1. Introduction
As is well known, capital companies are independent subjects of rights with legal personality. The termination of a company’s business activities, along with the completion of liquidation procedures and the subsequent deregistration from the trade registry, extinguishes the company’s legal personality. Consequently, such a company loses its legal capacity and capacity to act from both a substantive and procedural law standpoint, thereby terminating its legal existence.
However, the emergence of forgotten immovable or movable property owned by a company months or even years after the completion of its liquidation, the existence of uncollected receivables in favour of the company, or an ongoing lawsuit to which the company is a party are cases encountered in practice. Since a company deregistered from the trade registry no longer legally exists, it is not possible through ordinary means to finalize such incomplete matters or to transfer assets left legally unowned.
To overcome such deadlocks, the Turkish Commercial Code (“TCC”) has adopted the mechanism of supplementary liquidation, i.e. the “reinstatement of companies”, which enables the re-registration of a company by essentially reviving its legal personality, strictly limited to the specific purpose and concrete dispute at hand. In this briefing note, aimed at compiling practical and up-to-date information on this infrequently applied procedure, we address the deadlocks encountered in practice during the reinstatement process, particularly interinstitutional deadlocks, the procedural hurdles that undermine the process, and lifesaving practical resolution strategies.
2. Peremptory Time Limit and Preliminary Issue in Pending Lawsuits
If a company is deregistered from the trade registry while acting as a defendant in any case, the court grants the plaintiff a strict, peremptory term to file a lawsuit for the reinstatement of the company. While the reinstatement proceedings before the Commercial Court take months, the risk may arise that the main court dismisses the case on procedural grounds citing “failure to file the lawsuit within the strict time limit”. Therefore, as soon as the reinstatement lawsuit is filed, the court hearing the main case must be notified, and a decision to treat the reinstatement lawsuit as a preliminary issue should be requested.
Although far less common in practice, it is also possible for a company to be deregistered from the registry while a lawsuit in which it acts as the plaintiff is ongoing. In such a scenario, there is effectively no plaintiff left to pursue the case. The defendant who realizes this circumstance may choose one of two paths. The first is to request the reinstatement of the company solely limited to the finalization of the relevant lawsuit. The second is to leave the case unpursued pursuant to Article 150 of the Code of Civil Procedure, thereby ensuring that the file is removed from the active docket and deemed not filed if not renewed within the statutory period. However, it is not possible to collect attorney’s fees awarded in favour of the defendant from a liquidated company. Consequently, in order to collect the attorney's fees, the defendant’s counsel will also have a legal interest in requesting the reinstatement of the company.
3. Liquidators and Their Liability
During this process, liquidators are obliged to act with the care of a prudent manager and to safeguard the interests of creditors. Pursuant to Article 553 of the TCC, liquidators shall be jointly and severally liable with their personal assets to the company, shareholders, and corporate creditors in the event that they culpably breach any of their obligations arising from the law or the company's articles of association.
A liquidator who effects the deregistration of the company despite having knowledge of an ongoing lawsuit against the company, without awaiting the finalization of the legal proceedings or setting aside the necessary security, shall be deemed grossly negligent. In such a case, the liquidator may be held personally liable with their own assets for both the litigation costs incurred in the reinstatement lawsuit and the damages suffered by the creditors.
In reinstatement lawsuits, the last appointed liquidator must be designated as the defendant. In practice, however, the address records of these individuals are often outdated, their MERNİS address entries are insufficient, or they may even reside abroad. Service by publication processes, in turn, can prolong the lawsuit by 1 to 2 years. In such an event, it should be asserted before the court that the liquidator’s connection with the company has lapsed or that their address cannot be reached, and the court should be promptly requested to “appoint an impartial liquidator” to prevent the process from stalling. Furthermore, when selecting a liquidator, appointing non-professional shareholders as liquidators should be avoided during the liquidation of companies.
4. Procedural Law Issues to Consider in Reinstatement Lawsuits
In lawsuits seeking the reinstatement of a company, the court with subject-matter jurisdiction is the Commercial Court of First Instance, and the court with territorial jurisdiction is the court of the place where the company's registered office was located prior to its deregistration.
The lawsuit for reinstatement may be filed by the company’s last liquidators, last board members or managers, shareholders, and creditors who have receivables from the company or are conducting lawsuits or enforcement proceedings against the company. With respect to companies deregistered ex officio by the trade registry, any interested person whose interests are affected and who possesses a justified reason has the right to file this lawsuit.
The lawsuit must be filed jointly against the Trade Registry Office where the company was registered and the company’s last liquidator. Since the Trade Registry Office is involved in the lawsuit pursuant to statutory obligation, it is considered a statutory party, and even if the claim is upheld, litigation costs or attorney’s fees shall not be awarded against the registry. As a general rule, there is no preclusive period or statute of limitations for a request for the reinstatement of a company; the lawsuit may be filed at any time as long as the legal interest persists.
Courts may reinstate the company not generally, but strictly limited to the purpose of “conducting the relevant lawsuit/enforcement proceeding” and solely for the achievement of that purpose. A seemingly minor omission in the operative part of the judgment (for instance, the failure to state the enforcement file number or the court case number) may lead the Trade Registry Office to reject the application for the registration of reinstatement. Furthermore, when the judgment is being drafted, submitting a request form to the court can prove beneficial in ensuring that the ruling is established with sufficient clarity to be eligible for execution.
5. The Forgotten Final Step: Second Deregistration
Supplementary liquidation is a temporary revival strictly limited to the process specified in the court decision. Once the transaction is finalized, the liquidator must apply to the trade registry office for the re-deregistration of the company from the trade registry. The deregistration of the reinstated company does not occur automatically, and the company continues to appear as “in liquidation” in the registry.
In this situation, the company remains legally exposed to becoming the addressee of new service of process, potential attachments, or enforcement proceedings. Tax and other administrative obligations that resurface upon reinstatement may also persist, and the duty of the liquidator, along with the corresponding liability, legally continues.
6. Conclusion and Assessment
Driven by the economic conditions in our country, voluntary company closures and liquidation processes outside of concordat or bankruptcy proceedings are coming to the fore with increasing frequency. For this reason, it is of paramount importance for companies deciding on liquidation to meticulously identify their assets, receivables, as well as pending lawsuits and enforcement proceedings prior to deregistration, thereby finalizing all processes to prevent unforeseen complications, risks, and various expenses from arising. Otherwise, encountering a reinstatement lawsuit months or even years after deregistration and the liquidator facing personal liability may become inevitable.
Given that this rarely encountered mechanism, which has no alternative, may lead to unforeseen practical problems, the best safeguard against reinstatement is conducting a liquidation process with the same diligence shown at the company’s incorporation, thereby eliminating the need for a reinstatement lawsuit altogether. Nevertheless, the filing of this lawsuit may sometimes become imperative due to negligence, communication breakdowns, or unforeseeable circumstances. In such cases, rather than approaching it as a theoretical matter of corporate law, one must be prepared for a procedural marathon where bureaucratic hurdles between the court and the trade registry, as well as service of process crises, are managed through sound strategic steps.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
