Shareholder Liability for Public Debts

As a rule, only the company is liable for its debts. For public receivables, however, the law allows recourse to shareholders and managers for amounts that cannot be collected from the company. This liability is one of the most important points to consider when choosing a company type and in share transfers.

Limited Company Shareholders

Under Art. 35 of Law No. 6183 on the Procedure for Collection of Public Receivables, limited liability company shareholders are directly liable, in proportion to their capital shares, for public receivables that cannot be collected, wholly or partly, from the company. This liability is not limited to the capital subscribed.

A transferring shareholder may be held liable, together with the transferee, for public debts relating to the period before the transfer. In limited company share transfers, the company’s tax and social security debts should therefore be reviewed and indemnity provisions included in the agreement.

Joint Stock Company Shareholders

Joint stock company shareholders are not liable for the company’s public debts merely because they are shareholders. This is one reason investors prefer joint stock companies.

Legal Representatives

Under repeated Art. 35 of Law No. 6183, public receivables that cannot be collected from a company because its legal representatives failed to perform their public debt duties may be collected from the legal representatives’ personal assets. Board members in a joint stock company and managers in a limited company fall within this scope. Similar liability is provided for tax debts under the Tax Procedure Law.

Social Security Premiums

Under Law No. 5510, a company’s senior managers and legal representatives may be held jointly liable with the company for unpaid social security premiums.

In Practice

• Tax and social security debt certificates should be obtained during share transfers and due diligence.
• The resignation of persons leaving management and the appointment of new representatives should be registered with the trade registry without delay.
• A limited company may become a joint stock company through a change of legal form; however, liability for past-period debts should be assessed separately.