Share­hold­ers and pub­lic debts

Dünya Executive - - BUSINESS BY LAW - INCI KARCILIOGL­U, PART­NER ikar­cil­i­[email protected]­cuoglu.av.tr ASLIHAN BALCI, AS­SO­CIATE [email protected]­cuoglu.av.tr KOL­CUOGLU DEMIRKAN KOCAKLI

An es­sen­tial prin­ci­ple of cap­i­tal com­pa­nies un­der the Turk­ish Com­mer­cial Code (TCC) stip­u­lates that a “Share­hold­ers’ li­a­bil­ity vis-à-vis the com­pany [is] limited in pro­por­tion to their cap­i­tal con­tri­bu­tion”. Thus, as a re­flec­tion of this prin­ci­ple, the TCC clearly stip­u­lates that the part­ners of limited li­a­bil­ity com­pa­nies (LLC) are only li­able for their cap­i­tal con­tri­bu­tions and their ad­di­tional and side pay­ment obli­ga­tions set forth un­der the ar­ti­cles of as­so­ci­a­tion, and that part­ners are not re­spon­si­ble for the com­pany’s debts. Like­wise, ac­cord­ing to the TCC, share­hold­ers of joint-stock com­pa­nies are only li­able in pro­por­tion to their cap­i­tal con­tri­bu­tion.

Law 6183 on the Pro­ce­dure of the Col­lec­tion of Pub­lic Re­ceiv­ables (LPCPR) sets forth an ex­cep­tion to this prin­ci­ple. Ac­cord­ing to Ar­ti­cle 35/1, “Part­ner(s) of a limited li­a­bil­ity com­pany are di­rectly li­able for the un­col­lectible and deemed-tobe un­col­lectible pub­lic re­ceiv­ables in pro­por­tion to their share­hold­ing amount and they may be pur­sued in ac­cor­dance with the pro­vi­sions of this Law.” In this re­spect, if there is an un­col­lectible or deemed-tobe un­col­lectible pub­lic debt of an LLC, then the part­ner(s) of such LLC may be held di­rectly li­able with re­spect to such pub­lic debt, in pro­por­tion to their share­hold­ing amount in the com­pany.

Pro­ce­dural Tax Law (PTL) 213 sets forth a spe­cial pro­vi­sion for le­gal en­ti­ties, per­tain­ing to tax re­ceiv­ables – which is a pub­lic re­ceiv­able within the scope of the LPCPR. Ac­cord­ing to Ar­ti­cle 10 of the PTL, “The obli­ga­tions of the tax­payer le­gal en­ti­ties, mi­nors, wards (…) must be per­formed by their le­gal rep­re­sen­ta­tives (…). The tax-payables and con­tin­gent re­ceiv­ables, which can­not be col­lected from the as­sets of the tax­pay­ers due to the [le­gal rep­re­sen­ta­tive’s] fail­ure to per­form such obli­ga­tions, par­tially or fully, shall be col­lected from the as­sets of the non-per­form­ing party. This ar­ti­cle is also ap­pli­ca­ble to non-Turk­ish tax­pay­ers’ le­gal rep­re­sen­ta­tives in Turkey.”

When re­viewed to­gether, the afore­men­tioned pro­vi­sions make it un­clear whether le­gal rep­re­sen­ta­tives of the le­gal en­ti­ties should be pur­sued at the out­set, be­fore pur­su­ing the share­hold­ers for a tax re­ceiv­able, which can­not be col­lected from the LLC’s as­sets, com­pletely or par­tially. The con­tra­dic­tory de­ci­sions of the State Coun­cil and the Cham­ber of Tax Courts has led to the pub­li­ca­tion of a de­ci­sion by the State Coun­cil’s Gen­eral Assem­bly on the Uni­fi­ca­tion of Judg­ments (GAUJ) in the Of­fi­cial Gazette on June 20.

The GAUJ has ex­am­ined the con­flict­ing de­ci­sions. One part of the de­ci­sions re­viewed by the GAUJ stip­u­lates that the pub­lic re­ceiv­able, which can­not be col­lected from the LLC, should first be col­lected from the le­gal rep­re­sen­ta­tives – man­agers - of such LLC, who served within the rel­e­vant pe­riod (which the full re­ceiv­able is re­lated to). If the re­ceiv­able can­not be col­lected from the le­gal rep­re­sen­ta­tives, only then the share­holder(s), who had a share­hold­ing within the rel­e­vant pe­riod (which the full re­ceiv­able is re­lated to) can be held li­able for such re­ceiv­able, in pro­por­tion to their share­hold­ing. In th­ese court de­ci­sions, it has been con­sid­ered as a vi­o­la­tion of the limited li­a­bil­ity prin­ci­ple to claim a pub­lic re­ceiv­able di­rectly from the share­holder of an LLC with­out pur­su­ing the LLC’s le­gal rep­re­sen­ta­tive(s) – man­agers - first. Th­ese de­ci­sions as­sert that the se­quence to be fol­lowed for the col­lec­tion of an un­col­lectible pub­lic re­ceiv­able is to pur­sue the le­gal rep­re­sen­ta­tives of the LLCs first and then the share­holder(s) as in­di­cated in the LPCPR.

The other part of the de­ci­sions re­ferred to in the GAUJ stip­u­lates that there is no se­quence for pur­su­ing the le­gal rep­re­sen­ta­tives and share­hold­ers of an LLC with re­spect to un­col­lectible pub­lic re­ceiv­ables. In th­ese de­ci­sions, the em­pha­sis was given to debt-col­lec­tion vari­ances be­tween the le­gal rep­re­sen­ta­tives and the share­hold­ers; un­der the rel­e­vant pro­vi­sions of law, the le­gal rep­re­sen­ta­tives are held li­able for the full amount of the pub­lic re­ceiv­able, whereas the share­hold­ers are held li­able only in pro­por­tion to their share­hold­ing.

In light of the dif­fer­ences be­tween the court de­ci­sions, and the con­tro­versy in prac­tice, the GAUJ adopted the sec­ond ap­proach. Ac­cord­ingly, there is no se­quence among the le­gal rep­re­sen­ta­tives and share­hold­ers of an LLC with re­spect to the col­lec­tion of pub­lic re­ceiv­ables.

This, along with other de­ci­sions re­gard­ing tax col­lec­tion ren­dered by the Con­sti­tu­tional Court sug­gests that the courts’ ap­proach aims to en­sure the fastest method and process for col­lec­tion of un­col­lectible pub­lic re­ceiv­ables.

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