Exit Strategies: How to Liquidate or Close a Foreign-Owned Company in Turkey

Why Exit Planning Matters for Foreign Investors

Every successful investment has a lifecycle. Whether your Turkish subsidiary has fulfilled its purpose, market conditions have shifted, or a strategic pivot requires restructuring, understanding your exit options is as important as knowing how to enter.

Turkey’s commercial law framework - primarily governed by the Turkish Commercial Code No. 6102 (TCC) - provides several well-defined pathways for winding down or exiting a business. Navigating these correctly ensures you meet all legal obligations, protect your interests, and avoid penalties.

Exit Options at a Glance

Foreign investors in Turkey generally have four main exit routes:

1. Voluntary liquidation - formally dissolving the company
2. Share transfer - selling your shares to a third party
3. Merger or acquisition - combining with or being absorbed by another entity
4. Branch/liaison office closure - deregistering a non-incorporated presence

Each path carries different timelines, costs, and regulatory requirements. Let’s break them down.

1. Voluntary Liquidation (Tasfiye)

Voluntary liquidation is the most common exit method when there is no buyer and the company is simply being wound down.

Step-by-Step Process

Phase 1: Decision to Liquidate

• The general assembly (or board of directors for joint-stock companies) passes a resolution to dissolve the company
• For LLCs (Ltd. Şti.), a shareholders’ resolution with at least two-thirds majority is required
• For joint-stock companies (A.Ş.), the general assembly passes the dissolution resolution
• A liquidator is appointed - this can be a current director, shareholder, or an external professional

Phase 2: Notification and Registration

• The dissolution decision is registered with the Trade Registry (Ticaret Sicili)
• An announcement is published in the Trade Registry Gazette (Türkiye Ticaret Sicili Gazetesi) three times, calling on creditors to come forward
• Known creditors are notified directly via registered mail

Phase 3: Liquidation Period

• The statutory waiting period is one year from the date of the third Trade Registry Gazette announcement
• During this period, the liquidator collects receivables, settles debts, and converts assets to cash
• The company operates under its name with the suffix “in liquidation” (tasfiye halinde)
• Tax obligations continue during the liquidation period - the company must still file returns and pay applicable taxes

Phase 4: Final Steps

• After the one-year waiting period and once all debts are settled, the liquidator prepares a final balance sheet
• Remaining assets are distributed to shareholders
• The liquidator applies to the Trade Registry for cancellation (terkin)
• Tax office and social security institution (SGK) deregistration must be completed
• All company books and records must be preserved for 10 years after deregistration

Timeline

Expect the full process to take 14 to 18 months minimum, sometimes longer if there are disputed debts or ongoing litigation.

Key Costs

• Trade Registry fees and gazette announcements
• Liquidator fees (if external)
• Tax advisor and legal counsel fees
• Any outstanding tax or SGK liabilities

2. Share Transfer (Hisse Devri)

If the business is viable but you want to exit, selling your shares is often the fastest and most straightforward option.

For LLCs (Ltd. Şti.)

• Share transfers require a notarized share transfer agreement
• Approval by the shareholders’ assembly with at least two-thirds majority is needed (unless the articles of association state otherwise)
• The transfer must be registered with the Trade Registry

For Joint-Stock Companies (A.Ş.)

• Shares can generally be transferred freely unless the articles of association contain transfer restrictions
• For registered (nama yazılı) shares, an endorsement on the share certificate and registration in the share ledger is required
• Bearer shares were eliminated under the TCC amendments - all shares are now registered

Tax Implications

• Capital gains from share sales by non-resident investors may be subject to Turkish income or corporate tax
• Double taxation treaties (DTTs) between Turkey and the investor’s home country can significantly reduce or eliminate withholding taxes
• VAT does not apply to share transfers

Due Diligence Reminder

Buyers will conduct thorough due diligence. Ensure your company’s records - financial statements, tax filings, employment records, contracts - are clean and current before initiating a sale process.

3. Merger or Acquisition

Under the TCC, companies can exit through:

• Merger by absorption (devralma yoluyla birleşme): Your company is absorbed into another entity
• Merger by new formation (yeni kuruluş yoluyla birleşme): Both entities dissolve and form a new company
• Spin-off (bölünme): Partial transfer of assets and liabilities to another entity

These processes are governed by detailed TCC provisions and require:

• Merger/spin-off agreements approved by general assemblies
• Independent expert reports
• Trade Registry registration
• Creditor protection procedures

Mergers can be tax-efficient when structured properly under Turkey’s corporate restructuring tax exemptions.

4. Closing a Branch or Liaison Office

Foreign companies operating through branch or liaison offices have a simpler closure process compared to incorporated entities.

Branch Office Closure

• Decision by the parent company’s authorized body
• Appointment of a liquidator to wind down Turkish operations
• Settlement of all debts and obligations
• Cancellation from the Trade Registry
• Tax office and SGK deregistration

Liaison Office Closure

• Application to the Ministry of Industry and Technology
• Submission of the closure decision from the parent company
• Clearance from the tax office (even though liaison offices generally don’t pay corporate tax, they may have withholding tax obligations for employees)
• Cancellation from the relevant authorities

Tax Clearance: The Critical Checkpoint

Regardless of your exit route, obtaining tax clearance from the Turkish tax authority is essential. This involves:

• Filing all outstanding tax returns (corporate tax, VAT, withholding tax)
• Settling any tax debts, penalties, or interest
• Completing any ongoing tax audits or assessments
• The tax office will issue a clearance certificate once satisfied

Without tax clearance, Trade Registry cancellation will be blocked.

Employee Obligations

If the company has employees, the exit process must address:

• Severance pay (kıdem tazminatı): Employees with at least one year of service are entitled to severance pay upon liquidation
• Notice pay (ihbar tazminatı): Proper notice must be given or notice pay must be paid
• Unused annual leave: Must be compensated financially
• SGK deregistration: All employee and employer social security contributions must be current
• Work permits: If foreign employees hold work permits tied to the company, these will be cancelled upon closure

Failing to properly handle employee obligations can result in labour court claims and delay the liquidation process.

Regulatory and Sector-Specific Considerations

Some industries have additional exit requirements:

• Banking and finance: BRSA (BDDK) approval and depositor protection procedures
• Energy: EMRA (EPDK) license surrender and supply obligation transfers
• Telecommunications: ICTA (BTK) notification and customer migration
• Mining: Environmental rehabilitation and site closure obligations
• Healthcare: Patient record transfer and Ministry of Health notification

Practical Tips for a Smooth Exit

1. Start planning early. Liquidation timelines are longer than most investors expect. Begin at least 6 months before your target exit date.

2. Engage local counsel. Turkish liquidation involves multiple government agencies - a local law firm experienced in corporate dissolutions is invaluable.

3. Clean up the books. Resolve any outstanding disputes, reconcile intercompany balances, and ensure all filings are current before initiating the process.

4. Consider alternatives to liquidation. A dormant company (with minimal activity) may be cheaper to maintain temporarily than a full liquidation if you may re-enter the market.

5. Preserve records. Turkish law requires 10-year record retention post-closure. Use secure physical or digital archiving.

6. Coordinate with your home country. Inform your parent company’s tax and legal advisors to align the Turkish exit with global reporting obligations.

How FDI Consultancy Can Help

Exiting a market requires as much expertise as entering one. At FDI Consultancy, we support foreign investors through:

• Exit strategy assessment - evaluating the optimal path based on your situation
• Full liquidation management - handling all legal, tax, and administrative steps
• Share transfer facilitation - buyer identification, due diligence support, and transaction structuring
• Regulatory coordination - liaising with the Trade Registry, tax office, SGK, and sector regulators
• Employee termination compliance - ensuring proper severance, notice, and SGK procedures

Planning your exit from Turkey? Contact our team for a confidential consultation tailored to your situation.