TERMINATION OF LIMITED LIABILITY COMPANIES 15 May 2024

Limited liability companies may terminate depending on the occurrence of general and specific causes regulated in the Turkish Commercial Code No. 6102 (“TCC”). Although the former Turkish Commercial Code No. 6762 (“former TCC”) used the expression ‘cessation of limited liability companies' in Article 549, TCC Article 636 included the term ‘termination.

In Turkish corporate law, termination is classified as cessation and dissolution depending on whether termination requires any decision or notification. Accordingly, in the case of cessation, it is sufficient for limited liability companies in Turkey to have the special causes determined in the law or the company's articles of association. In this case, the company terminates automatically, and no decision or notification is required.

1. General Causes for Termination

General causes regulated in TCC Article 636:

"a) Upon the occurrence of one of the termination causes envisaged in the articles of association,

b) With the decision of the general assembly,

c) Upon commencement of bankruptcy proceedings,

d) In other termination cases envisaged by law."

As companies enter into liquidation when they terminate, their legal personalities are not affected by these processes. During the liquidation process, the legal capacity of the company is limited only to liquidation transactions, and the phrase 'in liquidation' is added to the company's trade name. This phrase ensures transparency by reflecting the current status of the company.

1. Termination of Limited Liability Companies According to Articles of Association

Limited companies may terminate upon the occurrence of causes envisaged in the articles of association. While the former TCC regulation uses the phrase ‘with causes written in the company contract,' this situation has been updated in TCC Article 636 as ‘with the occurrence of one of the termination causes envisaged in the company's articles of association.’

Limited company articles of association may include additional termination causes beyond legal requirements. These causes may include the expiration of the partnership term, completion of the company's business purpose or its becoming unsustainable, or situations such as the death of a partner. When such causes specified in the articles of association occur, the company automatically enters into the termination process.

2. Termination of Limited Liability Companies by General Assembly Resolution

According to Article 621, paragraph (ı) of the TCC, limited companies may terminate by a resolution of the general assembly. Under the former TCC, the general assembly of a limited company could decide to terminate the company under certain conditions. Among these conditions was the requirement for shareholders owning at least three-quarters of the company's share capital to approve the termination decision by a three-quarters majority vote. With the regulations of the TCC, the general assembly of a limited company can decide on termination under stricter conditions. According to Article 621 of the TCC, for the termination decision to be valid, the approval of at least two-thirds of the votes represented at the general assembly and the majority of the voting share capital is required.

3. Termination of Limited Company Upon Commencement of Bankruptcy Proceedings

According to Article 636, paragraph (c) of the TCC, a limited company terminates upon the commencement of bankruptcy proceedings. The moment of termination is the date when bankruptcy is declared.

4. Termination of Limited Liability Company in Other Cases Envisaged in the TCC

Limited companies may terminate for various causes envisaged in the law, including those not specified in Article 636 of the TCC. In particular, merger and complete division transactions are among these cases. For example, in a merger process, the merged company terminates upon registration in the trade registry (Article 152/3 of the TCC).

Similarly, in a complete division process, the transferring company also terminates upon registration in the trade registry (Article 179/3 of the TCC). Additionally, there is an important change for limited liability companies established after January 1, 2024. Limited companies established after this date are required to set their minimum capital amounts at least 50,000 TL according to Presidential Decree No. 7887.

2. Special Causes for Termination

Special causes that lead to the termination of limited companies include the absence of organs and termination for just causes.

1. Termination of Limited Liability Company Due to Absence of Organs

In the second paragraph of Article 636 of TCC, it is regulated that: "If one of the legally required organs of the company has been absent for a long time or if the general assembly cannot convene, upon the request of a shareholder or a creditor of the company for the dissolution of the company, the commercial court at the place where the company is headquartered, after hearing the directors, sets a period to rectify the situation in accordance with the Law. If the situation is not corrected despite this, the court decides on the dissolution of the company.”

2. Termination of Limited Liability Company Due to Just Causes

The right of limited liability company shareholders to terminate the company for just causes is regulated under TCC Article 636(3). According to this provision, each shareholder, in the presence of just causes, may apply to the court to request the terminate of the company. In this case, the court may decide on the termination of the company or offer alternative solutions. For example, a decision may be made to continue the company, and solutions such as paying the real value of the plaintiff shareholder's share may be implemented.

Just causes are not clearly defined in the TCC, and the legislator has left this definition to judicial decisions and doctrine. This indicates that just causes must be evaluated by the court based on the specific circumstances of the case. When evaluating the causes put forward, the court may consider not only the termination of the company but also other solutions. Among these solutions, removing the requesting shareholder from the company or paying the real value of their share may be included.

In a lawsuit filed with a termination request, the court may take additional measures, such as appointing a trustee, upon the request of one of the parties (TCC Article 636/4). The court's authority is established to ensure the fair and effective conduct of the process.