Introduction
Liquidation is the legal process through which a company ceases its commercial activities, settles its debts, converts its assets into cash, and distributes any remaining balance to shareholders before being formally removed from the trade registry.
In Turkey, liquidation procedures of companies are primarily governed by the Turkish Commercial Code (TCC), along with tax legislation and enforcement laws. Whether triggered voluntarily by shareholders or involuntarily due to insolvency, liquidation is a structured and legally supervised process.
For foreign investors, understanding the liquidation framework is particularly important when exiting the Turkish market or restructuring group operations.
This article provides a comprehensive overview of liquidation procedures of companies in Turkey, including voluntary liquidation, compulsory liquidation, creditor protection mechanisms, tax clearance requirements, and deregistration formalities.
1. Legal Framework
Liquidation procedures are governed by:
- Turkish Commercial Code No. 6102
- Enforcement and Bankruptcy Law
- Tax Procedure Law
- Trade Registry Regulation
The specific steps may differ slightly between Joint Stock Companies (A.Ş.) and Limited Liability Companies (Ltd.), but the general principles are similar.
PART I – VOLUNTARY LIQUIDATION
2. Grounds for Voluntary Liquidation
A company may enter voluntary liquidation upon:
- Expiration of company term
- Realization of corporate purpose
- Shareholders’ resolution
- Other grounds specified in Articles of Association
The most common reason is a general assembly resolution.
3. Shareholders’ Resolution
For voluntary liquidation:
- General Assembly must adopt liquidation decision.
- Required quorum depends on company type and articles.
The resolution must:
- Clearly state decision to liquidate
- Appoint liquidators
The decision must be registered with the Trade Registry.
4. Appointment of Liquidators
Upon entering liquidation:
- Board of Directors (A.Ş.) or managers (Ltd.) lose authority.
- Liquidators assume management powers.
Liquidators may be:
- Existing directors
- Shareholders
- Third parties
Their authority must be registered and published.
5. Company Name During Liquidation
Once liquidation begins:
- Company name must include “in liquidation” (tasfiye halinde).
This signals third parties about the company’s status.
6. Duties of Liquidators
Liquidators are responsible for:
- Preparing opening liquidation balance sheet
- Collecting receivables
- Selling assets
- Paying debts
- Representing company in legal matters
- Preparing final balance sheet
They owe fiduciary duties similar to directors.
7. Creditor Notification
Liquidators must:
- Announce liquidation in Trade Registry Gazette.
- Invite creditors to declare claims.
Announcement must be made three times at specified intervals.
This protects creditor rights.
8. Waiting Period
After creditor announcements:
- A statutory waiting period of at least six months applies.
This period allows creditors to assert claims.
Early distribution of assets is prohibited unless certain guarantees are provided.
9. Settlement of Debts
Before distributing assets to shareholders:
- All known debts must be paid.
- Contested debts must be secured.
If assets are insufficient:
- Insolvency proceedings may be required.
10. Distribution of Remaining Assets
After settling liabilities:
- Remaining assets are distributed to shareholders in proportion to capital shares.
Distribution must comply with:
- Articles of Association
- Legal reserve rules
11. Final Balance Sheet and Closure
Liquidators prepare:
- Final liquidation balance sheet
- Final report
General Assembly approves these documents.
Application for deregistration is then submitted to Trade Registry.
Upon deletion from registry:
- Company ceases to exist legally.
PART II – INSOLVENCY AND COMPULSORY LIQUIDATION
12. Insolvency-Based Liquidation
If company is insolvent:
- Creditors may initiate bankruptcy proceedings.
- Court declares bankruptcy.
In such cases:
- Bankruptcy administration manages liquidation.
This differs from voluntary liquidation.
13. Capital Loss and Technical Bankruptcy
Under TCC Article 376:
If capital loss exceeds certain thresholds:
- Board must call general assembly.
- Remedial measures must be adopted.
Failure to act may lead to liability.
If insolvency is evident:
- Bankruptcy filing is mandatory.
14. Court-Ordered Dissolution
Courts may order dissolution in cases such as:
- Just cause upon shareholder request
- Illegal activities
- Persistent corporate deadlock
Court may appoint liquidator.
PART III – TAX AND REGULATORY OBLIGATIONS
15. Tax Clearance
During liquidation:
- Company must continue filing tax returns.
- Corporate tax must be calculated for liquidation period.
Before deregistration:
- Tax clearance certificate is required.
Tax authority conducts review before approval.
16. Social Security Obligations
If company employed staff:
- Final social security obligations must be settled.
- Closure notification must be made to SGK.
Unpaid social security debts may trigger personal liability.
17. Record Keeping After Liquidation
Even after deregistration:
- Corporate books must be preserved for statutory period (usually 10 years).
Liquidator is responsible for record retention arrangements.
PART IV – LIABILITY ISSUES
18. Liability of Liquidators
Liquidators are personally liable if they:
- Act negligently
- Distribute assets before paying creditors
- Violate statutory procedures
They may face civil and criminal liability.
19. Shareholder Liability After Liquidation
If liquidation is completed properly:
- Shareholders generally bear no further liability.
However, in Limited Companies:
- Public debt exposure may continue if not settled.
20. Cross-Border Considerations
Foreign shareholders must consider:
- Capital repatriation rules
- Tax withholding on distributions
- Double taxation treaty implications
Proper tax planning is essential.
21. Timeline of Liquidation
Voluntary liquidation typically takes:
- Minimum 6–12 months
Duration depends on:
- Complexity of assets
- Ongoing litigation
- Tax audit completion
Fast liquidation is not legally possible due to mandatory waiting periods.
22. Practical Challenges
Common issues include:
- Ongoing lawsuits
- Unresolved tax audits
- Disputed receivables
- Incomplete corporate records
Early planning reduces complications.
Conclusion
Liquidation procedures of companies in Turkey follow a structured legal framework designed to protect creditors, ensure orderly asset distribution, and maintain regulatory oversight. Whether voluntary or insolvency-based, liquidation requires careful compliance with corporate, tax, and registry requirements.
For foreign investors exiting the Turkish market, understanding procedural steps, waiting periods, creditor protection rules, and tax clearance requirements is essential to avoid post-dissolution liabilities.
With proper legal planning and professional supervision, liquidation can be executed efficiently and in full compliance with Turkish law.
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