Economic difficulties and, in particular, the impact of the coronavirus pandemic on working hours and business volume across many sectors have increased interest in the question: how is a workplace closed? Commonly referred to as liquidation, this process requires attention to specific legal and administrative details.
What Is Workplace Closure / Liquidation?
In the private sector, operations do not always go as planned. Drops in business volume, economic strain, or extraordinary events such as pandemics can lead to the decision to close a business. Workplace closure, legally referred to as liquidation, is the formal process by which a company terminates its commercial activities. Individuals and legal entities subject to income tax or corporate tax must follow particular procedures and satisfy specific obligations during this process.
Once the statutory procedures have been completed, the persons or entities undergoing liquidation must terminate their registrations with the relevant public institutions. This typically includes the trade registry office, the applicable tax offices, and the Social Security Institution, among others. When these records are removed, the workplace closure or liquidation process is considered complete. The closure process for sole proprietorships is generally straightforward. Limited liability companies and joint-stock companies are closed by resolution of their partners or shareholders. Company closures may be carried out in two main ways: liquidation with formal winding-up procedures (tasfiyeli) or closure without formal liquidation (tasfiyesiz).
How Is Liquidation (Tasfiyeli) Company Closure Done?
For a liquidation-based company closure, the first step is to notify the relevant trade registry office and tax authorities. Documents declaring the cessation of trade, initiation of liquidation, and dissolution must be submitted to the trade registry. In addition, an inventory listing all creditors and claims should be filed with the registry. After these notifications are made, the competent institutions review and approve the submission. Following approval, the company’s liquidation notice is published in the Trade Registry Gazette. The date the liquidation is registered in the trade registry becomes the official start date of liquidation.
Throughout the liquidation period, the company retains its legal personality until all transactions are completed and the official records are removed. During this phase, company officials are limited to performing only tasks related to the completion of liquidation. The company name is usually amended to include an indication that it is under liquidation.
A liquidation officer is appointed to represent and manage the company during the process. The officer’s duties typically include selling company assets, preparing inventories, identifying debts owed to public and private creditors, organizing and safeguarding the company’s property, and carrying out other activities required to settle the company’s affairs.
How Is Closure Without Liquidation (Tasfiyesiz) Done?
Closure without formal liquidation is carried out through the courts. If valid legal grounds are presented, the court may order closure without a conventional liquidation process. Valid reasons commonly recognized by the courts include disputes among partners, an inability of the company to meet its debt obligations, or the absence of resources necessary to continue operations. When such grounds are submitted to a commercial court, a decision on closure without liquidation is often reached within approximately one year.
During this procedure, the courts examine the claims and, if they find sufficient justification, they issue a closure decision. Disputes among partners are among the most common grounds cited. Other accepted reasons include insolvency or lack of adequate capital to continue operations. All partners must provide evidence of their situations for the court to evaluate the validity of the claims. If the court concludes the reasons are justified, it will decide on the company’s dissolution. Following such a decision, outstanding debts are settled, fixtures and assets may be sold, and the company is formally closed.