Company Liquidation in Turkey

This court-ordered dissolution applies when a company’s continued operation becomes legally impossible or non-compliant. The procedure is regulated by the Turkish Commercial Code (TTK): Article 636 for Limited Liability Companies (Ltd. Şti.) and Article 530 for Joint-Stock Companies (A.Ş).

The primary triggers for compulsory liquidation include:

• Insolvency and Capital Loss: Under Article 376 of the TTK, if a company loses two-thirds of its share capital and statutory reserves, or is deemed insolvent, management must take immediate action. Failure to do so subjects the entity to court-ordered dissolution.
• Dissolution for Just Cause: Pursuant to Article 531 of the TTK, shareholders holding at least 10% of equity in private companies (or 5% in public companies) may petition the court for dissolution based on severe grounds, such as a deadlocked corporate conflict.
• Administrative or Judicial Decision: Liquidation is initiated by the court or the Ministry of Trade of Turkey (Ticaret Bakanlığı) due to gross statutory violations, activities breaching public order, or the prolonged absence of mandatory corporate management bodies.

This regime applies when a company is financially insolvent and unable to settle its outstanding liabilities. The procedure is regulated by the Execution and Bankruptcy Law No. 2004 (İcra ve İflas Kanunu).

Key characteristics of this regime include:

• It can be initiated either by the debtor (voluntary bankruptcy petition) or by creditors via formal execution proceedings.
• Asset management transfers entirely to a bankruptcy trustee (İflas İdaresi), who liquidates the company's property to repay creditors in a legally mandated order of priority.
• Upon the conclusion of bankruptcy proceedings and the settlement of remaining claims, the corporate entity is permanently deleted from the Trade Registry.

This represents the most common and managed method of closing a business. It is initiated entirely by the company's shareholders, provided the entity shows no structural signs of insolvency.

We will look at this more closely in this article.

Under the TTK, the resolution to commence voluntary liquidation for both Limited Liability Companies (Ltd. Şti.) and Joint-Stock Companies (A.Ş) must be passed by the General Meeting of Shareholders. The decision requires approval by a qualified majority specified in the articles of association and the TTK (typically two-thirds of voting shares for an A.Ş and three-quarters of the share capital for a Ltd. Şti.).

The certified minutes of the general meeting must be submitted to the relevant Trade Registry Directorate within 15 days from the resolution date.

A liquidator (Tasfiye Memuru) must be officially appointed during the same general meeting to oversee the winding-up process.

Once the liquidation process is initiated and registered, the entity formally transitions to "under liquidation" (Tasfiye halinde) status. This designation must be appended to the company name on all corporate instruments and official documentation.

During this active phase, the liquidator's primary statutory obligation is the formal notification of all creditors:

• The liquidator must dispatch an official notice via registered mail to every known creditor, instructing them to submit their financial claims.
• Creditors must be publicly notified via three distinct announcements published in the Turkish Trade Registry Gazette (Türkiye Ticaret Sicili Gazetesi), with each publication separated by a mandatory 1-year (7-day) interval.

Concurrently, the liquidator must execute a comprehensive asset inventory and prepare an initial liquidation balance sheet. This financial statement must be formally approved at the first general meeting following the liquidation resolution to synchronize the company's financial status across all stakeholders.

Following the third and final public notification, a mandatory 3-month statutory waiting period commences. During this window, no corporate assets may be distributed to shareholders. The liquidator must systematically realize company property to settle all remaining creditor claims according to the priority rules established in the articles of association.

Before the final corporate dissolution, the liquidator must fully settle all employment-related liabilities based on statutory labor laws and existing commercial contracts. This compliance checklist encompasses:

• Final accrued wages and salaries
• Payment in lieu of notice (İhbar Tazminatı), if the company failed to provide advance notification of redundancies
• Severance pay (Kıdem Tazminatı), mandatory for personnel with a minimum tenure of 1 year, calculated based on total employment duration and gross pre-tax salary
• Unused accrued vacation pay
• Unpaid contract-stipulated bonuses

Upon executing employee redundancies, all applicable payroll taxes must be settled. The liquidator is legally required to submit an electronic termination notification (İşten Ayrılış Bildirgesi) to the Social Security Institution (SGK) within 10 days from the separation date, utilizing the specific statutory liquidation code.

Upon satisfying all corporate liabilities, the liquidator enters the final closure phase:

1. The liquidator prepares a final liquidation balance sheet, which must be formally approved by the board of directors or the General Meeting. This confirms that all creditor, employee, and tax debts have been cleared. Only after this approval can remaining net assets be distributed to shareholders proportional to their equity holdings.

2. The approved final balance sheet and statutory tax clearance certificates are submitted to the Trade Registry. If the registry raises no objections, the corporate registration is canceled, and the final dissolution is officially gazetted in the Türkiye Ticaret Sicili Gazetesi.

3. The last appointed liquidator bears personal statutory liability for archiving all corporate accounting books, records, and transaction documents for a mandatory holding period of 10 years. The physical storage location of these archives must be formally registered with the Trade Registry, as tax inspectors maintain audit and investigation retrieval rights throughout this entire decade.

Prior to the actual distribution of net residual assets to shareholders, the general meeting may vote to reverse the liquidation and resume active business operations. This reversal mandates a qualified voting quorum representing at least 60% of the total share capital. Such resolution must be registered and published by the liquidator.

Furthermore, if additional administrative or distribution procedures are discovered after the formal de-registration, the former liquidators, board members, shareholders, or creditors may petition the commercial court of first instance at the company's historical headquarters. If the court validates the claim, it holds the power to temporarily restore the company's registration and re-appoint liquidators to complete the outstanding tasks.

Upon initiating voluntary liquidation, the entire process is managed by a designated liquidator (Tasfiye Memuru). The General Meeting may appoint a board member, a shareholder, an independent external professional, or a specialized corporate service provider to fulfill this role.

A company may appoint multiple liquidators. However, the Turkish Commercial Code (TTK) mandates that at least one liquidator with individual signing authority must be a Turkish citizen and a permanent resident of Turkey. If the appointed liquidators fail to meet this nationality and residency requirement, any shareholder, creditor, or the Ministry of Trade may petition the commercial court to officially appoint a qualified resident liquidator.

The liquidator holds exclusive corporate authority to represent the entity in court, manage relations with state regulators, attend judicial hearings, and execute transactions. If multiple liquidators are appointed, certain representation powers or specific transactional tasks may be legally delegated to a third party or a corporate agent.

Under the TTK, the specific features of the liquidator’s operations include:

• The liquidator is prohibited from executing any new transactions or agreements that are unrelated to the winding-up process;
• If the liquidator discovers that the company’s total liabilities exceed its aggregate asset value, they are legally required to immediately notify the commercial court of first instance so that the court can initiate formal bankruptcy proceedings;
• If the winding-up process extends beyond a single fiscal year, the liquidator must compile and submit annual liquidation financial statements and reports to the board at the close of each calendar period;
• The liquidator is legally bound to act as a prudent, responsible, and honest manager, taking all necessary steps to safeguard corporate assets and conclude the liquidation within the shortest possible timeframe.