1. INTRODUCTION
The termination of the legal existence of limited liability companies
under the Turkish Commercial Code Nr. 6102 (“TCC”) consists of a two-stage
structure: dissolution and liquidation. Upon the completion of the liquidation
process, the legal personality of the company ceases with the deregistration of
the trade name from the trade registry.
Dissolution refers to the elimination of the legal basis that enables
the company to continue its commercial activities as a result of the occurrence
of one of the grounds set forth under Article 636 of the TCC. As a consequence
of dissolution, the company enters into liquidation. Liquidation denotes the
process commencing with the occurrence of a ground for dissolution and ending
with the deregistration of the capital company from the trade registry and the
consequent termination of its legal personality. It should be emphasized that
the company does not lose its legal personality at the moment of dissolution.
During the liquidation process, the company continues to exist under the
designation “in liquidation”; however, its field of activity becomes limited to
matters relating to liquidation. The legal existence of the company terminates
upon the deregistration from the trade registry, carried out pursuant to the
application filed by the liquidators following the completion of the
liquidation process. [1]
This article examines the dissolution and liquidation of limited
liability companies and, within this context, evaluates their differences from incorporated
companies.
2. DISSOLUTION OF LIMITED LIABILITY COMPANIES
In legal doctrine, the dissolution of a company is defined as a change
of purpose. Accordingly, upon dissolution, the active purpose of generating and
sharing profit through joint effort transforms into the passive purpose of
liquidating the company’s assets. [2]
Article 636 of the
TCC sets forth the grounds for the dissolution of a limited liability company.
Accordingly, a limited liability company shall be dissolved in the following
circumstances:
(i) the occurrence
of a ground for dissolution, as stipulated under the articles of association;
(ii) a resolution
of the shareholders’ general assembly;
(iii) the opening
of bankruptcy proceedings;
(iv) other cases
prescribed by law; and
(v) a court decision.
Among these circumstances, the occurrence of a dissolution event
stipulated under the articles of association, bankruptcy, and other statutory
grounds are characterized as ipso facto dissolution, whereas a resolution of
the shareholders’ general assembly and a court decision are classified as dissolution.
2.1. Events of Ipso Facto Dissolution
Grounds for ipso facto dissolution arise either from the articles of
association or from statutory provisions. In limited liability companies,
shareholders may stipulate certain events under the articles of association as
grounds for dissolution. Upon the occurrence of a contractual ground for
dissolution, the company is automatically dissolved. The most significant
statutory ground is the opening of bankruptcy proceedings. Pursuant to Article
165 of the Debt Enforcement and Bankruptcy Law Nr. 2004, bankruptcy is opened
upon the issuance of a bankruptcy order. In the event of the opening of
bankruptcy, the company is dissolved and enters liquidation. In such cases, the
liquidation process is conducted in accordance with the provisions of the Debt Enforcement
and Bankruptcy Law.
2.2. Events of Dissolution
(i) Resolution of the Shareholders’ General Assembly: Pursuant
to Article 616 of the TCC, the resolution to dissolve the company falls within
the non-assignable powers of the general assembly of a limited liability
company. In addition, under Article 621 of the TCC, a resolution on the
dissolution of a limited liability company requires the concurrent presence of
at least two-thirds of the votes represented and the absolute majority of the
entire share capital carrying voting rights. Where these requirements are
satisfied, the general assembly of the limited liability company may adopt a
resolution to dissolve the company. Upon such resolution, the company is
dissolved.
(ii) Court Order:
- Article 636/2 of the TCC sets out dissolution on the grounds of
organ deficiency. It provides as follows: “Where one of the company’s
mandatory organs has not existed for a long period of time, or where the
general assembly cannot convene, the commercial court of first instance at the
company’s registered office, upon request of a shareholder or a company creditor,
shall hear the managers and grant the company a period to bring its situation
into compliance with the law. If the deficiency is not remedied within the
prescribed period, the court shall order the dissolution of the company.”
Accordingly, where the company’s mandatory corporate organs are absent
or unable to convene, a shareholder or a creditor may bring an action for the
dissolution of the company.
- Article 636/3 of the TCC sets out dissolution on just cause. It
provides as follows: “In the presence of just cause, any shareholder may
request the dissolution of the company from the court. Instead of ordering
dissolution, the court may decide to pay the claimant shareholder the real
value of their share and expel the shareholder from the company, or it may
adopt another appropriate and acceptable solution depending on the
circumstances.”
Accordingly, each shareholder may request the dissolution of the company
in the presence of just cause. The concept of “just cause” has been explained under
the decision, bearing the Basis number 2019/795, the Decision number
2022/374 and dated 24.03.2022, of the General Assembly of Civil Chambers of the
Court of Cassation as follows:
“Pursuant to to the aforementioned provision, each shareholder may
request the dissolution of the limited liability company in the presence of
just cause. The determination of what constitutes “just cause” is left to
the discretion of the court in light of the specific circumstances of the case
and the nature of the allegations raised. In essence, a situation in which the
corporate relationship has been irreparably damaged to such an extent that it
can no longer be maintained on the basis of good faith constitutes a just cause
for the dissolution of a limited liability company. In other words,
circumstances leading to the loss of trust within the partnership or rendering
the continuation of the company unbearable for the shareholders in accordance
with the principle of good faith may be regarded as just causes for
dissolution. Indeed, no shareholder can be expected, in line with the principle
of good faith, to continue a corporate relationship that has become intolerable
for them. The concept of just cause is inherently flexible and may encompass
different meanings depending on the particularities of each individual case.” [3]
2.3. Consequences of the Dissolution of a Limited Liability Company
In the event that the company is dissolved by a court decision, the
dissolution is registered with and published by the trade registry upon the
court’s order. Where the company is dissolved for any other reason, the duty to
register and announce the dissolution rests with the managers of the limited
liability company. Except for exceptional cases, a dissolved company enters
into liquidation. Pursuant to Article 533 of the TCC, by reference to Article 643
of the TCC, it is mandatory for the company’s trade name to include the phrase
“in liquidation” once it enters liquidation status.
3. LIQUIDATION OF LIMITED LIABILITY COMPANIES (LIQUIDATORS, LIQUIDATION
PROCESS, AND TERMINATION OF LIQUIDATION)
Liquidation is the entirety of the processes involving the completion of
the company’s ongoing affairs, the conversion of its assets into cash, the
collection of receivables, the payment of debts, and the distribution of any
remaining value to the shareholders. The ultimate purpose of liquidation is to
terminate the company’s proprietary relations and bring its legal existence to
an end through its deregistration from the trade registry. As a result, upon
dissolution, the purpose of liquidation replaces the company’s corporate
objective, and the company’s activities are carried out solely for the purpose
of liquidation. [4]
In the liquidation of a limited liability company, Article 643 of the TCC
refers to the provisions governing the liquidation of incorporated companies.
Accordingly, the provisions applicable to incorporated companies regarding the
liquidation procedure and the powers of corporate organs during liquidation are
also applied to limited liability companies.
3.1 Liquidators
As a rule, liquidation is carried out by the liquidators. A liquidator
is the person who performs the representation and management functions of the
company during the liquidation period. In the external relations of a company
in liquidation, representation is exercised through the liquidators, and the
powers of the corporate organs are limited to the purposes of liquidation. Pursuant
to Article 535 of the TCC, “Upon the company entering into liquidation, the
duties and powers of the organs are restricted to those transactions that are
necessary for the conduct of the liquidation and, by their nature, cannot be
performed by the liquidators.”
There are two main methods for the appointment of liquidators:
(i) Appointment of liquidators by general assembly resolution:
A liquidator may be appointed by the articles of association or by a resolution
of the shareholders’ general assembly of the limited liability company. Where
no liquidator is appointed by the articles of association or the general
assembly, liquidation is carried out by the manager or the board of managers of
the limited liability company pursuant to Article 536 of the TCC.
(ii) Appointment of liquidators by court decision: Where the
dissolution of the company is effected by a court decision, it is expressly set
out under Article 536/3 of the TCC that the liquidator shall be appointed by
the court.
The duties of the liquidator are to conduct the liquidation process
while preserving the company’s assets. In this context, the liquidator is
required to take over the company’s books and records, prepare an inventory and
balance sheet, collect the company’s receivables, pay its debts, sell company
assets where necessary, and follow up the deregistration process upon
completion of the liquidation.
Under the decision, bearing the Basis number 2022/83, the Decision
number 2023/2102 and dated 28.03.2023, of the 12th Civil Chamber of
the Court of Cassation, the duties of the liquidator and the liquidation
process are summarized as follows:
“In summary, the liquidation process under the provisions of the aforementioned
law may be described as follows: the liquidators shall identify all assets and
liabilities of the dissolved company, and after obtaining approval for the
relevant balance sheet, collect the company’s receivables, convert the existing
assets into cash by selling them, and subsequently pay the company’s debts to
its creditors. If any surplus remains, it shall be distributed to the
shareholders in proportion to their shareholding structure, as set out under the
articles of association. Thereafter, together with the relevant balance sheet,
the liquidators shall apply to the trade registry office by submitting a
petition in order to complete the deregistration process, thereby effecting the
company’s deregistration from the registry. During liquidation, since all
assets of the company are converted into cash, the company’s debts are settled
therefrom, and any remaining amount is distributed to the shareholders, as
reflected in the balance sheet, and no remaining assets exist, there would
consequently be no obligation to submit a declaration of assets.” [5]
3.2. Liquidation Activities
The liquidation process constitutes a period of activity that is
“limited to liquidation purposes” commencing as of the moment the company is
dissolved. The liquidation activities are set out under Articles 540 et seq. of
the TCC:
(i) Initial inventory and balance sheet: Upon assuming
office, the liquidators shall promptly prepare an inventory and a balance sheet
reflecting the company’s assets and financial position at the commencement of
liquidation, and such documents are submitted to the shareholders’ general
assembly for approval (Article 540 of the TCC).
(ii) Call and protection of creditors: Persons who are
identified as creditors based on the company’s books and records are notified
that the company has been dissolved through three announcements made at
one-week intervals. These announcements are published in the Trade Registry
Gazette, on the company’s website, and via any publication method, as
stipulated under the articles of association. Creditors are thereby invited to
notify their claims to the liquidators (Article 541 of the TCC).
(iii) Collection of receivables and conversion of assets
into cash: The liquidator shall take the necessary actions for the
collection of the company’s receivables and shall convert the assets included
in the company’s estate into cash in accordance with the purpose of
liquidation.
(iv) Payment of debts and taking necessary measures:
Liquidation is primarily based on the protection of creditors. For this reason,
as a rule, distribution to shareholders is not possible before the company’s
debts have been paid. Where it is established that the company’s assets are
sufficient to cover its liabilities, undisputed and due claims, as well as the
claims of creditors who apply following the announcement period and prove their
receivables, shall be paid. Debts that are not yet due shall be immediately
settled by way of discounting, pursuant to Article 542/1-h of the TCC, based on
the interest rate applied by the Central Bank of the Republic of Türkiye for
short-term loans. In addition, the amounts corresponding to the claims of
creditors known to the company but who fail to notify their claims shall be
deposited with a bank designated by the Ministry of Trade. With respect to
debts that are not yet due or are disputed, security shall be provided by
depositing an amount sufficient to cover such liabilities with a notary,
thereby ensuring the necessary protection. [1]
(v) Distribution of the remaining assets to shareholders: After
the debts of the company in liquidation have been paid and the share capital
contributions have been returned, any remaining assets of the company in
liquidation shall, unless otherwise provided under the articles of association,
be distributed among the shareholders in proportion to their paid-in capital
contributions and preferential rights. However, no distribution may be made
before the expiry of the three-month period prescribed by law, commencing as of
the third announcement inviting creditors (Article 543 of the TCC).
3.3. Termination of Liquidation
The completion of liquidation does not, in itself, automatically
terminate the legal personality of the company. For the legal personality to be
extinguished, the company must be deregistered from the trade registry.
According to the approach of the Court of Cassation, the completion of
liquidation and the registration of deregistration are distinct processes, and
the termination of the company’s legal personality is contingent upon the
registration of its deregistration.
Decision, bearing the Basis number 2024/344, the Decision number 2025/504
and dated 10.09.2025, of the General Assembly of Civil Chambers of the Court of
Cassation reads as follows;
“29. Pursuant to Article 533 of the Turkish Commercial Code, a dissolved
incorporated company enters into liquidation. A company in liquidation retains
its legal personality until the completion of the liquidation process,
including its relations with shareholders, and continues to operate under its
trade name with the phrase “in liquidation” added. Liquidation refers to the
process of converting the company’s assets into cash, collecting receivables,
paying debts, and, if any surplus remains, distributing it to the shareholders
as a rule. Liquidation is deemed completed upon the final settlement of these
operations. Since the completion of
liquidation operations is necessary, the legal personality and legal capacity
of the dissolved company continue to exist during the liquidation process. However,
although the completion of liquidation is a necessary condition for the
extinction of the legal personality of an incorporated or limited liability
company established upon registration with the trade registry, it is not
sufficient in itself. In other words, pursuant to Article 545/1 of the TCC, for
the termination of the legal personality of an incorporated company, after the
completion of liquidation, the liquidators must apply for the deregistration of
the company’s trade name from the trade registry in order to eliminate its
formal existence, and this request must be accepted and the deregistration must
be registered. With the deregistration of the company’s trade name from the
trade registry, the legal personality of the incorporated or limited liability
company comes to an end, and the company loses its legal existence and legal
capacity. (Ünal Tekinalp, Sermaye Ortaklıklarının Yeni Hukuku (The New
Law of Capital Companies), 4th ed., Istanbul, 2015, p. 192).
30. As can be seen, the dissolution of an incorporated company or
a limited liability company and the termination of its legal personality—namely
the complete extinction of its legal existence—are entirely distinct concepts.
A company that has been dissolved and entered into liquidation, and whose
liquidation procedures have been fully completed, cannot be regarded as having
lost its legal personality unless it is also deregistered from the trade
registry. In other words, in order to conclude that an incorporated company has
ceased to exist as a legal entity, both the full completion of the liquidation
process and the deregistration of the company from the trade registry must
occur cumulatively, as required for legal certainty and security.
(Asuman Yılmaz, Türk Ticaret Kanunu’na Göre Anonim ve Limited
Şirketlerde Ek Tasfiye (Supplementary
Liquidation in Incorporated and Limited Liability Companies under the Turkish
Commercial Code), Banking
and Commercial Law Journal, 2016, Vol. XXXII, Issue. 2, p. 154)” [6]
For this reason, one of the duties of the liquidators is, upon
completion of the liquidation process, to apply to the trade registry and
ensure the registration of the deregistration of the company’s trade name. The
legal personality of the company is terminated as a result of the full
completion of the liquidation proceedings and the company’s deregistration from
the trade registry.
4. DIFFERENCES BETWEEN LIMITED LIABILITY COMPANIES AND INCORPORATED
COMPANIES IN THE CONTEXT OF DISSOLUTION AND LIQUIDATION
The dissolution and liquidation regimes of limited liability companies
and incorporated companies exhibit a significant degree of similarity within
the systematic framework of the Turkish Commercial Code. The primary reason for
this is that the provisions governing the consequences of dissolution and the
liquidation procedure for limited liability companies explicitly refer to the
rules applicable to incorporated companies (Articles 636/5 and 643 of the TCC).
Despite this similarity, certain differences arise due to the distinct nature
of the two types of companies.
4.1. Differences in Actions for Dissolution on Just Cause
In a limited liability company, any shareholder may bring an action for
dissolution on just cause (Article 636/3 of the TCC). In contrast, in
incorporated companies, the right to file an action for dissolution on just
cause is granted only to shareholders meeting the statutory shareholding
thresholds (Article 531 of the TCC). This distinction is consistent with the
more “person-oriented” structure of limited liability companies and the fact
that the corporate relationship is based on closer and more personal ties among
shareholders.
4.2. Differences in Terms of Corporate Organs
In limited liability companies, the personal relationship among
shareholders may have a more direct influence on corporate management and
decision-making mechanisms. For this reason, “deadlock” situations—such as the
inability of the shareholders’ general assembly to convene, disputes regarding
the appointment of managers, or the de facto paralysis of management and
representation—are more frequently regarded as grounds for dissolution in
limited liability companies.
4.3. Similarity in the Liquidation Regime
In the liquidation of a limited liability company, Article 643 of the TCC
refers to the liquidation provisions applicable to incorporated companies. For
this reason, there is no fundamental difference between the two types of
companies in terms of the technical aspects of the liquidation process, such as
the appointment of liquidators, the preparation of the inventory and balance
sheet, the calling of creditors, the payment of debts, and the distribution of
the liquidation surplus. Accordingly, the differences primarily arise at the
pre-liquidation stage, namely in relation to the grounds for dissolution and
the processes leading to dissolution.
5. CONCLUSION
The dissolution and liquidation of a limited liability company are
structured under the Turkish Commercial Code as a two-stage system following
one another. Upon dissolution, the company’s profit-oriented business purpose
ceases to exist, and this is replaced by the purpose of liquidating its assets.
With dissolution, the company enters into liquidation; however, it does not
lose its legal personality at this stage. During liquidation, the company
continues to exist under the designation “in liquidation,” and the powers of
its organs are restricted to the purposes of liquidation. The complete
extinction of legal personality occurs only upon the registration of the
company’s deregistration from the trade registry following the completion of
liquidation. The Court of Cassation also considers the registration of
deregistration as a mandatory condition for the termination of legal
personality.
During the liquidation process, the liquidators prepare the initial
inventory and balance sheet of the company, call upon creditors, collect
receivables, convert the company’s assets into cash, pay its debts, and, if any
surplus remains, distribute it to the shareholders. Upon completion of this
process, an application is made to the trade registry for the deregistration of
the company’s trade name, thereby bringing the company’s legal personality to
an end.
Finally, although there is a general similarity between limited
liability companies and incorporated companies in terms of the liquidation
regime, significant differences arise particularly with respect to the grounds
for dissolution and termination. Indeed, the fact that any shareholder in a
limited liability company may file an action for dissolution on just cause
indicates that personal elements of the corporate relationship are more
decisive in this type of company. By contrast, the requirement in incorporated
companies that the right to bring a dissolution action be subject to certain
shareholding thresholds is closely linked to their capital-oriented structure.
In addition, the more limited organ structure in limited liability companies
and the closer relationships among shareholders may, in practice, more
frequently give rise to managerial deadlocks and consequent dissolution claims.
Osman Serhat Demirci, Legal Intern
References:
1. Yavuz Mustafa, Customs and Trade Journal, Year 10,
Issue 31, March 2023, pp. 43–52.
2. Poroy
R., Tekinalp Ü. and Çamoğlu E. (2017), Poroy R., Tekinalp Ü., and Çamoğlu E.
(2017), Ortaklıklar Hukuku-II (Company Law-II), Istanbul: Vedat
Publishing.
3. Decision, bearing the Basis number 2019/795,
the Decision number 2022/374 and dated 24.03.2022, of the General Assembly of
Civil Chambers of the Court of Cassation
4. Altıntaş
Selçuk (2021), TTK’ya Göre Anonim Şirketlerin Tasfiyesi (Liquidation of
Incorporated Companies under the Turkish Commercial Code), Ankara, Seçkin Publishing.
5. Decision, bearing the Basis number 2022/83, the
Decision number 2023/2102 and dated 28.03.2023, of the 12th Civil
Chamber of the Court of Cassation
6. Decision, bearing the Basis number 2024/344, the
Decision number 2025/504 and dated 10.09.2025, of the General Assembly of Civil
Chambers of the Court of Cassation
