Termination and Liquidation of a Foundation

Does Ceasing Activity Automatically Close a Foundation?

A foundation no longer earning income, its administrators leaving and a long period without activity do not describe the same legal issue. The foundation's purpose and whether achieving it has truly become impossible are examined first. Article 116 of the Turkish Civil Code regulates termination and removal from the register by court order where achieving the purpose becomes impossible and amendment is also unavailable.

Vacancies in a governing body should not be confused with impossibility of the purpose. In some circumstances, filling administrative vacancies or making a legally permissible deed amendment may allow operations to continue. Dissolution for a prohibited purpose or activity also rests on different conditions. A board resolution is not assumed to replace all these procedures.

Assets and Debts Must Be Identified First

Collect the deed and amendments, current register and administration records, an asset inventory, bank accounts, property records, debts, receivables and pending lawsuits. Contracts with employees, tenants, donors or conditional donors are also reviewed where relevant. Ceasing operations does not automatically extinguish existing obligations to these persons.

The destination of property and rights remaining after liquidation is determined under the foundation deed and applicable legislation. The foundation's assets cannot be distributed to administrators or founders at will. The position of property acquired through a conditional donation requires separate examination. Representative and signing authority and preservation of records during liquidation are planned explicitly.

How Are Court and Institutional Procedures Connected?

The order sought from the court, the supervisory authority's opinions and applications, liquidation transactions and register notifications are sequenced according to the reason for the proceedings. The foundation category is also important; the procedure for a new foundation is not treated as identical to special rules governing historical foundation statuses. The existence of a valid termination order and whether it has become final are checked.

The foundation's standing, authority under powers of attorney and representation during liquidation must not be overlooked in pending proceedings. Contemplating a property sale solely to cover expenses does not remove the legal conditions for sale. Which records will be delivered to whom and how documents will be retained during liquidation are also identified at the outset.

The initial document list should show ongoing leases, employment and service contracts as well as assets. Guarantees, deposits and uncollected receivables may affect the scope of liquidation. The priority of an imminent debt or lawsuit is determined separately.

Options for Continuation and Termination

Documents showing the grounds for termination and the financial position are assessed together. The documents supporting continued operations, deed amendment and termination are clarified. The resolutions, applications and subsequent steps required by each option are identified separately. Accounting and tax matters requiring work with the relevant specialist are also identified.