Partnerships in Turkey are a common form of business collaboration, but over time, partners may find it necessary to end their relationship for legal, financial, or operational reasons. Understanding the legal procedures for terminating a partnership is essential to ensure a smooth and dispute-free process. In this article, ER&GUN&ER Turkish Law Firm, a leading Istanbul Lawyer Firm, explains the legal roadmap for terminating partnerships in Turkey in accordance with Turkish Commercial Code and business law practices.
Legal Principles Governing Partnership Termination
Under Turkish law, the termination of partnerships is regulated primarily by the Turkish Commercial Code (TCC). Article 636 of the TCC outlines various reasons for dissolution, including expiry of the partnership term, court order, partner withdrawal, exclusion, or mutual agreement. The rules apply to different partnership types, such as general partnerships, limited partnerships, and joint stock companies.
Leaving the Partnership
A partner wishing to exit must first review the partnership agreement for withdrawal clauses. The exit must be officially notified to other partners and registered with the Turkish Trade Registry. In certain cases, partners must obtain unanimous or majority consent depending on the agreement’s terms.
Exclusion from Partnership
Excluding a partner requires legal justification and must follow the process defined in the agreement. This usually involves identifying grounds such as breach of fiduciary duty, misconduct, or incapacity. A court order may be required in contested cases.
Judicial Dissolution of Partnerships
When conflicts between partners escalate and no resolution is possible, judicial intervention may be necessary. Common causes include breach of contract, mismanagement, or operational deadlock. In such cases, a lawsuit can be filed before the Commercial Court of First Instance. The court evaluates the grounds for termination and issues a dissolution ruling.
For a successful litigation process, engaging a Turkish lawyer experienced in partnership disputes is highly recommended.
Termination Through Arbitration
Arbitration is a preferred alternative to court proceedings for resolving partnership disputes. If the partnership agreement includes an arbitration clause, the parties can initiate the process and present evidence and witnesses. Arbitrators then render a binding decision, often within a shorter timeframe than litigation.
Termination by Mutual Agreement
Partnerships in Turkey may also be dissolved through mutual agreement, which is often the least contentious route. The partners sign a termination protocol detailing asset division, debt settlement, and any ongoing obligations. Once finalized, this agreement must be registered with the Trade Registry and tax office.
At Istanbul Lawyer Firm, our English-speaking lawyers assist clients in preparing termination agreements that align with Turkish commercial law and minimize future liabilities.
Read our previous article: The Legal Landscape of E-Commerce in Turkey