Dormancy Is Not an Exit Strategy: Company Liquidation in Turkey for Foreign Shareholders
I. Introduction
Foreign investors often establish companies in Turkey as part of a wider regional or group strategy: to hold assets, serve local customers, support production, or act as a regional hub. Over time, that strategy is bound to change. Market conditions, internal restructuring, currency volatility or the simply the cost of keeping a dormant entity alive can make it commercially unnecessary to maintain a Turkish company.
Under Turkish law, however, a company cannot simply be left dormatn and forgotten. Company liquidation in Turkey (“şirket tasfiyesi”) is a formal process governed by the Turkish Commercial Code, requiring the company’s existing activities to be brought to an orderly end, its creditors to be identified and paid, and any remaining assets to be distributed to shareholders before the company is removed from the trade registry. Until these steps are completed, the company continues to exist and can still generate tax, administrative or private-law liabilities.
For foreign shareholders of Turkish limited liability companies (limited şirket / Ltd. Şti.) and joint stock companies (anonim şirket / A.Ş.), a decision to exit the market necessitates a clear understanding of how liquidation works in practice. Knowing in advance how dissolution is decided, how the liquidation is conducted, what the liquidator is responsible for, and how tax and banking aspects are handled makes it much easier to close a Turkish company in a controlled and compliant way.
II. When Does Liquidation Become Necessary? Legal Framework for Company Liquidation in Turkey
2.1. Legal Basis: Turkish Commercial Code
Company liquidation in Turkey is regulated by the Turkish Commercial Code No. 6102 (“TCC”). The Code sets out the rules on dissolution and liquidation of joint stock companies and provides that these provisions also apply to limited liability companies, unless there is a specific rule for LLCs. In practice, the same basic liquidation regime governs both forms of company.
From a shareholder’s perspective, there are two steps to distinguish. First, shareholders may decide, as a matter of business strategy, that they wish to close the company and leave the Turkish market. That is a commercial choice. Second, once the company has been dissolved, whether by a voluntary decision of the shareholders or because a legal ground for dissolution has occurred, the TCC requires that the company goes through a formal liquidation process. In other words, the decision to liquidate is voluntary in a solvent company, but once that decision is taken, the legal steps of liquidation are not optional.
This distinction matters because a company that is simply left “dormant” without proper liquidation is not permitted by the Turkish law. It can remain on the records of the trade registry and the tax administration, continue to receive notices and be exposed to tax, administrative or private-law claims. Liquidation is the mechanism that ensures the company’s assets and liabilities are dealt with transparently, creditors are protected and the company is ultimately removed from the trade registry.
2.2. Commercial and Legal Triggers for Liquidation
For foreign shareholders, liquidation usually appears on the agenda for very practical reasons. A Turkish subsidiary may no longer fit into the group structure, a local business line may be discontinued, or the cost of keeping a small or dormant entity compliant (such as accounting, audits, filings, registered office and other overheads) may outweigh any benefit. In such cases, shareholders often prefer to bring the company’s life to a formal end, rather than carry it as an inactive vehicle for years.
Alongside these commercial considerations, the TCC also defines specific legal situations in which a company is regarded as dissolved. The articles of association may limit the company’s existence to a fixed term; if that term expires and is not extended, dissolution follows. In other cases, the company’s purpose may have been fulfilled or has become impossible to pursue, so that maintaining the company no longer serves a real function. There are also involuntary grounds, such as court-ordered dissolution where corporate bodies cannot function, or insolvency leading to bankruptcy proceedings, which trigger a different, more court-driven path.
2.3. Who Decides? Shareholders’ Resolution to Dissolve
For both A.Ş. and Ltd., a voluntary liquidation normally begins with a resolution by the shareholders. This resolution is adopted at a General Assembly meeting and records the decision to dissolve the company and place it into liquidation. It also appoints one or more liquidators (tasfiye memuru) and authorizes them to make the necessary applications before the trade registry and other authorities.
The TCC imposes qualified majority rules for fundamental decisions such as termination. In a limited liability company, a termination decision will generally require the approval of at least two-thirds of the votes represented at the meeting, provided that these votes correspond to at least the absolute majority of the share capital with voting rights, unless the articles of association provide otherwise. Joint stock companies may be subject to different quorums depending on their articles and the nature of the resolution, but in practice a termination decision is treated as a major corporate act and is not adopted by a simple bare majority of those present.
Before convening the meeting, foreign shareholders should therefore review the articles of association to confirm the applicable quorum and voting thresholds, and to identify any special provisions on liquidation, liquidator appointment or privileged shares. If the meeting is held without respecting these requirements, the resolution can be challenged, which may delay or even invalidate the liquidation.
III. Company Liquidation Process & Steps
Once the shareholders have decided to dissolve the company, the liquidation moves through a series of structured steps. For foreign shareholders, it is helpful to view this as a sequence: registration of the decision, appointment of the liquidator, financial “stock-taking”, protection of creditors, realization of assets, and finally distribution and deregistration.
3.1. Registration and “In Liquidation” Status
After the General Assembly adopts the dissolution and liquidation resolution, the first concrete step is to file this decision with the Trade Registry. The resolution, together with the required attachments, is submitted for registration. Once accepted, the decision is recorded in the registry and published in the Turkish Trade Registry Gazette.
From the date of registration, the company is officially regarded as “in liquidation”. The trade name must be used together with this expression on all documents, invoices and correspondence. This is not merely a formality. It serves as a public signal that the company has stopped its normal commercial activity and is now in the process of winding up. From this stage onwards, new transactions should be entered into only if they are genuinely necessary to complete ongoing work, protect the company’s assets or facilitate the liquidation.
3.2. Appointment and Registration of the Liquidator
The same General Assembly resolution that decides on dissolution will usually also appoint the liquidator. Under Article 536 of the Turkish Commercial Code, the liquidator may be a member of the existing management, a shareholder or an external professional. However, at least one liquidator authorized to represent the company must be a Turkish citizen domiciled in Turkey. If shareholders only appoint foreign-resident liquidators and no qualified local representative, the court or the trade registry may insist on the appointment of a compliant liquidator before the process can move ahead.
Once appointed, the liquidator’s identity and powers are registered with the Trade Registry. From that point, the liquidator acts as the legal representative of the company during liquidation, replacing the former directors for all matters relating to the winding-up. The liquidator will sign contracts to sell assets, correspond with creditors and authorities, appear before courts where necessary and manage the company’s bank accounts. For foreign shareholders, choosing the liquidator is therefore a critical decision: this person will be responsible for the entire process on the ground.
3.3. Taking Financial Stock and Notifying Creditors
The liquidator’s first substantive task is to establish a clear picture of the company’s financial position on the day liquidation begins. This involves preparing a detailed inventory of assets and liabilities and an opening liquidation balance sheet, which is submitted to the shareholders for approval. The inventory should capture bank accounts, receivables, movable and immovable property, intellectual property, shareholdings, loans, deposits, tax and social security liabilities, employee-related claims and any pending or threatened disputes. This opening balance sheet acts as the financial starting point for the liquidation.
At the same time, the liquidator must identify and notify creditors. Creditors whose details appear in the company’s records are contacted directly. In addition, the liquidator publishes three announcements in the Turkish Trade Registry Gazette at weekly intervals, inviting all creditors to declare their claims within a specified period. Creditors who respond have their claims reviewed and, if accepted, scheduled for payment. For known creditors who do not respond, the liquidator is required to set aside the amounts owed to them, typically by depositing funds in a designated bank account, so that their rights are preserved. Debts that are not yet due or that are in dispute must be covered by appropriate reserves or security until maturity or final resolution.
3.4. Converting Assets, Paying Debts and Closing the Company
Once the financial starting point is clear and creditors have been notified, the liquidator proceeds to realize the company’s assets and settle its debts. Receivables are collected, guarantees are enforced and assets are sold. Depending on the nature of the business, this may range from selling office equipment to disposing of real estate, industrial assets or intangible rights. The aim is to convert assets into cash in a manner that is commercially reasonable and defensible vis-à-vis both creditors and shareholders.
The cash generated is then used to pay the company’s obligations in the correct order of priority. This includes tax and social security liabilities, employee entitlements, bank loans, supplier debts and other contractual obligations. Ongoing contracts are wound down or terminated as required by the liquidation, and any resulting penalties or compensation payments are recorded in the liquidation accounts. By the end of this stage, the objective is that all debts have either been paid, secured or reserved for, and the company’s remaining value is held in liquid form.
Turkish law also imposes a waiting period from the date of the third creditor announcement before any remaining funds can be distributed to shareholders. After this period has passed, and provided no new claims have emerged that materially change the situation, the liquidator prepares a final liquidation balance sheet.
In the final step, the liquidator applies to the Trade Registry to delete the company from the register. The deletion is published in the Trade Registry Gazette and the company’s legal personality comes to an end. The liquidator arranges for the company’s books and records, including those relating to the liquidation, to be kept in safe custody for the statutory retention period. For foreign shareholders, this final publication is the formal confirmation that the Turkish entity has been properly wound up and closed.
IV. Conclusion
For foreign shareholders, closing a company in Turkey is less about a single decision and more about following a defined sequence of legal and practical steps. Once the decision to dissolve has been taken, the Turkish Commercial Code sets the framework: the resolution is registered, the company enters “in liquidation” status, a liquidator is appointed, creditors are notified and protected, assets are realized, debts are settled and, only then, remaining value can be returned to the shareholders before the company is removed from the trade registry.
For foreign investors, the practical implications are clear. A Turkish company cannot simply be left dormant without risk. It continues to exist in the eyes of authorities and courts, and may accumulate tax, administrative or private-law liabilities long after business operations have ceased. A structured liquidation, by contrast, allows shareholders to draw a line under their Turkish presence: assets and liabilities are identified and resolved in an organized way, and the company is formally deleted from the register.
Because liquidation touches not only corporate law but also tax, social security and banking practice, it is usually helpful to approach it as a project rather than a formality. Early preparation of financial information, timely appointment of a qualified liquidator and careful attention to procedural details all contribute to a smooth and predictable exit from the Turkish market.
