StatuteTTK Art. 376, 633 (Turkish Commercial Code)
Loss of Capital in Türkiye: Board Duties (TCC Art. 376)
When you open the balance sheet, you see that part of the capital has melted away through losses. This is not only an accounting problem. At this point the law places clear duties on the board.
A stepped structure
TTK Art. 376 has three levels:
| Situation | What is done? |
|---|---|
| Half of the sum of capital and statutory reserves is uncovered by losses | The board immediately convenes the general assembly and proposes remedial measures |
| The uncovered amount reaches two thirds | If the general assembly does not decide to restore or reduce the capital, the company ends by operation of law |
| The company is over-indebted | The board notifies the court |
Which balance sheet applies?
The law is based on the last annual balance sheet. If there are signs that losses are approaching, the board can also have an interim balance sheet prepared and see the situation earlier.
What can remedial measures be?
- A capital increase by the shareholders, or converting shareholder current accounts into capital
- Restructuring of debts
- Cost reduction and a cash flow plan
- Sale of assets
Measures must be concrete and workable. Merely informing the general assembly is not considered enough.
Over-indebtedness and alternatives
Over-indebtedness means the company’s assets do not cover its debts. The board is then obliged to notify the court. Because postponement of bankruptcy has been abolished, concordat or out-of-court restructuring should be considered early if there is a chance of saving the company.
We explain the difference between concordat and bankruptcy in Concordat vs bankruptcy.
How Denova can help
In a company approaching these thresholds, financial analysis and legal assessment should be carried out together. Recording the board’s decisions is also important for liability.
Frequently asked questions
Does loss of capital also apply to limited companies?
Yes. TTK Art. 633 makes Art. 376 applicable to limited companies as well. The assembly of shareholders convenes instead of the general assembly, and the managers are responsible instead of the board.
What if the board does not meet this obligation?
Managers can be held personally liable for the damage caused to the company and creditors under the liability provisions of the TTK. Monitoring balance sheets regularly and going to the general assembly in time is therefore important.
This article is for general information only and is not legal advice. Every case must be assessed on its own facts. It reflects Turkish law as of the publication date.