21 September 2020
Liabilities of the Liquidation Officer Regarding a Voluntary Liquidation
According to the Turkish Commercial Code numbered 6102 (“TCC”) liquidation is the process in which a company converts all tangible assets into cash, terminates legal relationship between third parties and the company through performance of obligations and distributes the remaining cash assets to shareholders before the company is de-registered from the trade registry. The described liquidation process is required to be undertaken by liquidation officers. The crucial role that the liquidation officers undertake in this process may also lead to their liability. In this article, we have examined the liabilities of the liquidator that may be borne within the scope of the TCC.
Who are Liquidation Officers and How are they Appointed?
Liquidation officers are individuals who are charged with undertaking the liquidation process as determined in the TCC. One or more liquidation officers may be appointed to oversee the liquidation of a company. In case of voluntary liquidation by the shareholders, the liquidation officers may be determined by the articles of association or may be appointed through a general assembly resolution. The liquidation officer(s) may be chosen among shareholders or third parties; however, at least one of the liquidation officers must hold a Turkish citizenship and reside in Turkey.
How Does the Liability of the Liquidation Officer Arise?
In accordance with Article 553 of the TCC, liability of the liquidation officer will be borne if the obligations arising from the law or the articles of association are breached with fault attributable to the liquidation officer. In this respect, liquidation officers are liable against the company, shareholders and creditor of the company for damages caused through fault.
Liability of the liquidation officer is likely to be borne in issues relating to liquidation values of company assets, neglecting announcement to creditors and settlement of company obligations. For example, the liability of the liquidation officer may be borne against:
Shareholders (and possibly creditors), in the event company assets are liquidated below fair market values;
Creditors, in the event Announcements to creditors are not carried out, registered receivables are not duly paid or deposited in accordance with the legislation (please refer to link for further information),
Company, in the event the liquidation officer engaged in incompliant behavior leading to administrative sanctions.
The fault of the liquidation officer shall be an essential component in the determination of his / her liability. The term fault may be further elaborated to mean willful misconduct or negligence. The existence of fault shall be determined by investigating whether the necessary duty of attention and care has been fulfilled by the liquidation officer. The plaintiff shall bear the burden of proof with respect to this issue.
Several and Joint Liability
If more than one liquidation officer has been appointed, as a rule, all liquidation officers are severally and jointly liable for the damage incurred. However, if the distribution of duties has been made among the liquidation officers with a decision of the general assembly and the authority to act solely is allowed, each liquidation officer shall be liable for the transactions they have undertaken.
Who Can File a Lawsuit against the Liquidation Officer and What is the Statute of Limitations Duration?
The company, shareholders or company creditors may file a lawsuit for damages caused by liquidation officers as a result of the breach of their obligations. The lawsuit should be filed within 2 years starting as of the date of having found out about the damages and liability of the liquidators, and in any case within 5 years from the date of the action that has caused the damage. However, if the action of the liquidation officer also constitutes a crime under the Turkish Criminal Code, the compensation claim can be filed within the statute of limitations prescribed for the crime.
The company, shareholders and creditors may claim damages arising from the faulty actions, severally and jointly, from the liquidation officers. Liquidation officers should execute their responsibilities in accordance with the regulations of the TCC as well as their duty of attention and care in order to avoid compensation claims