Liability for Public Debts
Shareholders are not personally liable for the debts of corporate company under Turkish Law. Shareholders’ liability is to contribute the capital amount that is subscribed during the establishment or by a capital increase resolution. In case the shareholder makes the payment of capital, the liability of a shareholder towards the company shall be deemed fulfilled. Provided, however, there are exceptions regarding public debts which hold the shareholders of a limited liability company liable for unpaid public debts such as tax and social security premiums of the company.
Pursuant to Article 35 of the Code on Collection Procedure of Public Debts numbered 6183 (the “Code”) with the title of “Debts of Limited Liability Company”, in a case where public debts cannot be collected or it is understood that it will not be possible to collect those from assets of the limited company, the shareholders of the limited company shall be liable for such amount in proportion to their capital contribution. Legal follow-up shall be initiated against shareholders according to the provisions of the Code.
Liability after Transfer of Shares
Liability of a shareholder does not end when the shares are transferred to a third person. The former shareholder shall remain liable jointly and severally together with the new shareholder for the debts arising before the transfer of the shares.
In case a shareholder transfers his shares after the public debt has arisen and before it has been payable, the former shareholder and the new shareholder shall be jointly and severally liable for such debt which became payable after share transfer.
Other than shareholders, legal representatives of the company shall also be liable for public debts. According to the additional Article 35, if public debts cannot be collected or it is understood that it will not be possible to collect from the assets of legal entities, they will be collected from the personal assets of legal representatives. It is also stated that such article shall apply to representatives of foreign companies or persons. The representatives shall be entitled to recourse the entity liable for such debts paid by the representative on its behalf.
For further information please contact nilufer.budak@budaklegal.com
