Sooner or later a Turkish startup wants to separate something: the second product that deserves its own cap table, the services team that a buyer wants without the platform, the Turkish operating business that the foreign parent needs in a clean subsidiary before a sale. Selling the assets does the job at the cost of a taxable disposal, individual transfers of every contract and licence, and employee consents. The Turkish Commercial Code No. 6102 (TCC) offers a different route: the demerger (bölünme) under Articles 159 to 179, which moves a defined part of a company’s assets and liabilities to another company by universal succession on registration, and, for the reverse movement, the simplified merger under Articles 155 and 156 for wholly or ninety per cent owned companies. The Corporate Tax Law No. 5520 then makes the demerger tax-neutral if its own conditions are met. This article explains full and partial demerger, the symmetric and asymmetric variants and the ninety per cent rule, the demerger agreement or plan and report, the two-month inspection right and the general assembly quorums, creditor calls and security, employees, secondary liability, the tax conditions that decide whether the structure is worth doing, and the simplified merger that folds a subsidiary back in. It connects to our articles on group companies after a flip-up, transferring IP to a foreign parent and merger control thresholds.
Full and partial demerger
Article 159(1) defines the two forms. In a full demerger the company’s entire assets are divided into parts and transferred to other companies; its shareholders receive shares and rights in the transferee companies; and the demerged company is dissolved and struck off. In a partial demerger one or more parts of the company’s assets are transferred to other companies, and either the demerged company’s shareholders receive shares in the transferees (the split-off, which changes the cap table) or the demerged company itself receives the transferee’s shares in exchange for the assets and thereby creates a subsidiary (the hive-down, which leaves the cap table intact and is the usual “carve out a product line into a subsidiary” structure). Article 160 allows capital companies and cooperatives to demerge into capital companies and cooperatives; a joint-stock company can therefore demerge into a new limited or joint-stock company. Under Article 161 shares and rights are protected under Article 140, and the split-off may allocate shares in the transferees to the demerged company’s shareholders either in proportion to their existing holdings in every participating company (the symmetric, “ratio-preserving” demerger) or in different proportions in some or all companies (the asymmetric demerger), which is how two founder groups can separate a business into two companies each owns fully. Article 162 disapplies the capital-reduction procedure of Articles 473 to 474 where the demerged company’s capital is reduced, Article 163 requires the transferee to increase its capital by the amount needed to protect the demerged company’s shareholders and disapplies the in-kind contribution rules and the registered-capital ceiling, and Article 164 disapplies the minimum-founder and in-kind rules for a new company formed in the demerger.
The documents: agreement or plan, inventory, report, interim balance
Where assets go to existing companies, the participating companies’ management bodies conclude a demerger agreement; where they go to new companies, the management body draws up a demerger plan (Article 166(1)–(2)); both must be in writing and approved by the general assembly under Article 173 (Article 166(3)). Article 167 lists their content: the participating companies’ names, seats and forms; the division and allocation of assets and liabilities for transfer, with a clear inventory listing immovables, negotiable instruments and intangibles item by item; the exchange ratio, any equalisation payment and the shareholders’ rights in the transferee; rights allocated to holders of profit-sharing certificates, non-voting shares and special rights; the manner of exchanging shares; the date from which the shares participate in profits; the date from which the demerged company’s transactions are deemed made for the transferee’s account; special benefits to directors, managers and auditors; and the list of employment relationships transferred. Article 168 deals with unallocated items: in a full demerger they fall into co-ownership of the transferees in proportion to the net assets each received, in a partial demerger they remain with the demerged company; the same applies to receivables and intangibles; and companies in a full demerger are jointly liable for unallocated debts. Article 169 requires the management bodies to prepare a demerger report (joint or separate) explaining the purpose and consequences, the agreement or plan, the exchange ratio and its valuation, any additional payment or personal liability of shareholders, the consequences of a change of company form, the effects on employees and any social plan, and the effects on creditors. Article 165 requires an interim balance sheet where more than six months separate the last balance sheet date from the signing of the agreement or the drawing up of the plan, or where significant changes have occurred in the assets. For an IP-heavy carve-out the inventory is the crux: every trade mark, domain, code repository, contract and licence that should follow the product must be listed, because under Article 168(2) an unlisted intangible stays behind in a partial demerger.
Inspection, approval quorums and the ninety per cent rule
Article 171 requires each participating company to make the agreement or plan, the demerger report and the last three years’ financial statements and annual reports (and any interim balance sheet) available to shareholders at its seat for two months before the general assembly decision, to announce the right of inspection in the Trade Registry Gazette and on its website, and to provide copies free of charge; small and medium-sized companies may waive the demerger report (Article 169(4)) and the inspection right (Article 171(2)) with the approval of all shareholders, which is what most startups do. Article 173 requires the management bodies to submit the agreement or plan to the general assembly only after the creditor security under Article 175 has been provided, and sets the approval quorums by reference to Article 151: in a joint-stock company three-quarters of the votes present, provided they represent the majority of the share capital; in a limited company three-quarters of all shareholders holding at least three-quarters of the capital. Article 173(3) adds the rule that governs founder separations: in an asymmetric demerger the demerged company’s approval requires at least ninety per cent of the shareholders entitled to vote. A founder pair splitting a company into two therefore needs near-unanimity, and a minority that refuses can block the asymmetric structure and force a symmetric one, in which each shareholder ends up holding shares in both companies.
Creditors, employees and secondary liability
Article 174 requires the participating companies to call their creditors by three announcements at seven-day intervals in the Trade Registry Gazette, and on their websites, to notify their claims and request security; Article 175 obliges them to secure the claims of creditors who so request within three months of publication, unless they prove the demerger does not endanger the claims, and allows them to pay instead of securing where other creditors will not be harmed. Because Article 173(1) makes the provision of security a precondition to the general assembly’s approval, the creditor calls set the timetable: two weeks of announcements, three months for requests, then the meeting. Article 176 makes the other participating companies secondarily and jointly liable where the company to which a debt was allocated fails to pay, but only where the claim is unsecured and the primarily liable company is bankrupt, in composition, the subject of a definitive certificate of insolvency, has moved its seat abroad beyond pursuit or can no longer be pursued there; Article 177 preserves the personal liability rules of Article 158. Article 178 transfers employment relationships to the transferee with all rights and obligations unless the employee objects; an objecting employee’s contract ends at the end of the statutory notice period; the old and new employers are jointly liable for claims accrued before the demerger and until the contract would have ended; and employees may demand security for their claims. The demerger is registered under Article 179 and takes effect on registration, when all assets and liabilities in the inventory pass to the transferees; in a full demerger the transferor dissolves on registration.
Tax: when the demerger is neutral
Under Article 19(3)(a) of the Corporate Tax Law a full demerger is tax-neutral where a fully liable capital company transfers all its assets, receivables and debts at book value to two or more existing or new fully liable capital companies and its shareholders receive shares in the transferees, with up to ten per cent of the nominal value payable in cash. Under Article 19(3)(b) a partial demerger is tax-neutral only for two categories: participation shares held for at least two full years, and production or service enterprises, transferred at book value as a contribution in kind to an existing or new fully liable capital company, with the transferee’s shares either retained by the demerging company or given directly to its shareholders; for enterprises, all assets and liabilities necessary for the continuation of the activity must be transferred so that the enterprise’s integrity is preserved. Since Law No. 7456 of 2023 immovables are no longer within the tax-neutral partial demerger. Article 20 then sets the conditions. For a full demerger (Article 20(2)) the demerger date is the registration date, the demerged company and the transferees file its return jointly within thirty days of the Gazette announcement, and the transferees undertake joint liability for its tax debts. For a partial demerger (Article 20(3)) no separate return is triggered; gains from the demerger are not computed or taxed, and the transferees are jointly liable for the demerged company’s accrued tax debts only up to the fair value of the assets they received. For a product carve-out the questions are therefore whether the product line is a “service enterprise” whose integrity is preserved (team, contracts, IP and infrastructure moving together) and whether the transferee is a fully liable Turkish company; a spin-off to a foreign entity is not a tax-neutral demerger and is analysed as an asset transfer, as we discussed in transferring IP to a foreign parent. VAT and stamp-duty exemptions for qualifying demergers follow under the respective laws.
Folding back in: the simplified merger
The reverse movement, absorbing a wholly owned subsidiary, uses the simplified procedure. Article 155(1) allows capital companies to merge under the simplified regime where the acquiring company holds all the voting shares of the acquired company, or where a company, a natural person or a group of persons connected by law or contract holds all the voting shares of the merging companies; Article 155(2) extends it to a ninety per cent holding if the minority is offered a choice between equivalent shares in the acquiring company and a cash consideration equal to the real value of their shares under Article 141 and the merger imposes no additional payment, personal performance or personal liability. Article 156 grants the relief: for the one hundred per cent case the merger agreement need contain only the items in Article 146(1)(a) and (f) to (i), no merger report under Article 147 or inspection right under Article 149 is required, and the agreement need not be submitted to the general assembly under Article 151; for the ninety per cent case the agreement needs the items in Article 147(2)(a), (b) and (f) to (i), no report and no general assembly, but the inspection right must be provided thirty days before the registry application. Merger control under the Competition Law is a separate question that group-internal restructurings usually escape but that our threshold note should be checked against where a third party is involved.
Can we carve a product into a subsidiary without changing our cap table?
Yes, by a partial demerger in which the demerging company receives the new company’s shares (Article 159(1)(b), second alternative). The shareholders’ holdings in the parent are untouched, and the tax-neutral route is available if the product line qualifies as a service enterprise transferred whole.
Two founders want to split into two companies. What vote is needed?
An asymmetric demerger, in which each founder ends up owning a different company, needs at least ninety per cent of the voting shareholders of the demerged company (Article 173(3)) on top of the Article 151 quorums. A symmetric demerger needs only the Article 151 quorums but leaves both founders in both companies.
Do customers have to consent to their contracts moving?
No; the demerger transfers listed contracts by universal succession on registration (Article 179(4)). Contracts with change-of-control or assignment clauses may still give the counterparty a termination right under their own terms, so review the key ones before finalising the inventory.
Related: spin-off · merger · statutory merger · group companies after a flip-up.
Sources. Turkish Commercial Code No. 6102 (Articles 140–141, 146–147, 149, 151, 155–156, 158–179); Corporate Tax Law No. 5520 (Articles 19–20, as amended by Law No. 7456). Statute links open the official Turkish texts on mevzuat.gov.tr.
This article is provided for general information only and does not constitute legal advice. Please seek legal support for an assessment of any specific matter.
