Exit from Partnership in Capital Companies

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Exit from Partnership in Capital Companies

In capital companies, the process of exiting the partnership is governed by Articles 638 and following of the Turkish Commercial Code (TCC). The relevant provisions provide guidelines for when a shareholder wishes to exit the company, under certain conditions and justifiable reasons.

Right to Exit and Justifiable Reasons

The company agreement may grant shareholders the right to exit the company, and this right may be subject to certain conditions. If a shareholder wants to leave the company, they can file a lawsuit to request the exit if there are justified reasons. The court, upon the shareholder’s request, may freeze some or all of their rights and obligations arising from the partnership during the course of the lawsuit, or take other protective measures.

The TCC does not provide an exhaustive list of justifiable reasons for exit, allowing the court to determine if a reason is justified based on the nature of the situation. For example, long periods without dividend distribution or systematic restrictions on a shareholder’s right to access company information may be deemed as valid reasons for exit.

Separation Fund and Payment Conditions

A shareholder who exits the partnership is entitled to demand a separation fund, which is proportional to the actual value of their capital share. However, if the company agreement regulates the exit right and specifies the payment method, the exit fund will be paid according to the terms outlined in the agreement.

Article 642 of the TCC governs the payment of the separation fund, stating the following conditions under which it becomes due upon the shareholder’s departure:

  1. If the company disposes of usable equity.
  2. If the shares of the departing shareholder are transferable.
  3. If the company has reduced its share capital in accordance with the relevant provisions.

Liabilities and Claims Related to Separation Fund

The unpaid portion of the departing shareholder’s separation fund constitutes a claim against the company, which is subordinate to the creditors’ claims. The separation fund becomes due once the equity amount is determined in the company’s annual report.