Company Dissolution/Liquidation in Turkey
Company Dissolution/Liquidation in TurkeyUpdated on Monday 21st November 2022
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Even if the Turkish economy is performing well, not all companies register good results and some of them are required to end their activities at some point. This implies the liquidation followed by the dissolution of the business under the requirements of the law. The most important law which provides for the liquidation and dissolution of Turkish companies is the Company Law, however, it is important to note that specific requirements are imposed on different types of companies. Below, our lawyers in Turkey explain how different types of companies can be liquidated and then dissolved. We can also assist local and foreign entrepreneurs during the company liquidation and dissolution procedures in Turkey.
Types of companies that can be liquidated in Turkey
According to the law, only companies undertaking commercial activities can be liquidated and then dissolved. These companies are:
- private limited liability companies;
- joint stock companies;
- collective companies;
- commandite companies;
- commandite companies with share capital
- foundations and associations undertaking commercial activities.
It must be noted that Turkish collective and commandite companies are the equivalent of partnerships in other European countries, which is why foreign investors who have opened businesses in this country, and they are seeking to liquidate them are advised to ask for legal assistance from our Turkish law firm. Also, cooperatives are often met in the agriculture industry, one of the most performant economic branches in Turkey. During the liquidation procedure, the name of the company must be amended by appending a phrase which will indicate the company is being liquidated.
How can a company be liquidated in Turkey?
The procedure for liquidating or dissolving a company in Turkey falls under the Commercial Law. There are many reasons for which a company may request to register for liquidation and the decision can be taken by the general assembly of the company or by an appropriate Turkish court. There are several reasons which can lead to company liquidation in Turkey. Among them are:
- the company has reached its purposes and the shareholders no longer want to continue the business activities;
- the company was established for a limited period of time which was prescribed in its Articles of Association;
- the company shareholders consider that the company no longer represents their interests;
- one or more claims have been filed by creditors with a Turkish court and the company is bankrupt.
The liquidation process can be:
- voluntary (as a result of the company’s general assembly decision);
- compulsory or mandatory (after the creditors have filed a petition with a court).
Our Turkish lawyers can provide more information on the company dissolution reasons.
What are the steps for company liquidation in Turkey?
If the decision of company liquidation is taken by the management of the company during a general meeting, a liquidator must be appointed to represent the company during the process. Certain information about the company must be submitted to the Trade Register upon starting the liquidation procedure.The general meeting has the powers to dismiss the liquidator and can decide the level of power he has in this process. In the situation of a compulsory liquidation, the Court must appoint the liquidator and has the power to dismiss it if necessary. The liquidator will prepare the balance sheet and the inventory of the company’s assets which must be approved by the shareholders during an extraordinary meeting. The liquidator checks the documents and notifies the creditors regarding the liquidation process. He then decides the specific terms if depositing the claims.
The creditors are then submitting their claims and if it is not completed in due time, the amount necessary to cover their claims is deposited to an administrative authority appointed by the liquidator. After paying the company’s debt, the rest of the assets will be distributed to the shareholders in accordance with their contribution to the capital of the business. The last step is to convene a general meeting in which the termination of the liquidation procedure is announced. The decision is then registered at the Trade Register and the name of the company is permanently deleted from it; our lawyers can offer you assistance in this sense. The liquidator is required to appoint a third party who must keep the company’s documents for at least 10 years. The name and the address of that person must be mentioned in the application sent to the Turkish Trade Registry.
The liquidation of an insolvent company in Turkey
Most of the times, Turkish companies ask for liquidation and dissolution when running into financial difficulties which no longer allows them to generate profits. This is the first stage in the liquidation procedure which implies for the company to declare bankruptcy. A Turkish insolvent company can be declared bankrupt by a commercial court specialized in such actions. The court will issue a bankruptcy decision which will contain the date and hour the company was declared bankrupt. The decision will be filed with the bankruptcy office which will notify the following institutions:
- the Trade Register;
- the Land Register;
- the Customs Authorities;
- the Banks Association;
- the Capital Market Board;
- the Stock Exchange;
- the Chamber of Commerce;
- the Industry Chamber.
Following that, the bankruptcy decision must be published in the press and the Official Gazette.
Are you interested in immigration to Turkey and want to know the formalities involved? You will need a visa to enter this country, depending on the state you come from. In this sense, you can ask for specialized help from our lawyers in Turkey who have experience in this field. They can take care of the necessary documents to guarantee that these will not be rejected by the authorities. You will also need a work and residence permit, so contact our specialists.
The liquidation of joint stock companies in Turkey
Apart from the reasons mentioned above, a Turkish joint stock company can also be liquidated under several specific conditions. The first one is related to losing two-thirds of the share capital. The second one is when the number of shareholders is below 5, while the third reason is bankruptcy. With respect to the dissolution, there are certain exceptions, as the joint stock company can be merged with another company, can be turned into a limited liability company or transferred to another public company, cases in which the dissolution can be avoided. The liquidation and dissolution of joint stock companies can be more complicated, which is why it is advisable to ask for assistance from a Turkish law firm.
Liquidation of branches in Turkey
Foreign investors who have opened a branch office in Turkey should know that this type of company can be liquidated following the standard liquidation procedures; the liquidation process for this entity lasts at least one year.
Documents needed to complete the company liquidation process in Turkey
The following documents are necessary to start the company dissolution procedure in Turkey:
- the minutes of the shareholders’ meeting indicating the decision of winding-up the company;
- the declaration through which the liquidator who will handle the process is appointed;
- an inventory which shows all the assets of the company is also required;
- the balance sheet showing the company’s financial status must be prepared;
- a declaration of the shareholders through which the inventory and balance sheet are approved.
All these documents must be filed with the Companies Register in order for the liquidation procedure to begin.
Taxation during the dissolution process
It is very important to know that companies in dissolution are still liable to local taxation. Since the company is in the process of liquidation, it will no longer have a financial year; this will be replaced by a liquidation period. The liquidation period covers the time starting with the first day when the company is entering in the dissolution process and the day when the liquidation procedures have been completed. After the dissolution process ends, the local authorities will have to refund taxes in the situation in which the company overpaid in this sense. During this process, the company will be subjected to the standard taxation system applicable to all companies in Turkey; furthermore, the company will also be obligated to file the documents which are prescribed to a regular company. According to the Turkish legislation, shareholders of a company in a liquidation process will be repaid for their capital, for which no taxes will be applied.
How long does the liquidation process last in Turkey?
It may take several years to liquidate a company in Turkey, depending on its size and the complexity of its debts, but usually, a liquidation process can be completed in a period of 12-18 months.
The dissolution of companies in Turkey
Company dissolution implies ceasing all business activities in a company. The dissolution procedure of a company in Turkey, be it private or public, implies the final phase in the existence of that business. The dissolution procedure starts as soon as the remaining assets of the business have been distributed among the shareholders. Company dissolution in Turkey will imply the deletion of the company and of its trade name from the Companies Register permanently. Following that, the company will also be deleted from the tax office’s records and the tax and VAT numbers of the company will no longer be in use. The last phase of the dissolution of a company in Turkey implies the liquidator to hand over all the documents and accounting books to a public notary designated by the commercial court. The notary must keep the documents for 10 years after the liquidation. The deletion of the company from the Trade Register and with the tax authorities take only a few days to complete.
If you need legal services related to the liquidation of a Turkish company, please contact our law firm in Turkey. Our Turkish lawyers can help foreign investors who want to liquidate and dissolve their businesses in this country, however, they can also rely on us if they want to start companies here.