According to the Turkish Commercial Code numbered 6102 ("TCC"), shareholders may decide to liquidate their joint stock or limited liability company. Liquidation of a company shall be initiated with the shareholders’ resolution to enter into liquidation.

Liquidation is a process that includes the liquidation of all receivables and debts of the company. During this process, the assets of the company such as receivables and goods are converted into cash by the assigned liquidation officer(s) and the debts of the company are paid. The cash remaining at the end of the liquidation process is distributed to the shareholders in proportion to their capital contribution and privilege rights unless it is otherwise stipulated in the articles of association.
The liquidation of the assets of the company may cause significant difficulties for the creditors of the company in collecting their owed receivables. Therefore, the TCC includes various provisions to protect creditors during the liquidation process.
Announcement to Creditors

The TCC obligates companies to notify its creditors by way of announcements in order to ensure the performance of obligations during the liquidation process. This announcement serves as an invitation to creditors, so that all claims of receivables can be collected and consolidated for the purposes of liquidation. The announcement to creditors is further explained in our previous post.
 

Depositing of Known Receivables

The main principle based on the application of the creditors to the company in liquidation in order to claim their receivables. However, the liquidation officer is obligated to secure the receivables of the individuals and legal entities that have not replied to announcements or other invitations. In accordance with the relevant provisions of the TCC, amounts corresponding to known receivables which have not or could not be paid shall be deposited in a bank determined by the Ministry of Trade.

According to the Circular issued by the Ministry of Trade dated 20 March 2020 and numbered 29301, receivables should be deposited in the Ziraat Bank branch which is located closest to trade registry that the liquidating company headquarters is registered with. In the event there is no branch located in the district that the company headquarters is registered, the deposit shall be made to the closest Ziraat Bank branch [1].
 

Payment of Undue Debts

The liquidation officers are required to ensure payment of undue debts of the company by implementing a discount on the debt at the rate applied to short-term loans by the Central Bank of the Republic of Turkey. Creditors must accept these payments.
 

Debts which have not been Borne or Disputed Claims

The amounts corresponding to debts that have not been borne yet or disputed claims are required to be deposited at the notary. This deposit may not be necessary if these receivables are secured or assets distribution to shareholders (at the end of liquidation) are subject to satisfaction of these receivables.

It is not always possible to determine the amounts corresponding to unborn debts or disputed claims. This is particularly evident in disputes. In the context of declaratory cases, partial or uncertain receivable claims it will be necessary to wait for the disputes to reach certain stages in order to determine the receivables that will arise. Additionally, there is a possibility that the amount to be deposited does not cover the receivables that may be borne or incurred as a result of the dispute. These aspects may raise issues relating to the liability of the liquidation officer and the revival of the company. Therefore, it may not always be possible or preferred to finalise the liquidation procedures of companies by depositing such receivables.
 

Conclusion

Payment of the debts of the companies to be liquidated is regulated within the scope of the TCC both for the practical requirements of the liquidation process and the protection of creditors. Failure to fulfil the obligations specified under TCC may prevent the finalization of the liquidation process, result in liability of the liquidation officer and/or the revival of the company.
 

[1] https://www.resmigazete.gov.tr/eskiler/2015/03/20150320-20.htm