Withdrawal from a Limited Company
Also known as: Withdrawal for Just Cause, Exit Right, Withdrawal Action, Severance Payment, Ortaklıktan Çıkma
Author Ali Gül
In short
A limited company shareholder leaving the company, either under a right in the articles or by court order for just cause, and receiving a severance payment reflecting the real value of its share.
Withdrawal is a mechanism allowing a limited liability company shareholder to leave the company and receive the value of its share. This option, not available in joint stock companies, protects shareholders from being trapped in limited companies, where the personal bond between shareholders is strong.
Ways to Withdraw
- Withdrawal right under the articles: The articles may grant shareholders a right to withdraw, subject to conditions (TCC Art. 638/1).
- Withdrawal action for just cause: Any shareholder may ask the court to allow its withdrawal where there is just cause (TCC Art. 638/2). Deep disagreements between shareholders, systematic exclusion from management and profits or impossibility of achieving the company’s purpose may be regarded as just cause.
When a shareholder brings a withdrawal action or gives notice of withdrawal, the other shareholders also have the right to join on the same terms by giving notice within three months.
Severance Payment
The withdrawing shareholder is entitled to a severance payment reflecting the real value of its share (TCC Art. 641). Real value is determined according to the company’s assets at the date of withdrawal and, if necessary, by expert examination. The company must have freely available equity to pay; otherwise the shareholder remains a creditor for the unpaid amount.
Points to Watch
- Withdrawal is registered with the trade registry.
- The withdrawing shareholder may remain exposed to liability for the company’s uncollectable public debts relating to the period of membership; see Shareholder Liability for Public Debts.
- To resolve disputes without going to court, buy-out mechanisms may be provided in the shareholders’ agreement.
Removal of a shareholder at the other shareholders’ wish is expulsion.
Frequently Asked Questions
Can a limited company shareholder withdraw whenever they want?
No. A shareholder can only withdraw under a right granted in the articles or by obtaining a court order for just cause. Otherwise, the way to leave is to transfer the share.
Is withdrawal possible in a joint stock company?
A joint stock company has no withdrawal right like a limited company. A shareholder leaves by transferring shares. Where there is just cause, minority shareholders may seek dissolution of the company; instead of dissolution, the court may order the purchase of the claimant's shares at their real value.
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