Liability of Limited Liability Companies’ Shareholders for Public DebtsNovember 2020, ERDEMİR&ÖZMEN ATTORNEY PARTNERSHIP
Liability of Limited Liability Companies’ Shareholders for Public Debts
According to the article 573 of the Turkish Commercial Code numbered 6102 (“the TCC”), a limited liability company is such company which is founded by one or more than one real or legal person under a trade name and whose capital is determined and comprised of the sum of the principal capital shares. Limited liability company shareholders are not liable for corporate debts and they are only obliged to pay the principal capital shares they have committed and to fulfill their additional payment and side performance obligations stipulated by the company articles of association. Furthermore, the article 602 of the TCC regulates the liability of the shareholders.
“The company is only liable with its assets due to its debts and obligations.”
However, the liability for public debts constitutes an exception to this rule. The origin of this liability is regulated by the article 35/1 of the Law numbered 6183 on Collection Procedure of Public Receivables (“the Law numbered 6183”).
"Limited liability company shareholders are, in proportion to their capital shares, directly liable for the public debts which cannot be fully or partly collected or are understood to be uncollectable fully or partly from the company, in which case enforcement proceedings shall be carried out against those limited liability company shareholders as per the provisions of this Law."
Within this context, the public debts, which cannot be fully or partly collected or are understood to be uncollectable from the assets of the limited liability company, shall be collected directly from the personal assets of the shareholders in proportion to their shares in accordance with the provisions of the Law. Likewise, the following provisions are contained in the other paragraphs of the article 35:
“In case a shareholder transfers his capital share in the company, the transferor and the transferee of the share shall be held liable severally as per the provision of the first paragraph, for the payment of the public receivables pertaining to the period prior to the transfer.
In case the holders of the share are different persons at the times that the public receivable has arisen and become due and payable, these persons shall be held liable severally as per the provision of the first paragraph, for the payment of the public receivable.”
Thus, if the holders of the share are different persons at the times that the public receivable has arisen and must be paid, these persons shall be held liable severally for the payment of the public receivable.
There is a separate provision with regard to the Social Security Institution (“the SSI”) debts of limited liability companies. In the Social Insurance and General Health Insurance Law numbered 5510 (“the Law numbered 5510”), the paragraph 21 of the article 88 bearing the heading “Payment of the Premiums” prescribes that:
“In case the Institution’s insurance premiums and other receivables are not, without a justifiable reason, paid within the periods specified in this Law, the public administrations’ public officials responsible for accruals and payments, the senior executives or officials of other employers with legal personality, including members of the company board of directors, and their legal representatives are liable to the Institution severally and jointly with their employers.”
Accordingly, for the SSI debts not paid on their due dates without a justifiable reason, the company shareholders in limited liability companies shall be liable principally, not secondarily, together with the employer limited liability company. Therefore, the SSI may also directly take recourse to the company shareholders, without being compelled to carry out enforcement proceedings against the limited liability company for such receivables. The extent of this liability is only in proportion to the capital shares in the company. In case the company has been liquidated, the Institution will collect its receivable directly from the company shareholders since the legal personality of the company ceases to exist.
It is prescribed that the shareholders in a limited liability company shall, in proportion to their shares and with their personal assets, be liable for the public debts which cannot be fully or partly collected or are understood to be uncollectable from the assets of limited liability company.