Leaving a Turkish Limited Company for Just Cause: TCC Article 638, Court Exit and Exit Payment

1. Article 638 creates a personal right to seek exit from the limited company

Limited companies are closed-capital structures in which shareholders often depend heavily on one another. Unlike a listed investment that can simply be sold on a market, a limited-company interest can be difficult to transfer because company approval, articles restrictions and lack of buyers can block exit.

Article 638 recognises that a shareholder should not be forced indefinitely to remain in a company relationship that has become objectively intolerable for serious reasons. The shareholder can therefore ask the commercial court for judicial exit.

This route is distinct from dissolution of the company itself. The aim can be to separate one shareholder while preserving the business.

2. The company agreement can create additional exit rights

The articles of association may specify events giving a shareholder a right to leave, such as death of a key person, failure to achieve a defined condition, loss of a licence, shareholder deadlock or other contractual triggers permitted by law.

Where such a contractual exit right exists, the first task is to interpret the exact wording, procedural steps and valuation method. A contractual route can be simpler than proving just cause if the trigger clearly occurred.

The statutory Article 638 right remains important when the articles are silent or when the contractual trigger does not fit the facts.

3. Just cause requires more than ordinary disagreement

Not every commercial disagreement is just cause. Shareholders are expected to tolerate lawful majority decisions, changing business conditions and ordinary disputes over strategy.

Just cause is generally associated with serious circumstances that destroy the basis of continued shareholder cooperation or make continuation unfair. The assessment is fact-specific and considers the duration, gravity and effect of the conduct.

Evidence of repeated abuse is usually stronger than one isolated disagreement.

4. Persistent majority oppression can support exit

Examples can include systematic exclusion from information, diversion of company opportunities to majority-controlled entities, discriminatory distributions, self-dealing that harms the company or use of voting power solely to trap the minority without legitimate business purpose.

The claimant should distinguish unlawful or abusive conduct from decisions that merely reduced expected returns. Courts examine the objective corporate impact and the shareholder relationship as a whole.

Contemporaneous objections, minutes and financial records are more persuasive than later general allegations.

5. Deadlock can become just cause where the company cannot function normally

A 50/50 structure can become paralysed if shareholders cannot appoint managers, approve accounts, finance operations or make required decisions. Not every tie creates just cause, but sustained inability to operate can make continued membership commercially meaningless.

Shareholders’ agreements, reserved matters and casting-vote clauses should be reviewed before litigation because they can provide contractual solutions.

Where no workable mechanism exists, Article 638 can become an exit tool.

6. Information denial matters when it prevents meaningful shareholder participation

Limited-company shareholders have statutory information and inspection rights. Persistent refusal to provide accounts, contracts or management information can support a broader oppression case.

The shareholder should make written, specific information requests and preserve the response or refusal. Vague assertions that “they never told me anything” are weaker than a documented sequence.

Information-right litigation can sometimes solve the problem without requiring exit.

7. Profit diversion and related-party extraction can be central evidence

A shareholder can be trapped in a company whose revenue is shifted through management fees, related-party purchases, excessive salaries or other arrangements benefiting the controlling side. Such conduct should be analysed through company accounts and related-party agreements.

The issue is not that every payment to a related party is unlawful. The claimant must show why the transaction harms the company or shareholder relationship and lacks legitimate business justification.

Transfer-pricing and tax issues can coexist but do not replace the company-law claim.

8. The action is filed before the competent commercial court

The defendant is the company. Jurisdiction and venue should be checked from the company’s registered seat and the applicable commercial-procedure rules.

The petition should identify the just-cause facts, requested exit and any interim protection needed during the proceedings.

Foreign shareholders can litigate through Turkish counsel under a properly prepared power of attorney.

9. Article 638 allows interim regulation of rights and obligations

Exit litigation can take time. During that period, continued voting, management access, capital calls or other shareholder obligations can aggravate the conflict.

The court can therefore regulate or suspend relevant rights and obligations as an interim measure where justified.

The request should be proportionate and linked to a concrete risk rather than used to obtain the final result in advance.

10. Filing the action does not automatically end shareholder status

Until the exit becomes effective under the legal decision framework, the claimant generally remains a shareholder. Voting, information, dividend and contribution rights can therefore continue unless the court orders otherwise.

The company should not treat the filing itself as a completed transfer or deletion from the share ledger.

Likewise, the claimant should not assume that all obligations stop automatically.

11. Exit produces a financial settlement, not merely deletion of the shareholder name

TCC Article 641 gives the departing shareholder a right to an exit payment corresponding to the real value of the participation. The amount is not necessarily equal to nominal capital or the original investment.

Valuation can require review of assets, liabilities, earnings, hidden reserves, goodwill, related-party balances and pending disputes.

Where the articles contain a valuation clause, its validity and relationship with mandatory law should be reviewed.

12. Real value is an economic valuation question

Book value can differ substantially from real value. A profitable company with valuable customer relationships can be worth more than accounting equity; a distressed company can be worth less.

Expert valuation is often central. The valuation date and method should reflect Article 641 and the facts of the case.

Artificial transactions designed to depress value before the exit decision can themselves become evidence of abuse.

13. Payment can depend on legally available equity

The Commercial Code protects company capital and creditors. Exit payment cannot be made in a manner that unlawfully returns protected capital.

Article 642 regulates when the exit payment becomes due and links payment to available equity, capital reduction or transfer of the share in the situations defined by law.

The claimant should therefore distinguish valuation entitlement from immediate cash collectability.

14. Other shareholders can seek to join the exit process

Article 639 provides a framework allowing other shareholders to request participation in the exit under equal conditions once an exit action is notified through the company process.

This prevents selective treatment where several shareholders face the same breakdown.

The company must follow the statutory notification and equality rules.

15. Build the case from company records, not only personal messages

Useful evidence includes general assembly minutes, manager resolutions, shareholder correspondence, accounting records, bank statements, related-party contracts, information requests, expert reports and the articles/shareholders’ agreement.

Personal messages can corroborate motive or threats but rarely replace objective corporate records.

A chronology linking each act to its corporate consequence is highly effective.

16. Foreign shareholders should resolve document and service issues early

Overseas shareholders commonly hold foreign corporate ownership documents, powers of attorney or shareholder agreements requiring apostille/legalisation and Turkish translation.

Banking arrangements for a later exit payment, foreign exchange and tax residence evidence should also be prepared.

Bakırcı & Keskin Hukuk Bürosu has one physical office in Mersin. Company disputes throughout Türkiye can be coordinated from Mersin subject to court jurisdiction and procedural rules.

17. The exit payment can have tax consequences

The corporate-law value of the exit and the shareholder’s tax treatment are separate questions. A foreign shareholder can face Turkish-source capital gain or treaty analysis depending on legal form, acquisition history and residence.

The tax position should be modelled before settlement so the net economic outcome is understood.

Our foreign shareholder share-sale tax guide explains related exit taxation concepts.

Conclusion

Article 638 provides a practical exit route for a limited-company shareholder who can prove just cause. The strongest case separates ordinary business disagreement from serious structural oppression or breakdown, seeks proportionate interim protection and prepares the real-value payment issue from the start. For a foreign shareholder, corporate evidence, Turkish procedural authority and tax/payment planning should be coordinated rather than handled as separate afterthoughts.