1. INTRODUCTION
An incorporated company,
which is a commercial partnership possessing legal personality, acquires its
legal existence upon registration with the trade registry and loses such
existence upon deregistration. However, the company’s reaching this final stage
does not constitute a wholly uniform legal process; rather, it is subject to
different grounds of dissolution and distinct procedural regimes.
Pursuant to the Turkish
Commercial Code Nr. 6102 (“TCC”), the dissolution of incorporated companies is
addressed under two main categories: general grounds for dissolution and
specific grounds for dissolution. The general grounds are set out under Article
529 of the TCC, whereas the specific grounds are separately provided for in
Articles 530 and 531 of the TCC.
After a general overview
of the dissolution of incorporated companies, the absence of corporate organs
under Article 530 of the TCC and dissolution on justifiable grounds under
Article 531 of the TCC will be examined in detail in this article.
2. GENERAL GROUNDS FOR
DISSOLUTION OF INCORPORATED COMPANIES: AN OVERVIEW OF ARTICLE 529 OF THE TCC
The dissolution of incorporated
companies occurs through two main mechanisms: ipso facto dissolution (infisah)
and dissolution by decision (fesih). Ipso facto dissolution refers to
the automatic termination of the company upon the occurrence of a ground
stipulated by law or provided for in the articles of association, without the
need for any resolution or notice. Dissolution by decision, on the other hand,
refers to the dissolution of the company as a result of a decision by a
competent corporate body (the general assembly) or by a court; in a sense, it
constitutes the reverse of incorporation.
Article 529/1 of the TCC
sets out the general grounds for dissolution of incorporated companies in six
subparagraphs. These grounds are as follows:
a) Expiration of the term stipulated under
the articles of association, provided that the company has not continued its
operations in fact after the expiry so as to become a company of indefinite
duration;
b) Achievement of the corporate
purpose or the impossibility of its achievement;
c) Occurrence of any dissolution
event stipulated under the articles of association;
d) Resolution of the general assembly
duly adopted in accordance with Article 421(3) and (4) of the TCC;
e) Declaration of bankruptcy;
f) Other cases provided
for by law
It should be noted here that
it is also possible to include in the articles of association of an incorporated
company dissolution and termination grounds that are not expressly provided for
in the law or any other related applicable regulations. In such a case, it is
accepted that, upon the occurrence of one of the grounds stipulated under the
articles of association, the dissolution of the company may be requested from
the court. [1]
With regard to dissolution
by resolution of the general assembly, Article 421(3)–(4) of the TCC requires
the fulfilment of qualified quorums for a resolution on the dissolution of the
company to be validly adopted. Accordingly, the affirmative vote of
shareholders or their representatives representing at least seventy-five per
cent of the company’s capital is required. In the absence of such quorum, the
general assembly shall not be able to resolve upon the dissolution of the
company.
Some of the general
grounds for dissolution provided for in Article 529 of the TCC are of the
nature of ipso facto dissolution, directly and automatically bringing the legal
existence of the company to an end. In contrast, in cases such as the
occurrence of a dissolution event stipulated under the articles of association
or a resolution of dissolution adopted by the general assembly, an expression
of will by the competent corporate body or the court is required.
However, the dissolution
of incorporated companies is not limited to the general grounds set out under Article
529 of the TCC. The legislator has also provided for specific grounds of
dissolution in cases where the corporate structure becomes inoperable or the
shareholder relationship reaches an intolerable level. In this context,
dissolution due to the absence of corporate organs (Article 530 of the TCC) and
dissolution on justifiable grounds (Article 531 of the TCC) are of particular
significance under the scope of the law of incorporated companies.
3. DISSOLUTION OF
INCORPORATED COMPANIES DUE TO THE ABSENCE OF CORPORATE ORGANS UNDER ARTICLE 530
OF THE TCC
Article 530 of the TCC sets
out the first of the special grounds for dissolution of incorporated companies.
Pursuant to Article 530/1 of the TCC: “If one of the company’s mandatory
corporate organs has been absent for a considerable period of time or the
general assembly cannot convene, upon the request of shareholders, company
creditors, or the Ministry of Customs and Trade, the commercial court of first
instance at the company’s registered seat shall, after hearing the board of
directors, grant a time period for the company to bring its situation into
compliance with the law. If the situation is not remedied within this period,
the court shall order the dissolution of the company.”
Article 530 of the TCC
provides for a specific ground of dissolution aimed at addressing the legal
vacuum arising from the dysfunction of the corporate structure of an incorporated
company. As a consequence of their legal personality, incorporated companies
express their will through their corporate organs and carry out management,
representation, and decision-making functions via these organs. Accordingly,
the prolonged absence of statutorily required corporate organs, or their
inability to perform their duties, endangers the company’s ability to continue
its operations.
The legislator adopted
Article 530 of the TCC to prevent the indefinite continuation of situations
that render the company practically inoperative; thereby aiming either to
ensure that the company regains a legally compliant organizational structure
or, where this is not possible, to have it dissolved.
For Article 530 of the TCC
to be applicable, the missing organ must be the one that is mandatorily
required by law. Under
the Turkish Commercial Code Nr. 6102, the mandatory corporate organs of an incorporated
company are the general assembly and the board of directors.
When referring to the
absence of a corporate organ within the meaning of Article 530 of the TCC, the
first organ that comes to mind is the board of directors, which is responsible
for the management and representation of the company. As also stated under the
legislative reasoning of the provision, the absence of a required organ refers
to the actual non-existence of that organ. Accordingly, where the term of
office of the board of directors has expired but a new board has not been
elected, or where the board has become vacant due to the resignation of its
members and there is no possibility of filling the vacancies, the management
organ must be deemed to be absent.
It should, however, be
noted that the departure of a single board member from office, or the
conviction of only one member, does not constitute an absence of a corporate
organ within the meaning of Article 530 of the TCC, as such isolated
deficiencies do not render the board entirely inoperative. In such cases, the
law expects the board to fill the vacancy in accordance with Article 363 of the
TCC.
In contrast, the general
assembly is not a permanent organ but a decision-making body that convenes at
specific intervals; therefore, in its case, it is not a matter of “absence” but
rather of “inability to convene.” The inability of the general assembly to
convene refers to situations where the bodies authorized to call a meeting fail
to do so or do not act accordingly, where the quorum requirements prescribed by
law or the articles of association cannot be consistently satisfied, or where,
although the general assembly convenes, it is unable to adopt resolutions due
to a deadlock in decision-making quorums.
There is, however,
doctrinal debate as to whether a situation in which a corporate organ formally
exists but fails to function for various reasons should be regarded as an
absence of a corporate organ. In
cases where, due to conflicts of interest or disagreements among the members of
the corporate organs or shareholders, members vote in different directions or
refrain from attending meetings, and as a result the organ becomes unable to
adopt any resolutions—or is persistently unable to adopt resolutions on matters
of significant importance for the company’s operations due to valid quorum
requirements—such a situation is referred to in the doctrine as a “deadlock”.
[2]
A group of scholars in the
doctrine who argue that the absence of a corporate organ can only arise where
the organ is physically non-existent maintain that “absence” should be
understood strictly in its literal sense. According to this view, reductions in
the number of persons constituting the organ, conflicts of interest, the
company entering liquidation, or the difficulty and complexity of electing an
organ cannot be characterized as an absence of a corporate organ. By contrast,
scholars who adopt a broader interpretation of organ absence approach the issue
primarily through Article 530 of the TCC and argue that the expression “absence
of the company’s mandatory organs” under the provision should be understood to
mean both the failure to constitute such organs and their failure to function.
[3]
On the other hand, in a
single-shareholder incorporated company, resolutions are adopted in accordance
with the will of the sole shareholder; therefore, the occurrence of a deadlock
situation is, as a rule, not possible.
In addition to all these
considerations, for Article 530 of the TCC to be applicable, the absence of
a corporate organ or the inability of the general assembly to convene must have
persisted for a considerable period of time. The purpose of this
requirement is to prevent shareholders, creditors, or the Ministry of Trade
from immediately filing a dissolution action.
Neither the wording of the
provision nor the legislative reasoning thereof provides any guidance as to
what constitutes a “considerable period of time.” In this respect, the
legislative reasoning states that “in order to prevent abuses as to what
should be understood by continuity, and to allow flexibility depending on the
circumstances of the concrete case, discretion has been left to the judge”.
It should also be noted
that the absence of a corporate organ or the inability of the general assembly
to convene must not be temporary but must have a continuous (permanent)
character. The existence of a merely temporary situation, or a short-term deficiency,
will not satisfy the admissibility requirement for a dissolution action.
Pursuant to Article 530 of
the TCC, the right to bring an action is granted to shareholders, company
creditors, and the Ministry of Customs and Trade.
Before ordering the
dissolution of the company, the court is obliged to hear the board of directors
and grant a period of time for the company’s situation to be brought into
compliance with the law. If the deficiency is remedied within this period,
there will be no need for dissolution, and the case will become devoid of
essence. If, however, the deficiency is not remedied within the prescribed
period, the court shall order the dissolution of the company.
Pursuant to Article 530/II
of the TCC, upon the filing of an action, the court may, at the request of one
of the parties, take necessary interim measures. In this context, the
appointment of a trustee to the company is particularly envisaged. The trustee
temporarily represents the company’s capacity to act for the duration of the
organ deficiency. However, it should be noted that, especially in cases where
the board of directors is entirely absent, the obligation of the court to hear
the board cannot, in practice, be fulfilled; accordingly, it is accepted that
this requirement shall not apply in such situations.
Accordingly, Article 530
of the TCC constitutes a protective dissolution mechanism that intervenes in
serious and persistent structural defects in the corporate governance of an incorporated
company, aiming to prevent the company from becoming entirely inoperative. On
the one hand, the provision allows for the remedying of deficiencies in order
to ensure that the company can continue its operations as far as possible; on
the other hand, it proceeds from the assumption that, where such deficiencies
cannot be remedied, the continuation of the company’s legal existence would be
detrimental in terms of commercial life, thereby leading to dissolution as a
legal consequence.
On the other hand, the
specific grounds for the dissolution of incorporated companies are not limited
to the absence of corporate organs, but also include the possibility of
dissolution based on different circumstances, such as the relationship among
shareholders becoming intolerable. In this context, dissolution on justifiable
grounds set out under Article 531 of the TCC constitutes another significant
ground for dissolution, particularly in cases where the relationship of trust
between shareholders has been destroyed and it has become practically
impossible for the company to operate in accordance with its purpose.
4. DISSOLUTION OF
INCORPORATED COMPANIES ON JUSTIFIABLE GROUNDS UNDER ARTICLE 531 OF THE TCC
Pursuant to Article 531 of
the TCC: “In the presence of justifiable grounds, shareholders representing
at least one-tenth of the share capital, and in publicly held companies
one-twentieth, may request the commercial court of first instance at the
company’s registered seat to order the dissolution of the company. Instead of
ordering dissolution, the court may decide to expel the claimant shareholders
from the company by paying them the real value of their shares as of the date
closest to the decision, or may adopt any other appropriate and acceptable
solution in light of the circumstances.”
Article 531 of the TCC grants
shareholders meeting certain thresholds the right to request the court to
dissolve the company in the presence of justifiable grounds; however, it
neither defines nor exemplifies what constitutes such grounds. The
legislator made this choice deliberately, and the legislative reasoning of the
provision explicitly states that determining the content of this concept has
been left to judicial decisions and legal doctrine.
According to the generally
accepted definition in the doctrine, decisions, transactions, and conduct that
continuously, seriously, and materially infringe a shareholder’s rights or
interests, and that render continued participation in the company intolerable
for the shareholder in accordance with the principle of good faith, constitute
justifiable grounds. [4]
Within the framework of
the case law of the Court of Cassation, the grounds invoked for the justifiable
dissolution of an incorporated company may be grouped under several headings:
- Poor management of any incorporated company
(Decisions, dated 06.05.2015, bearing the Basis number 2014/18585 and
the Decision number 2015/6457, and dated 12.10.2015, bearing the Basis number 2015/6768
and the Decision number 2015/10302, and dated 03.03.2016, bearing the Basis
number 2015/9088 and the Decision number 2016/2352, and dated 30.05.2017,
bearing the Basis number 2016/4639 and the Decision number 2017/3180, of the 11th
Civil Chamber of the Court of Cassation);
- Irregularities in general assembly
meetings, such as the failure to hold meetings, the suspicious completion of
signatures despite the absence of actual attendance, and the failure to convene
the general assembly for an extraordinary meeting despite the company being de
facto insolvent and over-indebted, with the persistent non-application of the
relevant provisions of the law in this regard (Decisions, dated 16.03.2015, bearing
the Basis number 2015/2197, and the Decision number 2015/3596, and dated 11.06.2015,
bearing the Basis number 2015/2255 and the Decision number 2015/8166, and dated
23.12.2015, bearing the Basis number 2015/5994 and the Decision number 2015/13820,
and dated 03.03.2016, bearing the Basis number 2015/12197 and the Decision
number 2016/2357, and dated 11.10.2017, bearing the Basis number 2016/2552 and
the Decision number 2017/5272, and dated 22.11.2017, bearing the Basis number 2016/4245
and the Decision number 2017/6420, of the 11th Civil Chamber of the
Court of Cassation);
- The company’s deviation from its
corporate purpose by being directed towards individual interests, the failure
of the members of the board of directors to carry out activities aimed at
achieving the company’s objectives, and the sale of all facilities and
equipment used for the realization of the company’s purpose, rendering the
achievement of such purpose no longer possible (Decisions, dated 03.03.2016,
bearing the Basis number 2015/9088 and the Decision number 2016/2352, and
bearing the Basis number 2016/211 and the Decision number 2016/8872, and dated
11.10.2017, bearing the Basis number 2016/2552 and the Decision number 2017/5272,
of the 11th Civil Chamber of the Court of Cassation);
- The restriction of shareholders’
rights to obtain information and conduct examinations, including the failure to
provide information regarding the company’s financial situation despite
requests, the refusal to allow examination of the company’s income and
expenses, the failure to inform shareholders about the company’s management,
assets, and profit-loss situation, and the obstruction of shareholders’ rights
to supervision and access to information (Decisions, dated 10.02.2014, bearing
the Basis number 2013/12495 and the Decision number 2014/2202, and dated 06.05.2015,
bearing the Basis number 2014/18585 and the Decision number 2015/6457, and
dated 12.10.2015, bearing the Basis number 2015/6768 and the Decision number 2015/10302,
and dated 03.12.2015, bearing the Basis number 2015/4504 and the Decision
number 2015/12980, and dated 23.12.2015,
bearing the Basis number 2015/5994 and the Decision number 2015/13820, and
dated 28.01.2016, bearing the Basis number 2015/2939 and the Decision number 2016/937,
and dated 03.03.2016, bearing the Basis number 2015/12197 and the Decision
number 2016/2357, and dated 21.03.2016, bearing the Basis number 2015/8313 and
the Decision number 2016/3066, and bearing the Basis number 2016/211 and the
Decision number 2016/8872, and dated 11.10.2017, bearing the Basis number 2016/2552
and the Decision number 2017/5272, of the 11th Civil Chamber of the
Court of Cassation);
- The failure to distribute dividends
to shareholders for a prolonged period, the obstruction of shareholders’ right
to receive dividends, and the non-distribution of profits to shareholders
despite the company’s high profitability (Decisions, dated 11.06.2015,
bearing the Basis number 2015/2255 and the Decision number 2015/8166, and dated
03.12.2015, bearing the Basis number 2015/4504
and the Decision number 2015/12980, and dated 23.12.2015, bearing the Basis
number 2015/5994 and the Decision number 2015/13820, and dated 21.03.2016, bearing
the Basis number 2015/8313 and the Decision number 2016/3066, and dated 03.03.2016,
bearing the Basis number 2015/12197 and the Decision number 2016/2357, and
bearing the Basis number 2016/211 and the Decision number 2016/8872, of the 11th
Civil Chamber of the Court of Cassation)
- The breakdown of the relationship of
trust among shareholders, a shareholder’s default in paying outstanding capital
obligations, serious disputes among shareholders escalating to judicial
proceedings, and the complete deterioration of relations between the plaintiff
and the other shareholder siblings, which also affects the functioning of the
company as a family-owned business, resulting in an irreparable level of
mistrust and conflict among shareholders (Decisions, dated 01.12.2015, bearing
the Basis number 2014/18024 and the Decision number 2015/12808, and dated 03.12.2015,
bearing the Basis number 2015/4504 and the Decision number 2015/12980, and
dated 23.12.2015, bearing the Basis
number 2015/5994 and the Decision number 2015/13820, and dated 11.10.2017, bearing
the Basis number 2016/2552 and the Decision number 2017/5272, of the 11th
Civil Chamber of the Court of Cassation) [5]
Pursuant to Article 531 of
the TCC, shareholders representing at least one-tenth of the share capital, and
in publicly held companies one-twentieth, may request the court to order the
dissolution of the company. The
prevailing view in the doctrine is that this quorum is mandatory in nature;
therefore, it cannot be either reduced or increased by the articles of
association.
The fact that the right of
action under Article 531 of the TCC is granted exclusively to minority
shareholders clearly distinguishes this provision from Article 530 of the TCC;
whereas under Article 530, any shareholder, company creditor, and the Ministry
of Trade may bring an action without any shareholding threshold requirement.
The most distinctive
feature of the provision is that it grants the court broad discretion to adopt
alternative solutions appropriate to the circumstances, without being obliged
to order dissolution. Accordingly, even if the court finds the asserted
grounds to be justified, it is not required to order the dissolution of the
company. Instead of dissolution, the court may decide to expel the claimant
shareholders from the company by paying them the real value of their shares as
of the date closest to the decision, or it may adopt any other appropriate and
acceptable solution in light of the circumstances.
At this point, the
principle of dissolution as a last resort (ultima ratio) plays a
decisive role under Article 531 of the TCC. Accordingly, the mere existence of
justifiable grounds does not automatically lead to dissolution; the court must
first examine alternative solutions capable of eliminating the justifiable
grounds. Only where such solutions are unavailable or prove ineffective may the
court, as a last resort, order the dissolution of the company. This approach is
of significant importance in terms of the principle of corporate continuity and
also serves procedural economy.
5. CONCLUSION
The dissolution of incorporated
companies constitutes one of the most complex and multi-dimensional issues of
Turkish commercial law. The Turkish Commercial Code Nr. 6102 adopts a
systematic distinction between general and specific grounds for dissolution in
this area, and further sets out specific grounds for dissolution under two
separate institutions: dissolution due to the absence of corporate organs and
dissolution on justifiable grounds.
Article 530 of the TCC,
concerning the absence of corporate organs, applies in cases where one of the
company’s statutorily required organs has been absent for a long period or
where the general assembly cannot convene. This provision aims either to ensure
the continuity of the company in situations where it is effectively suffering a
legal paralysis or to bring this process to an orderly conclusion through
liquidation. The court must first grant the company a period to remedy its
situation; only if the deficiency is not remedied within this period may it
order dissolution. The fact that the concept of a “long period” is left
undefined in the statute allows the judge to assess the circumstances of the concrete
case, but in practice it may also give rise to difficulties. For this reason,
it is of great importance that courts develop consistent case law by referring
to the criteria established in doctrine and judicial decisions.
Article 531 of the TCC,
governing dissolution on justifiable grounds, is a distinctive provision
introduced into Turkish law by the Turkish Commercial Code Nr. 6102, filling a
significant gap that was deeply felt under the former Commercial Code. This
provision grants minority shareholders meeting a specified threshold the right
to request the court to dissolve the company, while also conferring broad
discretion on the court to adopt alternative remedies instead of ordering
dissolution. The fact that the concept of “justifiable grounds” is neither
defined nor exemplified in the statute necessitates that its content be
concretized through judicial decisions and legal doctrine. An examination of
the case law of the Court of Cassation shows that situations such as the abuse
of majority power, deviation from the corporate purpose, and the breakdown of
the relationship of trust may be recognized as justifiable grounds.
In both mechanisms, the
court occupies a central role in the process, and dissolution is in any event
adopted as a last resort. This approach reflects a perspective that views the incorporated
company not merely as a contractual relationship between shareholders, but as
an organizational form that contributes to the broader economic order and whose
functionality should be preserved. However, it should also be noted that,
particularly with regard to the concept of justifiable grounds, both case law
and doctrine are still in the process of formation. For this reason, it is
considered that a broader body of judicial practice under Article 531 of the
TCC will continue to shape its application, offering a rich field of study for
both practitioners and academics.
Att. Ezgi Karpınar
References:
1. Bilge, M.E.:
"Anonim Şirketin Sona Ermesi ve Tasfiyesi (Dissolution and Winding-Up
of Incorporated Companies)", Journal of the Faculty of Law, Erzincan University,
V. XVI, Issue: 3-4, 2012, p. 273.
2. Burak Keçecioğlu, “Yargıtay
Kararları Işığında Anonim Şirketin Organ Yokluğu Sebebiyle Feshi Davasında
Şirkete Tesis Edilen Yönetim Kayyımlığına İlişkin Yargılamanın Medeni Yargı
Kapsamında Değerlendirilmesi (An Evaluation within the Scope of Civil
Procedure of the Appointment of a Management Trustee in Proceedings for the
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in Light of the Case Law of the Court of Cassation)”, Journal of the
Faculty of Law, Kırklareli University, V.1, Issue: 2, December 2023, p.387.
3. Keçecioğlu, op. cit., pp.
387–388.
4. Şahin, p. 110.
5. Cengiz Erten, “Anonim Şirketlerde Haklı
Sebeplerle Fesih Hakkının Yargıtay İçtihatları Çerçevesinde Değerlendirilmesi (An
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