According to the Turkish Commercial Code numbered 6102 ("TCC"), joint-stock and limited liability companies may be liquidated due to compulsory reasons such as the realization of the conditions stipulated in the articles of association, bankruptcy, or court decisions; or may be liquidated voluntarily as a result of shareholders’ general assembly resolutions.

In this article, we will review the voluntary liquidation process of joint-stock and limited liability companies through the resolution of the general assembly.

What is Liquidation?
Liquidation is the process in which a company converts all tangible assets into cash, terminates legal relationships between third parties and the company through the performance of obligations, and distributes the remaining cash assets to shareholders before the company is de-registered from the trade registry.

Resolution of the General Assembly to Enter into Voluntary Liquidation
General assembly resolutions regarding entering voluntary liquidation must be adopted by the voters constituting at least seventy-five percent of the shareholders. The general assembly resolution regarding initiation of liquidation is required to be registered with the trade registry and announced in the Turkish Trade Registry Gazette ("TTRG"). The announcement should explicitly indicate that the company has entered liquidation. If other forms of the announcement have been stipulated in the articles of association, additional announcements should be made by these means. The company shall enter into voluntary liquidation once the general assembly resolution has been registered with the trade registry.

Voluntary Liquidation Process and the Liquidation Officer

The company retains its legal entity during the voluntary liquidation process and commercial its commercial title is amended to include the phrase “in liquidation”. During this process, the company may only undertake transaction for the purpose of finalizing liquidation.

The liquidation officer(s) will execute the liquidation proceedings. Liquidation officers may be determined by the articles of association or may be appointed through a general assembly resolution. The board of directors is required to register the liquidation officer at the trade registry and have this registration announced on the TTRG. 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.

 

Publishing Announcement to the Creditors

The TCC regulates that a company which has initiated liquidation is required to carry out announcements to creditors to claim their receivables. This announcement serves as an invitation to creditors so that all claims of receivables can be collected and consolidated for the purposes of liquidation.

Accordingly:

• Creditors who can be determined from the company ledgers or other documents and whose registered addresses are known, are required to be invited via registered letter,

• Other creditors should be invited by an announcement published in the TTRG three times, on the website of the company and if other forms are stipulated under the articles of association, the creditors should also be invited in such forms,

to notify the company and the liquidation officer(s) of their claim.

Relevant provisions of the TCC shall be implemented for individuals and entities who are identified as creditors but have not responded to the announcements as well as unborn debts, claims under disputes or undue debts.
 

Waiting Period

The company cannot finalize the liquidation process or distribute the liquidated assets to the shareholders for at least six months after the last announcement published in the TTRG. However, the company may request that the Commercial Court of First Instance to reduce the waiting period on the basis that it does not constitute a threat to creditors.
 

Finalization of the Voluntary Liquidation
The liquidation may be finalized through shareholders' decisions subsequent to the expiration of the six-month waiting period, payment of all receivables and the distribution of the liquidated assets to the shareholder(s). The distribution shall be carried out in proportion to the capital contribution and privilege rights of the shareholders unless otherwise stipulated in the articles of association. The commercial title of the company shall be deregistered from the trade registry upon the request of the liquidation officers.

It should be noted that the commercial ledgers and documents including those relating to liquidation must be kept for 10 years following the finalization of the liquidation.