RIGHT TO EXIT FROM PARTNERSHIP IN LIMITED LIABILITY COMPANIES 2 April 2024
Exiting a partnership refers to a partner voluntarily leaving a limited liability company. The provisions related to exit are regulated by Article 638 of the Turkish Commercial Code (“TCC”), while the participation in exiting is specifically regulated in Article 639.
- Recognition of the Right to Exit through the Articles of Association
According to Article 638/1 of the TCC, the company's articles of association may grant partners the right to exit the partnership, and the exercise of this right may be subject to certain conditions. This right can be included in the articles of association at the time of establishment or can be envisaged through an amendment to the articles of association. There is a wide discretion regarding the conditions to which the exit is subject. For example, a provision may be included in the articles of association that grants the right to leave to partners who have completed 5 years in the partnership. If the articles of association grant partners the conditional or unconditional rights to exit, then the partners do not need to sue to exercise this right. This right is a unilateral declaration of intent that must be communicated to the other party. If not specifically regulated in the articles of association, the notification is generally not subject to any form. However, it is advisable to make it in writing for proof. The notification is made to the managers of the limited liability company.
- Exit Based on a Just Cause
The legislator has granted partners the right to exit through court intervention based on just cause, under Article 638/2 of the TCC. This is a statutory exit scenario, and there is no need for a specific provision in the articles of association in this regard. The presence of just cause makes the exit from the partnership absolute and cannot be overridden by articles of association. The exercise of this right is requested through litigation in case of just cause, and it is concluded with a court decision. In other words, the exit becomes effective upon the finalization of the court decision, which is constitutive. A just cause may arise from partnership operations or outside the partnership relationship, from personal relations.
- Participation in Exiting
The legislator has regulated participation in exiting in Article 639 of the TCC. According to this provision, if a partner wishes to exit based on the provisions of articles of association or file a lawsuit due to just causes; the managers must immediately inform the other partners. Upon receiving this notification, each of the other partners may do one of the following within one month from the date the notification reached them:
- If the just cause stipulated in the articles of association is also valid for them, they may notify the managers that they will also participate in exiting, or
- They may join the exit lawsuit due to just causes
All partners who exit or participate in exiting are treated equally, in proportion to their principal capital shares. Participation in exiting applies only in the case of exiting, not in the case of expulsion, as explicitly regulated under Article 639/4 of the TCC.
- Exiting in the Case of Company Mergers
TCC also provides another way for exiting a partnership in the general provisions concerning commercial companies. The possibility of exiting a partnership in the event of a company merger is envisaged in Article 141/1 of the TCC. According to this article, in the case of a merger, the partners of the merging companies may be granted the right to receive a severance payment equivalent to the real value of the shares in the acquiring company or the partnership rights to be acquired, thus exiting the partnership relationship.
