Dissolution And Liquidation Of Joint Stock Companies
The New Turkish Commercial Code numbered 6102 (“New TCC”) entered into force on July 1, 2012 with the amendments made by the Law onAmendment of the Turkish Commercial Code and the Law on Entry into Force and Application of Turkish Commercial Code.
The dispositions of the New TCC pertaining to termination and liquidation of joint stock companies are regulated considering the needs under Turkish Commercial Code numbered 6762 (“TCC”). The New TCC adopted the possibilities of termination with justified reasons, additional liquidation and revocation of liquidation. The terms “public limited-liability company” and “public limited company” are more contemporary referral of these types of companies by EU and UK legislators and often abbreviated as “LLC” or “PLC” and bear these suffixes.
Article 529 of the New TCC regulates the grounds for dissolution of joint stock companies. Pursuant to sub-paragraph (a) of this article, joint stock companies shall be dissolved at the end of the term stipulated under the articles of association unless the company has implicitly become a company for undetermined term by continuing its activities despite the fact that the term of the company expired. This disposition aimed to fill a legal gap under the TCC since the status of the companies which continued their activities even their term expired had not been regulated under the TCC. The Turkish Court of Cassation opined that the company which continued its activities despite the fact that its term expired would become a company for undetermined term and the articles of association of the company should be amended accordingly. The New TCC ended the said controversy.
Pursuant to sub-paragraph (b) ofArticle 529 of New TCC, realization of the purpose of the company or the fact that its realization becomes impossible is also accepted as ground for dissolution. The phrase “purpose of the company” under the TCC is replaced by “scope of operation” under the New TCC.
Articles 530 and 531 of the New TCC regulate involuntary or compulsory dissolution. Pursuant to Article 530, in case of non-existence of one of the legally required organs or in case the general assembly (“GA”) could not be convened, the commercial court of first instance located at the registered office of the company shall allow a time to perform this mandatory duty. . Should this duty not fulfilled within allowed time, the company will be dissolved. Since joint stock companies can be established withonly one shareholder under the New TCC, the fact that the number of shareholders is less than five is no more a ground for termination.
Article 531 of the New TCC regulates the possibility of dissolution with company’s voluntary arrangement under justified reasons, which was not regulated under the TCC. Pursuant to this article, shareholders representing one tenth of the capital or one twentieth of the capital in publicly held joint stock companies may request the dissolution of the company before the commercial court of first instance located at the registered office of the company. This right is regulated as a minority right. The circumstances which may be classified as justified reason are not defined within the article. However, the court may, instead of dissolution of the company, rule on squeeze-out of the claimant shareholder with payment of the real value of its shares on thedate the most close to the date of decision or on another convenient and acceptable solution.
Pursuant to Article 532, the dissolutions will be registered and announced by the board of directors (“BoD”) to the trade registry in case the termination resulted from reasons other than bankruptcy or court decision. The company which is terminated shall be subject to liquidationproceedings; however, the legal exceptions are reserved. Article 533/2 clearly stipulates that the authorities of the organs of the company remain valid provided that these authorities are limited to liquidation proceedings. The liquidation and the status of the company organs in case of bankruptcy are regulated correspondingly with the provisions of the TCC.
Article 536 and following articles of the NewTCC regulate the liquidation. Pursuant to Article 536 pertaining to liquidators (or administrators), the liquidation shall be conducted by the BoD unless other liquidators are nominated within articles of association or by a GA resolution. The liquidators shall be registered to trade registry by the BoD and announced. Pursuant to the third sub-paragraph of the said article, the liquidator shall be nominated by the court in case the liquidation takes place upon a court decision. Before the New TCC, the liquidation proceedings were pursued by the BoD, even in the event of a court decision. One of the liquidators having the authority to represent the company must be a Turkish citizen and reside in Turkey.
Pursuant to Article 537/1 of the New TCC, the nominated liquidators or the members of the BoD which pursue the proceedings may always be relieved of this duty by the GA. Pursuant to the second sub-paragraph of the same article, the court decision is sufficient for registration and announcement of the liquidators which are nominated by the court. In case none of the liquidators is a Turkish citizen or Turkey resident, the court may appoint a person having the said qualities as a liquidator upon the request of shareholders, creditors and Ministry of Customs and Trade.
Article 539 of the New TCC regulates limitation and extension of the authorities of the liquidators. The authorities of the liquidators cannot be transferred; however, a representative authority may be granted to another liquidator or a third person. The transactions of the liquidatorapart from the liquidation proceedings with third persons shall be binding on the company unless the third person is aware or it is impossible that the third person is not aware that the transactions is not within the scope of liquidation. The registration and announcement of liquidation is not sufficient for proving the said circumstance.
First inventory and balance sheet within the scope of the liquidation proceedings shall be immediately prepared by the liquidators once they take office. The New TCC, unlike the TCC, stipulates that the experts may be requested to evaluate the value of the company assets, if necessary.
Article 541 of the New TCC regulates invitation and protection of the creditors. The creditors whose addresses are known shall be invited by registered letter. Other debtors shall be invited by an announcement to be made three times in three weeks in the Trade Registry Gazette and onthe web site of the company as stipulated under the articles of association. Within these invitations, the debtors will be informed about dissolution of the company and they will be asked to notify their receivables. Second sub-paragraph of this article stipulates that the receivables of the debtors who did not notify their receivables shall be deposited in a bank account to be determined by the Ministry of Customs and Trade.
The distribution following the liquidation is regulated under Article 543 of the New TCC. Pursuant to this article, the remainder assets of the company in liquidation following payment of the debts and return of the share value to the shareholders, shall be distributed to the shareholders in proportion with the paid-up capital share and their privileges, unless otherwise stipulated under the articles of association. In case a privilege for liquidation share is stipulated, the dispositions of articles of association shallapply. Thus, in case of liquidation, the share values shall be firstly returned, and consequently, the remaining asset shall be distributed in proportion with the paid-up capital and privileges of the shareholders.
Following the end of the liquidation, the books and the documents including those related to liquidation shall be kept pursuant to Article 82 of the New TCC which regulates principles of keeping the documents and the term that the documents shall be kept. Following the end of the liquidation, the trade name shall strike off the trade registry upon the request of the liquidator and this deletion shall be registered and announced.
Pursuant to Article 546 of the New TCC, the disputes between the shareholders and liquidators shall be resolved under simple procedure for judgment. The court shall grant its decision within 30 days. Thus, the disputes shall be resolved quickly and the decision will be available within a determined term.
New TCC adopts two new concepts with regard to liquidation. One of these concepts is additional liquidation which is regulated under Article 547 of the New TCC. Pursuant to this article, in case additional liquidation is deemed necessary following the closing of the liquidation proceedings, the last liquidators, BoD members, shareholders or creditors may request from the commercial court of first instance located at the registered office of the company, to register the company once again until the additional liquidation proceedings are completed. Thus, the registration of the company once again even it was deleted from the register becomes possible in case it is necessary to take some additional measures. The justification of the article presents some cases, which necessitate an additional liquidation such as the fact that some of the assets are not considered during the liquidation, that the legal requirements during the distribution of the assets are not respected and filing a lawsuit for liability against the organs of the company. The justification of the article also stipulates three conditions for additional liquidation: Existence of a justified interest to be protected, the fact that the registration is the only way to resolve the problem and that a lawsuit is filed in order to cancel the decision to delete the registration provided that existence of a receivable or asset of the company is proved by sufficient documents.
Pursuant to Article 547/2, in casethe court deems the request appropriate, it will rule on registration of the company once again, it will appoint the last liquidators or one or more other persons as liquidators and provides that the registration is announced.
Revocation of the Liquidation (Restoration to the Register)
Another new concept adopted by the New TCC is revocation of the liquidation ―also referred as restoration to the register―, which is regulated under Article 548 of the New TCC. By application of revocation of the liquidation with a GA resolution, the company will no longer be in liquidation process and will become once again a company having the purpose of obtaining profit. Pursuant to the relevant article, the GA may decide on the revocation of the liquidation, unless the process of distribution of assets is started, in case the company is dissolved since the term stipulated for the company expired or by a GA resolution. The resolution for revocation of the liquidation must be adopted by the votes representing at least sixty percent of the capital. However, this quorum may be increased or other measures may be stipulated. The resolution for revocation of the liquidation shall be registered and announced by the liquidator.
The dispositions of New TCC concerning dissolution and liquidation of the companies are regulated considering the needs under the TCC. It is clearly stipulated that the company whose term expired shall not be dissolved in case the company continues its activities. The New TCC adopted the possibilities of dissolution with company’s voluntary arrangement under justified reasons, additional liquidation and revocation of liquidation, which did not exist under the TCC. We hope that the New TCC, which is in force since July 1, 2012 shall facilitate the proceedings for dissolution and liquidation procedures more efficiently.