Contact: Prof. Dr. H. Ercüment Erdem; Erdem & Erdem (Turkey)
Turkish Commercial Code No. 6102 (“TCC”) brought many innovations and formed many new entities. One of the innovations is the sole shareholding joint-stock and limited liability company. Pursuant to the Article 504 of the abrogated Turkish Commercial Code No. 6762 (“Former TCC”) a limited liability company cannot be formed by less than two, and more than fifty shareholders. The minimum limit of the number of the shareholders has been abandoned and incorporation of a sole shareholder limited liability company has become possible.
Expulsion from Limited Liability Companies Incorporated by Two Shareholders According to Former TCC
The limit of the number of shareholders in the Former TCC caused problems. For example, in limited liability companies incorporated by two shareholders, in case of a discrepancy, as the Former TCC didn't allow for a single-shareholder limited liability company the only remedy applicable was the dissolution of the company for just cause by the court. Thus, because of these conflicts among the shareholders, companies that had good dynamics and efficient commercial potential were faced with dissolution and were eliminated from business life. As sole-shareholding limited liability companies were not permitted, the Court of Cassation didn't allow the expulsion of a shareholder with just cause. The established opinion of the Court of Cassation was based on the ground that the withdrawal or expulsion of a shareholder from a limited liability company incorporated by two shareholders was not possible, even in the presence of a just cause, since the company can't proceed with a sole shareholder after withdrawal or expulsion. Therefore the only remedy was to request dissolution of the company. Further to the Court of Cassation, as there is no article about the maintenance of sole shareholding limited companies in the Former TCC, Article 504/II indicates: "If the number of shareholders is down to one or one of the compulsory organs of the company can't be formed, unless these deficiencies can't be removed within an appropriate time, upon the request of an associate or a creditor of the company, the Court decides the dissolution of the company. Upon the request of a party, the Court takes necessary cautionary judgments." This Article was only applicable when the number of shareholders was down to one because of an obligatory reason such as the death of a shareholder within the regular term of the company or transfer of all shares to one shareholder. The Court of Cassation adopted the view that according to the Former TCC Article 551/II, the right of expulsion of a shareholder exists only for limited liability companies with more than two shareholders.
Within the frame of the established opinion of the Court of Cassation, which was based on the According to the Former TCC, courts used to decide for the dissolution of companies by just cause instead of the expulsion of a shareholder in case of discrepancies between the shareholders; this caused the interruption of commercial life and prevented the development of the companies.
