This article is for general information; a wind-down should be planned around the specific situation, with its tax, employment and corporate law dimensions together.
The startup world adores origin stories; nobody writes the closing chapters. Yet for most ventures the journey ends not with an exit but with a decision to shut down. And a badly managed wind-down can cost far more than a failed company — it can reach the founder’s personal assets. Here is the law of turning the lights off properly.
The Decision Point: Decide Before the Runway Ends
The most common mistake we see is making the wind-down decision when the bank balance hits zero. Liquidation takes months, and money keeps being spent throughout: final salaries, severance payments, taxes, liquidation costs. A proper closing requires deciding while the company can still cover several months of obligations. The brutal rule: a company that closes without paying its employees’ severance hasn’t legally closed; it has transferred its problem onto the founder.
Which Door: Liquidation, Composition, Bankruptcy
If the debts can be paid, the path is clear: voluntary liquidation (Turkish Commercial Code art. 529 ff.) following a dissolution resolution of the general assembly. A liquidator is appointed, creditors are summoned by three announcements in the trade registry gazette one week apart, assets are converted to cash, debts are paid, and the remainder is distributed to shareholders — not before six months have passed from the third announcement. Realistic timeline: about a year, even in the best case.
If the company is balance-sheet insolvent, the picture changes: the board has a duty under TCC art. 376 to have the situation assessed and, where required, to file for bankruptcy. Ignoring that duty and “managing along” is a ticking bomb that grows the directors’ personal exposure. Where a realistic restructuring prospect exists, composition with creditors (konkordato) can be a waystation — though for an early-stage startup its cost usually exceeds its benefit.
Who Gets Paid, and in What Order?
Not everyone stands in the same queue at closing. In practice the ranking runs roughly as follows:
- Employee claims: Final wages, severance and notice pay rank among the privileged claims — first to be paid, both legally and reputationally.
- Public claims: Taxes and social security premiums. As you’ll see below, leaving these unpaid leads directly to the founder.
- Secured and ordinary creditors: Banks, suppliers, the landlord.
- Shareholders: Last. If your investor holds a liquidation preference, whatever remains flows to the preferred shares first — the founder often receives zero. Read the waterfall clause in your shareholders’ agreement now.
The Founder’s Personal Risk: The Limited Liability Fairy Tale
“If the company fails, the company fails” is true — subject to two big exceptions, and both take the stage at closing:
- Public debts: Under Tax Procedure Law art. 10 and repeated art. 35 of Law No. 6183, legal representatives are personally liable for tax and social security debts that cannot be collected from the company. In a limited company, shareholders can additionally be pursued for tax debts pro rata to their shares. Paying the supplier with the last cash in the till while skipping the tax office means rewriting the debt from the company onto the founder.
- Liability suits: Delaying the insolvency filing, moving assets out of creditors’ reach, or a careless liquidation are standard subject matter for damages claims against directors.
The Team: The Last Duty Is the Most Important One
Be meticulous with notice periods and severance calculations; if 20 or more employees are affected, do not skip the collective dismissal procedure under Labor Law art. 29. Unused annual leave pay, earned bonuses, social security exit codes — each is standard material for lawsuits filed years after the closing. Reference letters and honest communication are part of the moral closing, if not the legal one; this industry is small, and founders found again.
The Three Forgotten Folders: Data, IP, Contracts
- Personal data: Under the KVKK, data whose retention basis has lapsed must be deleted, destroyed or anonymized, and the VERBIS record updated. Copying the user database to a personal drive “just in case” is a closed company’s living data breach.
- Intellectual property: Trademarks, domains, code and patent applications are sellable assets in liquidation; they are often the company’s last real value. If a founder takes them over, it must be at arm’s-length value and documented — an undocumented free transfer is risky in both tax and criminal terms.
- Contracts: Customer and supplier agreements should be terminated properly, subscriptions cancelled, and customers given a transition period.
Don’t Leave a Zombie Company Behind
“Let’s skip the liquidation hassle and just let it sit” is the most expensive form of laziness: an empty company generates annual book certification, filing and accountant costs; unfiled returns accumulate tax penalties; and thanks to the representative liability described above, those penalties follow the director personally. A company either lives or is properly closed; there is no limbo.
The Dignified Shutdown Checklist
- Make the decision before the runway ends; build a closing budget.
- Talk to your investors early and honestly; plan the general assembly dissolution resolution.
- Pay employee claims in full; check the collective dismissal procedure.
- Think about tax and social security first, not last — personal liability lives there.
- Seek buyers for IP and domains; document every transfer.
- Run and minute the KVKK deletion-destruction process.
- Appoint the liquidator and put the process on its official calendar.
Discussing a shutdown scenario is not defeat; it is management maturity. If you want to plan it quietly and properly, write to us — these conversations are confidential.
