Under Turkish law, a joint-stock company's liquidation follows its termination and ends with its deregistration. If the process is found incomplete—due to overlooked assets or ongoing disputes—supplementary liquidation allows temporary reinstatement of the company's legal personality to finalize unresolved matters.
Introduction
Under Turkish law, a joint-stock company may be terminated for various reasons such as merger, division, voluntary dissolution, or legal mandate. Voluntary termination requires a general assembly resolution and triggers a liquidation process, during which the company's assets are sold, liabilities settled, and any remaining surplus distributed to shareholders. This process concludes with the company's removal from the trade registry and loss of legal personality. However, in cases where liquidation is improperly completed, the concept of supplementary liquidation allows for the temporary revival of the company's legal personality to properly finalize the process.
Termination of a Company and Liquidation Procedure
Pursuant to Article 533 of the Turkish Commercial Code ("TCC"), a company that resolves to terminate must initiate a liquidation procedure, except in cases otherwise provided by law. During liquidation, the company retains its legal personality, including its relations with shareholders, and continues to operate under its trade name with the phrase "in liquidation" appended. During this period, the powers of the company's governing bodies are limited solely to actions necessary for the liquidation.
The company in liquidation will first undergo an assessment of its receivables, assets, and liabilities. As a rule, termination is followed by an asset liquidation process, during which the company's assets are primarily sold and converted into cash, unless otherwise provided in the articles of association or decided by a general assembly resolution. Once receivables are collected and liabilities settled, the shareholders' share values are allocated, and any remaining surplus is distributed among them in proportion to their contributed capital and any preferential rights, unless otherwise provided in the articles of association or applicable statutory provisions. Importantly, if it becomes clear that the company's debts exceed its assets, an insolvency filing is mandatory.
Upon completion of the liquidation, the company's trade name must be removed from the trade registry, thereby formally ending its legal personality.
Supplementary Liquidation under Turkish Law
After the liquidation is completed and the company is removed from the trade registry, it may later become evident that certain actions required to be completed during the liquidation were overlooked, or that a dispute has arisen requiring the revival company's legal personality. For example, in some cases, companies may improperly conclude the liquidation process despite ongoing legal proceedings, leading to their removal from the trade registry and loss of legal status. However, as a general principle, liquidation should not be concluded while a dispute is pending. It is the liquidator duty to ensure that the outcome of such disputes is properly reflected in the liquidation process. Failing to do so may result in undistributed company assets being discovered after liquidation, which were not included in the distribution of the liquidation surplus.
In such cases, a procedure known as supplementary liquidation may be applied, allowing for the temporary revival of a company whose liquidation, and therefore its legal personality, has already ended. This revival reinstates legal personality for a limited period and for the purpose of completing the specific action required to finalize the liquidation properly. Article 547 of the TCC provides that if additional liquidation actions are required after the liquidation has been concluded, the last liquidators, board members, shareholders, or creditors may apply to the commercial court of first instance where the company is registered to have the company re-registered for the purpose of completing these outstanding actions.
If the court grants the request, the company will be temporarily reinstated in the trade registry for the limited purpose of supplementary liquidation. It is crucial to note that this does not amount to a permanent revival of the company and the company cannot resume its commercial activities through this process. Rather, it is a procedural safeguard to carry out tasks that were either overlooked or inadequately addressed during the initial liquidation.
The request for a supplementary liquidation may be justified for several reasons, such as the existence of undistributed assets, non-compliance with legal requirements during asset distribution, the intention to file lawsuits concerning shares wrongfully received by shareholders, or the presence of ongoing lawsuits or enforcement proceedings involving the company. However, this request must be based on a legitimate and protectable interest, and supplementary liquidation must be the only effective means to safeguard that interest.
It is also worth noting that if the company in liquidation is the claimant in a lawsuit, it may consider assigning its receivables to third parties. In such cases, the assignee will assume the claimant's position in the lawsuit, and the proceedings will continue accordingly.
Conclusion
In conclusion, the liquidation process under Turkish law is a structured mechanism that ensures the orderly termination of a company's legal existence, including the distribution of its assets and settlement of its liabilities. However, the process may sometimes be improperly concluded, such as when legal proceedings are still pending or when certain assets remain undistributed. In such cases, supplementary liquidation serves as a critical legal remedy, allowing for the temporary reinstatement of the company's legal personality to complete outstanding actions.
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