Closing a Turkish Company: Local Liquidator Requirement for Foreign Shareholders
I. Introduction
Foreign shareholders closing a Turkish company usually face three separate questions: how to run the legal liquidation, how the exit will be taxed, and who will actually carry out the process on the ground (the local liquidator requirement). The first of these, the step-by-step mechanics of dissolution and liquidation under the Turkish Commercial Code, is addressed in our guide on company liquidation in Turkey for foreign shareholders (https://www.asylegal.com/company-liquidation-in-turkey-foreign-shareholder/). The second, how corporate tax, withholding tax and liquidation surplus are treated, is examined in our analysis of the tax consequences of closing a Turkish company (https://www.asylegal.com/tax-consequences-of-closing-a-turkish-company/).
A third element is just as decisive in practice: the liquidator. In Turkish company liquidation, the liquidator steps into the shoes of management and becomes the legal representative of the company throughout the wind-down. Turkish law goes further and requires that at least one liquidator with representation authority is a Turkish citizen resident in Turkey. For foreign controlled companies, especially those whose boards consist entirely of non-resident directors, this means that the company cannot be closed from abroad alone. The appointment of a suitable liquidator in Turkish company liquidation becomes a central strategic decision, shaping how smoothly the exit will proceed and how authorities and banks will interact with the company in its final phase.
II. Legal Framework: Why a Local Liquidator Is Mandatory in Turkish Company Liquidation
2.1. Liquidation Must Be Carried Out by Liquidators or the Board
Under the Turkish Commercial Code (“TCC”), a company cannot simply “stop operating” and vanish. Once a dissolution ground exists, typically through a shareholders’ resolution in a solvent company, the company must enter liquidation, and someone must be formally responsible for conducting that liquidation.
Article 536 of the TCC provides that liquidators may be appointed either in the articles of association or by a shareholders’ resolution. If no separate liquidator is appointed in this way, the board of directors in a joint stock company, or the managers in a limited liability company, automatically act as liquidators by law. Through the reference in Article 643 TCC, these rules apply to both JSC and LTD structures.
In other words, Turkish law does not allow a company in liquidation to be left without a responsible person. Either expressly appointed liquidators or, by default, the existing board or managers act as the liquidator, and from that point they are expected to finalize the wind-down.
2.2. The Local Liquidator Rule: Turkish Citizen and Resident
The same provision that allows the board or managers to act as liquidators also introduces a crucial condition. Article 536 states that at least one of the liquidators who has authority to represent the company must be a Turkish citizen who is also resident in Turkey.
This requirement is not limited to foreign-owned companies, nor can it be waived in the articles. It is a mandatory rule for all capital companies in liquidation. Regardless of who the shareholders are, the group of people registered as “liquidator with representation authority” must include at least one Turkish citizen resident in Turkey.
In practice, this rule is enforced at a very practical level. The relevant trade registry examines who is being registered as liquidator when the company files the “entry into liquidation” resolution, and if none of those persons meets the nationality and domicile test, the registry will not complete the registration until a compliant liquidator is added.
2.3. Foreign-Only Boards: Why They Cannot Run Liquidation Alone
The interaction between these rules is particularly important where a Turkish company is controlled entirely from abroad and its board or managers are all foreign nationals.
On paper, if shareholders do nothing, Article 536/1 would make that foreign board the liquidator by default. However, if none of those board members is a Turkish citizen resident in Turkey, the requirement in Article 536/4 is not satisfied. Which consequently means that a foreign-only board cannot carry out liquidation on its own in a way that complies with the TCC.
In such a case, the deficiency needs to be cured. This can be done in different ways: shareholders may appoint a separate Turkish liquidator with representation authority; they may restructure the board so that at least one Turkish citizen resident in Turkey remains in office during liquidation; or, if no step is taken, the commercial court at the company’s seat can appoint a qualified liquidator on request. In each scenario, the common denominator is that a locally present, locally accountable person must join the liquidation.
III. The Liquidator’s Role in Practice and Its Significance for Foreign Controlled Companies
3.1. Stepping into Management’s Shoes and Acting as Local Anchor
Once the dissolution decision has been registered and the liquidator in Turkish company liquidation has been recorded at the trade registry, the liquidator becomes the company’s legal representative for the duration of the wind-down. In this capacity, the liquidator replaces the board of directors or managers for all matters related to liquidation.
From that point onwards, it is the liquidator who signs applications to the trade registry and tax office, corresponds with creditors and counterparties, appears before courts and administrative authorities where necessary, and manages the company’s bank accounts. Filings, responses to official requests and applications for deregistration are all channeled through the liquidator.
3.2. Key Steps in the Liquidation Process
In practical terms, the liquidator’s work follows the logic of the liquidation itself. At the outset, the liquidator prepares an inventory of the company’s assets and liabilities and an opening liquidation balance sheet, which is presented to the shareholders for approval. This document sets the financial starting point of the liquidation and should reflect bank balances, receivables, movable and immovable property, loans, deposits, tax and social security liabilities, employee claims and pending disputes.
The liquidator then identifies and notifies creditors. Creditors listed in the company’s records are contacted directly, while unknown creditors are invited to file their claims through the required announcements in the Turkish Trade Registry Gazette. Accepted claims are scheduled for payment. For known creditors who do not respond, the liquidator must set aside the corresponding amounts so that their rights are preserved, and must reserve funds for debts that are not yet due or are disputed.
In parallel, the liquidator takes control of the company’s assets and converts them into cash by collecting receivables, enforcing guarantees and selling assets where appropriate. The proceeds are used to pay the company’s debts in the correct order of priority, including public-law obligations and employee entitlements. Once creditors have been protected and debts have been settled, the liquidator prepares the final liquidation balance sheet and report, submits them to the shareholders for approval and then applies for the company’s deletion from the trade registry.
3.3. Managing Risk and Selecting the Right Liquidator
The legal framework attaches responsibilities to this role. Under the Turkish Commercial Code, liquidators are expected to act with the care of a prudent manager and may be held liable if they breach their statutory or contractual duties and cause damage to the company, its shareholders or its creditors.
From a public-law perspective, the liquidator is responsible in practice for ensuring that tax returns, notifications and payments are made during the liquidation period and that public debts are not overlooked. If assets are distributed while corporate tax, VAT or social security liabilities remain unpaid, authorities may seek to enforce those obligations against the company and may, in certain circumstances, look to the liquidator in their capacity as legal representative.
For foreign controlled companies, these points make the choice of liquidator particularly important. The person appointed must satisfy the statutory requirement of being a Turkish citizen resident in Türkiye, but that alone is not sufficient. In many cases, shareholders prefer to appoint a professional such as a lawyer, certified public accountant or firm with experience in Turkish liquidations. Familiarity with corporate and tax procedures, the ability to communicate clearly in at least one common working language and a willingness to provide regular, structured updates are all relevant criteria.
IV. Conclusion
For foreign shareholders, the question of who will act as liquidator in Turkish company liquidation is not a secondary detail. The Turkish Commercial Code requires that every company in liquidation has a liquidator, and that at least one liquidator with representation authority is a Turkish citizen domiciled in Türkiye. In companies with purely foreign boards or managers, this requirement cannot be met without bringing a local liquidator into the structure.
Once appointed, the liquidator becomes the company’s representative for the wind-down, responsible for preparing inventories and balance sheets, notifying and paying creditors, realizing assets and ultimately securing the company’s removal from the trade registry. At the same time, the liquidator is the main interlocutor for the trade registry, tax office and banks, and carries legal responsibilities if these tasks are not performed with due care.
Therefore, appointing a suitable Turkish liquidator is a central part of planning the closure of a Turkish subsidiary. If considered early and structured carefully, this appointment can provide the stability and local presence needed to bring the company’s affairs to an orderly end.
