Termination of Joint Stock Companies

The Turkish Commercial Code No. 6102 ("New TCC"), along with the amendments made to the Turkish Commercial Code No. 6335 and the Law on the Entry into Force and Application of the Turkish Commercial Code, entered into force on July 1, 2012, without any postponement.

The new Turkish Commercial Code (TTK) has reorganized the issues of termination and liquidation according to the needs that arose during the period of the Turkish Commercial Code No. 6762 ("TTK"). Within this framework, new concepts such as termination for just cause, supplementary liquidation, and reversal of liquidation have been introduced.

Termination

Article 529 of the new Turkish Commercial Code (TTK) specifies the reasons for the termination of joint-stock companies. According to clause (a) of this article, joint-stock companies terminate upon the expiration of the term specified in their articles of association; however, if they continue their operations during this period, they do not become indefinite-term companies. This regulation has clarified controversial issues from the TTK era. During the TTK period, Supreme Court rulings determined that joint-stock companies that continued their operations despite the expiration of their term became indefinite-term companies and that their articles of association needed to be adapted accordingly. The new TTK has put an end to such debates.

Article 529(b) of the new Turkish Commercial Code also states that the failure to achieve the business objective or the impossibility of achieving it is one of the reasons for termination. With this regulation, the expression "business objective" has been used instead of "company purpose".

Articles 530 and 531 of the new Turkish Commercial Code (TTK) address specific termination situations. According to Article 530, if one of the company's necessary legal bodies is absent for an extended period, or if the general assembly cannot be convened, the primary commercial court in the company's location grants a period to rectify the situation. If the situation is not rectified within this period, a decision is made to dissolve the company. The establishment of a single-person joint-stock company and the situation where the number of shareholders falls below five are not considered grounds for termination under the new TTK.

Article 531 of the new Turkish Commercial Code (TTK) regulates the institution of dissolution for just cause, which was not present in the previous TTK. According to this article, in the presence of just cause, shareholders representing at least one-tenth of the capital, and in publicly traded companies one-twentieth, may apply to the primary commercial court in the location of the company's headquarters for a decision on the dissolution of the company. A minority right is thus established. The article itself does not specify what constitutes just cause, but the court may, instead of dissolution, decide on the payment of the true value of the shares to the plaintiff shareholders, their expulsion from the company, or another solution appropriate to the situation.

Article 532 of the new Turkish Commercial Code states that if the termination is due to a reason other than bankruptcy or a court decision, it must be registered and announced in the commercial registry by the board of directors. Except for the exceptions in the law, the dissolved company enters the liquidation process. Article 533/2 clarifies that with the company entering liquidation, the powers of the organs continue, limited to the purpose of liquidation. In the case of bankruptcy, the liquidation process and the status of company organs are regulated similarly to the Turkish Commercial Code.

Liquidation

Articles 536 and subsequent articles of the new Turkish Commercial Code contain regulations regarding liquidation. According to Article 536, which regulates liquidators, if a liquidator is not appointed by the articles of association or a general assembly resolution, the liquidation is carried out by the board of directors. The board of directors registers and announces the liquidators in the commercial registry. According to the third paragraph of the article, if the dissolution of the company has been decided by a court, the liquidator is appointed by the court. In the previous period, liquidation matters were handled by the board of directors. It is a requirement that at least one of the authorized liquidators be a Turkish citizen and reside in Türkiye.

Article 537/1 of the new Turkish Commercial Code states that appointed liquidators or board members performing their duties may be removed from office at any time by the general assembly. The second paragraph of the article stipulates that a court decision is sufficient for the registration and announcement of liquidators appointed by the court. If neither of the liquidators is a Turkish citizen or resides in Türkiye, the court shall appoint a person meeting these conditions as liquidator upon the request of shareholders, creditors, or the Ministry of Customs and Trade.

Article 539 of the new Turkish Commercial Code regulates the limitation and expansion of the powers of liquidators. The powers of liquidators are non-transferable, but they may authorize another liquidator or a third party to act on their behalf in order to perform certain actions. Actions taken by a liquidator outside the scope of the liquidation do not bind the company if the third party knew or could not have known that the action was not in accordance with the liquidation's purpose. Registration and announcement of the liquidation are not sufficient proof of this.

The initial inventory and balance sheet in the liquidation process are prepared as soon as the liquidators begin their duties, in accordance with Article 540 of the New Turkish Commercial Code. The New Turkish Commercial Code stipulates that expert assistance may be sought, if necessary, to appraise the company's assets.

Article 541 of the new Turkish Commercial Code introduces regulations regarding the summoning and protection of creditors. Individuals known to be creditors and whose addresses are known are notified by registered mail, while other creditors are informed through three announcements published one week apart in the Trade Registry Gazette, the company's website, and in the manner specified in the articles of association, and are called upon to declare their claims. If creditors fail to declare their claims, their receivables are deposited in a bank designated by the Ministry of Customs and Trade.

The distribution following liquidation is regulated in Article 543 of the New Turkish Commercial Code. According to this article, after the company's debts are paid and the share capital is returned during the liquidation phase, the remaining assets are distributed among the shareholders in proportion to their paid-in capital and preferential rights, unless otherwise stipulated in the articles of association. In the case of preferred shares, the provisions specified in the articles of association apply. Thus, it is stipulated that the paid-in share capital will be returned first, and the remaining assets will be distributed among the shareholders in proportion to their paid-in capital and preferential rights, unless otherwise specified in the articles of association.

At the end of the liquidation process, the books and documents relating to the liquidation are kept in accordance with Article 82 of the New Turkish Commercial Code. Following the completion of the liquidation process, the company's trade name is removed from the trade registry upon the request of the liquidators, and the removal is registered and announced upon request.

Article 546 of the new Turkish Commercial Code states that disputes between shareholders and liquidators shall be resolved according to a simplified judicial procedure. The court shall render its decision within thirty days, thus ensuring the swift resolution of disputes.

Additional Liquidation

The new Turkish Commercial Code introduces two new institutions regarding liquidation. One of these is supplementary liquidation, regulated in Article 547 of the new Turkish Commercial Code. If, after the closure of the liquidation process, it is determined that supplementary liquidation procedures are necessary, the final liquidators, board members, shareholders, or creditors may request the re-registration of the company. In this case, the company is re-registered for the supplementary procedures after the liquidation.

Conclusion

The new Turkish Commercial Code (TTK) aims to address shortcomings in previous legal regulations and make processes more efficient by regulating the termination and liquidation processes of joint-stock companies in a more comprehensive and understandable manner. Issues such as companies becoming indefinitely inactive if they continue operations despite the expiration of their term have been clarified. Furthermore, new regulations concerning termination for just cause, supplementary liquidation, and reversal of liquidation address various situations companies may encounter during the liquidation process and offer greater flexibility. These innovations introduced by the new TTK will ensure that the termination and liquidation processes of companies are conducted in a more orderly, fair, and transparent manner. These changes aim to create a more predictable and reliable legal environment for both companies and shareholders. In this context, it is expected that the regulations introduced by the new TTK will yield positive results for companies during the implementation phase.