In this article, we outline liquidation procedure in Türkiye, detailing the steps for voluntary termination, asset assessment, and shareholder distribution. We also examine the impact of pending lawsuits on the process and address issues related to improperly concluded liquidations and available legal remedies.
1. Voluntary Termination and Initiation of Liquidation Procedure
Under Turkish law, the termination of a corporation may be due to various reasons (e.g., merger, division, voluntary termination). In case of voluntary termination, a general assembly resolution for the termination is required. If and when a corporation decides on the termination voluntarily, the liquidation procedure must be initiated and exhausted.
2. Assessment of Assets, Receivables, and Liabilities
As per Article 533/1 of the Turkish Commercial Code ("TCC"), a corporation that voluntarily decides on the termination should initiate a liquidation procedure, save for the specified exceptions as determined by the law. The corporation in liquidation will undergo an assessment of its receivables, assets, and liabilities. After the sale of identified assets, the collection of its receivables, and the payment of the corporation's liabilities, the surplus amount will be distributed among the shareholders in accordance with the provisions of the corporation's articles of association and relevant statutory provisions.
3. Asset Liquidation and Conversion into Cash
In principle, the assets of a corporation in liquidation are sold and converted into cash, unless otherwise stipulated in the articles of association or adopted by a general assembly resolution. Following the settlement of the corporation's liabilities and the allocation of shareholders' share prices, the residual sum will be distributed among the shareholders in proportion to their contributed share capital and privileged rights, unless otherwise set forth in the articles of association.
4. Impact of Pending Lawsuits on Liquidation Procedure
Any lawsuit pending before local, regional, or high courts involving a corporation in liquidation would delay the conclusion of the liquidation process, as the liquidation process would not be concluded until a final judgment in such a lawsuit.
5. Instances of Improper Conclusion of Liquidation Procedure
Nevertheless, there have been instances where corporations improperly concluded liquidation processes even in the presence of a lawsuit pending. In such a scenario, where the corporation in liquidation is likely the defendant of such a lawsuit, the judge would grant a certain time to the other party (likely the claimant) to initiate a lawsuit to reinstate the terminated corporation for additional liquidation. If, following this lawsuit, the terminated corporation is reinstated due to the necessity of additional liquidation, the corporation will be re-registered with the trade registry as per the relevant court decision.
Conclusion
The liquidation procedure in Türkiye is a meticulous process ensuring that the termination of a corporation is carried out in a systematic and fair manner. However, the presence of pending lawsuits can significantly impact the timeline and outcome of the liquidation process, potentially leading to the reinstatement of a terminated corporation for further liquidation proceedings. It is imperative for corporations and stakeholders involved in liquidation to manage these legal complexities with diligence and adherence to the relevant laws and regulations to achieve a satisfactory resolution.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.