, it has been ruled that in the presence of a secret partnership and in the presence of evidence of collusive transactions, there is no legal benefit in filing a determination lawsuit and there is no need for a finalized judicial decision in order to request interim injunction and ancillary attachment regarding public receivables, and since this issue has created an established jurisprudence before the Regional Courts of Justice and the Court of Cassation; it can be said that there is no need to file a declaratory action in order to apply the provisions of interim injunction and ancillary attachment in accordance with the provisions of the LPCPR.

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