What is an ordinary company?

Since an ordinary company is not considered a commercial company within the meaning of the Turkish Commercial Code, the provisions regarding ordinary companies are located between Articles 620 and 645 of the Turkish Code of Obligations. Article 620 of the UK Code defines an ordinary company as a contract under which two or more people undertake to combine their labor and goods to achieve a common goal. An ordinary company differs from commercial companies regulated in the Turkish Commercial Code in the following aspects:

-Ordinary companies do not have legal personality.

-Legal bonds in ordinary companies are looser than in commercial companies.

-Commercial companies are subject to the numerus clausus principle.

FOUNDATION OF ORDINARY COMPANY - ORDINARY COMPANY AGREEMENT

An ordinary partnership is established by making a contract that imposes debt on both parties. No further action is required for establishment. The essential element of the contract is the will of the parties to establish a partnership. In addition, with the ordinary company agreement, the parties must pursue a common goal, strive to achieve the goal, and share in the profits and losses.

As a rule, the ordinary company contract is not subject to form. Therefore, an ordinary partnership can also be established verbally. However, there are some exceptions to the freedom of shape. If the parties agree that the ordinary partnership agreement should be based on a certain form, the agreement should be made in the agreed manner.

There are some legal exceptions to freedom of shape, apart from the voluntary shape requirement. These exceptions are;

- If an immovable property is added to the ordinary company as capital, the contract must be made formally.

- If a motor vehicle is included as the capital of an ordinary company, the contract must be prepared by a notary public.

- If the ordinary company capital includes industrial property rights, the contract must be made in writing.

RESPONSIBILITY IN ORDINARY COMPANIES

Organized company partners are unlimitedly liable to third parties for their personal assets. There is joint and several liability between partners. An ordinary partnership does not have legal personality. Therefore, enforcement proceedings cannot be brought against the ordinary company.

In a decision of the General Assembly of the Supreme Court of Appeals, "A partnership in which two or more businesses combine their contributions to achieve a certain purpose does not have the capacity to be a party since it does not have a legal entity. Partners are directly and unlimitedly liable to the creditors with all their assets for the debts of the partnership, but real and legal persons have the capacity to be a party." He stated as follows.

Receivables belonging to the partnership cannot be directly seized without determining the profit or liquidation share of the debtor partner, who is under enforcement proceedings due to his personal debt. This situation was stated in a decision of the 12th Civil Chamber of the Supreme Court of Appeals dated 2017. "In ordinary partnerships, in case of enforcement proceedings against one of the partners due to their personal debts, the complaint must be accepted, since it cannot be decided to seize an existing right belonging to the partnership without determining the profit or liquidation share of the debtor partner." It is expressed as .

Since ordinary companies do not have legal personality, checks or promissory notes cannot be issued in the name of ordinary companies. In terms of checks or promissory notes issued by partners, the liability of other partners is determined according to the representation provisions, as we will explain below. If one of the partners has issued a negotiable document on behalf of the partnership, all partners become liable.

JUSTICE PARTNERSHIP SUBJECT

Organized companies are not limited in terms of subject matter. Therefore, partnerships can be established in any matter, provided that it does not violate the general provisions of the Code.

Ordinary companies can operate commercial enterprises in accordance with Article 12 of the Turkish Commercial Code.

LIABILITIES OF PARTNERS IN ORDINARY COMPANIES

1- Obligation to Invest Capital in an Ordinary Company

According to Article 621 of the Turkish Code of Obligations, each partner is obliged to contribute a contribution to the partnership in the form of money, receivables or other goods or labor. UK has regulated the capital as participation share.

Again, according to Article 621 of the Code of Obligations;

Unless otherwise agreed in the contract, the participation shares must be equal to each other and of the importance and quality required by the purpose of the partnership.

If a partner's participation fee consists of providing something for use, in the lease agreement; If it consists of ownership of something, the provisions in the sales contract regarding liability for damage, defect and seizure are applied by analogy.

If one of the partners does not fulfill its obligation to contribute capital, dissolution of the partnership may be requested. The General Assembly of the Supreme Court of Appeals did not accept the ordinary company agreement as a contract that imposes mutual obligations on both parties. For this reason, it ruled that the default provisions cannot be applied against the partner who does not fulfill the participation fee.

2- Obligation to Participate in Loss

While listing the elements of the ordinary partnership agreement, we stated that each partner is obliged to share in the profits and losses. Partners' participation in losses is mandatory since it is considered an essential element of the contract.

There is a statutory exception to this general rule. In accordance with the provision of TBK 623/3, the agreement stating that a partner will only participate in the profits without participating in the losses is valid only for the partner who has contributed only his labor as participation share. The loss sharing rate can be regulated by the ordinary company contract. But these ratios are valid only in internal relations. Contract provisions have no validity in foreign relations.

TBK 623/1. According to the article, unless otherwise agreed in the contract, each partner's share of the profit and loss is equal, regardless of the value and nature of the participation share. As a matter of fact, the 8th Civil Chamber of the Supreme Court of Appeals stated, "In the concrete case; although the plaintiff claimed that 60% of the profits obtained from the verbally established ordinary partnership belonged to him and the remaining 40% belonged to the defendant, he could not prove this claim, which was not accepted by the defendant, with conclusive evidence. In this case, in accordance with the first paragraph of Article 623 of the TBK explained above, the shares of the plaintiff and the defendant in the earnings in the ordinary partnership are equal. This is the case." "While the court should have decided on the merits of the dispute by accepting that the parties' profit shares are equal and dividing the liquidation profit equally between the parties, the distribution of the liquidation profit in accordance with the liquidation balance sheet prepared on the basis of the claim regarding the unproven profit share was not deemed appropriate and required reversal." There is a decision as follows.

3- Prohibition of Competition in Ordinary Companies

Article 626 of the Turkish Code of Obligations regulates the obligation of non-competition among ordinary company partners.

According to the article, "Partners cannot do things that hinder or harm the purpose of the partnership for their own benefit or the benefit of third parties." In case of violation of the prohibition of competition, liability for compensation will arise.

In addition, it is also possible to request the dissolution of the company.

4- Duty of Care

Another of the obligations of ordinary company partners is the duty of care. The duty of care is regulated in Article 628 of the UK Code. According to the article;

Each partner is obliged to show as much effort and care in partnership affairs as in his own business.

Each partner is obliged to compensate the others for the damages caused by his own fault, without the right to offset them with the benefits he provided to the partnership in other business.

The partner who carries out the partnership business for a fee is responsible in accordance with the provisions of the power of attorney.

RIGHTS OF SHAREHOLDERS IN ORDINARY COMPANIES

1- Right to Request Dividend

Ordinary partnerships are partnerships established for economic purposes. Therefore, partners have the right to demand their share of the company's profits. This situation is stated in Article 622 of the Turkish Code of Obligations: "Partners are obliged to share among themselves all profits belonging to the partnership due to their nature." It is expressed as follows.

According to Article 623 of the Turkish Code of Obligations, the sharing of profits in ordinary partnerships is done as follows;

- If there is a regulation in the contract, profit and loss are distributed according to this regulation.

- Unless otherwise agreed in the contract, each partner's share of profit and loss is equal, regardless of the value and nature of the participation share.

- An agreement stating that a partner will only participate in the profits without participating in the losses is only valid for the partner who has contributed only his labor as participation share.

2- Right to Request Fees, Interest, Advances and Expenses

Article 627 of the Turkish Commercial Code regulates the rights of partners to claim expenses incurred for the company, to demand interest on the money given in advance, and to demand compensation for the labor expended by the partner. According to the relevant article;

The other partners are liable to one of the partners for the expenses incurred or debts incurred for the partnership business; The other partners are obliged to compensate for the losses incurred directly by this partner due to management works and the losses arising from the dangers arising from the management of the partnership.

The partner who gives money to the partnership as an advance may request interest starting from the day he gave it.

A partner who has made efforts for the partnership business even though he is not obliged to do so may request payment of a compensation required by equity.

3- Right to Review

The right to review is regulated in Article 631 of the Turkish Code of Obligations. As it is known, the liability of partners in ordinary companies is not limited. In addition, partners have management authority. For these reasons, the partners are granted the right to review. Since the right to review is a mandatory right, it cannot be removed by contract.

According to Article 631 of the UK;

Even if they do not have management authority, each partner has the right to obtain information about the operation of the partnership, to examine its books and records, to take samples from them and to make a summary of its financial situation. On the contrary, contracts are absolutely void.

4- Management and Right of Objection

In ordinary companies, management rights can be transferred to one or more partners or a third party by contract. However, if there is no such provision in the contract, all partners will have the right to manage the company. Each of the directors of the partnership can operate on his own. However, every partner authorized to manage the partnership has the right to prevent the transactions by objecting. The right to object must be exercised before the completion of the transaction.

TBK 625/3. According to the article;

Unanimity of all partners is required to appoint a general authorized representative to the partnership and to carry out the extraordinary affairs of the partnership. However, in cases where delay is harmful, each of the managing partners is authorized in this regard.

MANAGEMENT IN JOINT PARTNERSHIP

Appointment and Dismissal of Director

The managers of ordinary companies can be determined by contract or by decision taken after the establishment of the company. As we mentioned above, the company manager may be a third person other than the partners. If the manager is not appointed, all partners will have management authority.

If the manager is appointed by contract, a contract amendment is required for his dismissal. If he was appointed by decision, a new decision must be taken for dismissal.

According to Article 629 of the Turkish Code of Obligations, the manager can only be dismissed if there is a justified reason. Unless there is a justified reason, partners cannot remove or limit the management authority. As stated in the justification of the article, if there is a justified reason, there is no need for a court decision.

As a matter of fact, Article 629 of the BK states: "The management authority granted to one of the partners by the partnership agreement cannot be removed or limited by the other partners without a justified reason. Even if there is a provision in the partnership agreement stating that the authority cannot be removed, each of the other partners can remove the management authority if there is a justified reason. Justifiable reasons exist especially in cases where the managing partner excessively neglects his duty or loses the ability required for good management."

Powers of the Administrator

The powers of the manager are regulated by Article 625 of the Turkish Code of Obligations. The article stated that the management authority covers only ordinary affairs. In extraordinary matters, partners must make a unanimous decision. Again, according to the article, each of the managers is deemed to be authorized in urgent matters.

Administrator's Rights

The most fundamental right granted to the manager by Article 625 of the UK Code is the management of the partnership. In ordinary companies, management rights can be transferred to one or more partners or a third party by contract. However, if there is no such provision in the contract, all partners will have the right to manage the company. Each of the directors of the partnership can operate on his own. However, every partner authorized to manage the partnership has the right to prevent the transactions by objecting. The right to object must be exercised before the completion of the transaction.T

BK's 625/3. According to the article;

Unanimity of all partners is required to appoint a general authorized representative to the partnership and to carry out the extraordinary affairs of the partnership. However, in cases where delay is harmful, each of the managing partners is authorized in this regard.

Manager's Debts

The manager has a duty of care, a duty to be accountable, and a duty to allow inspection. As we mentioned above, the right to review is an absolute right granted to all partners and cannot be excluded by contract.

TBK 630/3. According to the article, "Managing partners are obliged to give accounts and pay their share of earnings to the partners at least once a year. The agreement regarding the extension of the accounting period is absolutely null and void. The same rule applies if the person managing the partnership is not one of the partners."

REPRESENTATION OF ORDINARY COMPANY

According to Article 637 of the Code of Obligations, the partner who is assigned management duty is deemed to have the authority to represent the partnership or all partners against third parties. But this rule is not absolute. The manager's power of representation can be eliminated by contract. The actions taken by the partner with the authority to represent are binding on all other partners. Direct representation occurs and third parties can claim their receivables from all company partners.

In accordance with paragraph 3 of the article, the authority for important disposition transactions to be made by the managing partner who has the authority to represent must be given unanimously by all partners and this issue must be clearly stated in the authorization document. If permission is not given, the legal actions taken by the partner are binding only on him/her. In case of unauthorized representation, the provisions regarding working without a power of attorney apply.

Again, Article 637 includes the provision that a partner who conducts a transaction with a third party on his own behalf and on behalf of the partnership will be himself a creditor or debtor towards this person. Indirect representation is mentioned in this article. If there is indirect representation, other partners are not responsible.

TRANSFER OF ORDINARY COMPANY

Article 632 of the Turkish Code of Obligations requires the consent of all partners for the recruitment of a new partner into the partnership. As clearly stated in the provision, it is not possible to transfer company shares without the common consent of all partners.

If one of the partners transfers his share without the consent of all other partners, the transferee cannot become a partner. However, this transfer process is valid between the transferor and the transferee. The transferee may request his share of the profits from the transferor. Apart from this, there is no right that the transferee can benefit from due to company partnership.

QUITTING AND REMOVING FROM AN ORDINARY COMPANY

According to Article 633 of the UK;

"If a partner makes a notice of termination, is restricted, goes bankrupt, his share in the liquidation is converted into cash through compulsory execution, or dies, and if there is a provision in the contract stating that the partnership will continue with other partners, when one of these situations occurs, that partner or his representative or the heir of the deceased partner may leave the partnership or be expelled from the partnership with a written notification by the other partners."

In case a partner quits or is expelled, his share passes to the other partners in proportion to their shares. The partner's liquidation share is calculated by the expert. If the parties have a disagreement about the expert who will calculate the share, this person is appointed by the judge.

The consequences of opting out are regulated in Articles 635 and 636 of the UK Code. Relevant items are as follows;

BK 635: Insufficiency of assets

If the assets of the partnership are not sufficient to cover its debts on the date of termination of the partnership capacity, the partner who quits or is expelled is obliged to pay the amount of his share of the debt to the other partners within the framework of the regulations regarding participation in losses.

BK 636: Incomplete workr

The exiting or expelled partner participates in the profit or loss arising from the works that have not yet been completed during the period in which he was a partner. The person whose partnership status has ended, as of the end of that accounting year, will receive his share of profit from the partnership, if any, due to the completed works; It may also request necessary information about ongoing work.

TERMINATION OF THE ORDINARY COMPANY

The reasons for the dissolution of ordinary companies are regulated in Article 639 of the UK Code. According to the article, the reasons for the termination of the ordinary company are;

1. The realization of the purpose stipulated in the partnership agreement or its realization becomes impossible,

2. If there is no provision in the contract regarding the continuation of the partnership with heirs, upon the death of one of the partners,

3. If there is no provision in the contract stating that the partnership will continue, the restriction, bankruptcy or liquidation of a partner's share in liquidation,

4. By unanimous decision of all partners,

5. Expiration of the agreed period for the partnership,

6. If the right to notify termination is reserved in the partnership agreement or if the partnership is established for an indefinite period or during the life of one of the partners, a partner must give notice of termination,

7. In case of justified reasons, court decision upon request for termination, always without any other conditions.

It is counted as follows.

Article 641 of the UK Code is as follows.

If the partnership is terminated by any means other than notice of dissolution, a partner's authority to manage the affairs of the partnership continues with respect to him until he learns of the termination or could have learned if he had exercised due care in the situation.

If the partnership ends with the death of one of the partners, the heir of the deceased partner is obliged to immediately notify the other partners of the situation. The heir continues the business that the deceased partner was previously carrying out, within the framework of the rules of honesty, until the necessary precautions are taken. Other partners continue to carry out the partnership business in the same way, temporarily.

TERMINATION OF THE ORDINARY COMPANY

If the partnership is established for an indefinite period or for the life of one of the partners, the partners must give 6 months' notice in order to request the dissolution of the company. The notice of termination takes effect at the end of the accounting period. In order to give notice of termination in limited-liability companies, the right of termination must be granted in the partnership agreement.

Apart from this, the ordinary company can be terminated upon the will of all partners to terminate.

Finally, the law stipulates that the company can be terminated by court decision in case of just cause.

LIQUIDATION OF ORDINARY COMPANY

Converting partnership assets into cash, paying off debts, and distributing the remainder to the partners is called liquidation. Liquidation is carried out jointly by all partners. Partners have the right to appoint a liquidator. In case of dispute, the liquidator may be appointed by the judge. A fee is paid to the liquidator.

According to Article 643 of the Turkish Code of Obligations;

"If anything increases after the debts of the partnership are paid and the advances given by each partner to the partnership, the expenses incurred for the partnership and the contribution share they have put in are returned, this gain is shared between the partners. If the remaining assets of the partnership after the debts, expenses and advances are paid are not sufficient to return the participation shares put by the partners, the loss is shared between the partners."

Receivables are subject to a 5-year statute of limitations. During this period, partners and the company's bodies must claim their receivables from each other.