REASONS FOR TERMINATION OF LIMITED LIABILITY COMPANY

Firstly, it must be noted that a limited liability company (“LLC”) may terminate by way of dissolution and cancellation methods. Dissolution occurs on its own motion when causes of termination prescribed in law or in Articles of Association (“AoA”), without any prior resolution or notice needed, take place; while cancellation arises when officers authorized by law or AoA apply for termination of company due to causes set out therein. It must be said in this respect that neither dissolution nor cancellation affects the legal personality of the relevant company. As such, the company’s legal capacity of the legal personality may solely be restricted for the purpose of liquidation. That being so, the company which dissolves or which is awarded a decision for cancellation will enter into the process of liquidation. Therefore, any LLC that is in the process of liquidation shall have additional expression as “in the process of liquidation” added to its trade name. The reasons for the termination of LLC can be listed as follows:

1. Termination of LLC Due to Causes Prescribed in AoA

In addition to legal causes for termination pursuant to the Article 636 subparagraph (a) of Turkish Commercial Code numbered 6102 (“TCC”), LLC may terminate upon the resolution of shareholders assembly and opening of bankruptcy. That said, causes for termination may be set out in AoA provided that these causes are not in contradiction with the peremptory rules prescribed in TCC. For instance, the company may terminate for the reasons of expiration of shareholding period, achievement of business operation or non-possibility thereof, decease of a shareholder etc. if such circumstances have been provided in AoA and have realised. In such cases, due to causes that are not listed numerus clausus in TCC and/or AoA, LLC may terminate.

2. Termination of LLC Upon Resolution of General Assembly

It must be first noted that resolution on termination of a LLC, in other words, “on cancellation” may be adopted by general assembly of the LLC according to the Article 636 subparagraph (b) of TCC. This is because the Article 616 of TCC provides that the power for cancellation is listed among the non-transferrable powers of the shareholders assembly. Also, resolution of general assembly is deemed as shareholders assembly with regards to LLC. For the sake of legal validity of this method, the resolution of shareholders assembly must be adopted in compliance with the basis and procedures prescribed in TCC.

3. Termination of LLC Upon Opening of Bankruptcy

Another circumstance that terminates LLC is bankruptcy of the company. Under Turkish legislation, the fact that stock corporations have liabilities (debts) exceeding their assets constitutes specific ground for bankruptcy. In this regard, pursuant to the Article 636 subparagraph (c) of TCC, LLC terminates upon opening of bankruptcy. Termination in this way occurs in consideration of the date for opening of bankruptcy. 

4. Termination of LLC Due to Other Circumstances Provided for in TCC

LLC may terminate due to the reasons that are not listed under the Article 636, but due to other reasons provided for in TCC. For instance, following merger of companies and the registration of this merger, the assignee company terminates.

5. Termination of LLC Due to Specific Reasons

In the Article 636 of TCC, specific reasons that terminate LLC are set out as “lack of company’s organs” and “rightful cancellation”.

a. Lack of Company’s Organs

If, for a long time, the company lacks one of its necessary organs in accordance with the legislation or shareholding assembly has not been able to be held, at “the request for cancellation” of a shareholder or a creditor, commercial court of the first instance in the region where the company’s headquarter is located grants the company a delay for bringing the status quo compliance with the legislation. If, still, no positive improvement has taken place pursuant to the court’s decision and within the given period, the commercial court of the first instance rules on the cancellation of the company.  

b. Rightful Cancellation

According to TCC, the legislator furnishes shareholders of LLC with the power for rightful cancellation. It must be noted in this respect that any shareholder of the LLC will have right to sue for cancellation on rightful causes. However, no definition for “rightful cause” has been made nor any exemplary cases have been listed in the legislation. It has been rested on the case law and the doctrine to define what constitutes rightful cause. It must be highlighted that it is the court who have the authority to decisively determine whether asserted causes constitute rightful causes.