A company share can be inherited; however, the transfer of the share to the heirs does not mean that all of the company’s assets belong directly to the heirs, or that the heirs automatically become managers. First, the type of company, the nature of the share and the company agreement must be determined. The transfer by inheritance of a share in a limited company and the transfer of registered shares in a joint-stock company may follow different rules.
Failure to pay dividends after the death, failure to invite the heirs to the general assembly, failure to record the transfer in the share register, or understating the value of the company may all create a dispute. The solution does not consist of submitting a certificate of inheritance alone. The representation of the co-heirs’ estate community, the company organs, the right to request information and the valuation procedure must be considered together. Turkish Commercial Code No. 6102 (TTK).
Separating company assets from the inherited share
The real estate, bank accounts and machinery of a limited or joint-stock company belong to the company as a legal entity. If the decedent held forty percent of the company, the estate in principle includes that share and the decedent’s personal claims against the company. Forty percent of each of the company’s properties is not directly regarded as property registered in the decedent’s name.
This distinction affects practice in three ways. First, the company’s assets should not be listed as personal property when the estate is investigated. Second, when the value of the share is determined, the company’s debts and economic position are taken into account. Third, collecting a company receivable is not the same lawsuit as claiming the heir’s dividend or current account receivable from the company.
Sole proprietorships and ordinary partnerships
Not every activity called a “company” in everyday speech is a limited or joint-stock company. The absence of a separate legal personality in a sole proprietorship changes the relationship between the assets and debts and inheritance. In an ordinary partnership (adi ortaklık), under TBK Article 639, the death of a partner may end the partnership if the agreement contains no provision for continuation with the heirs. A liquidation share and direct participation in the management of the business are not the same right.
Because collective companies and other types are subject to special provisions, the rules of limited companies should not be carried over to every commercial structure. The first group of documents consists of the trade registry record, the current company agreement, the share register and any agreement between the partners. The name on the business sign or the way the family describes it is not sufficient to determine the legal type.
How does a limited company share pass to the heirs?
Statutory transfer without general assembly approval
Under TTK Article 596(1), when a capital share passes by inheritance, the rights and obligations pass to the acquirer without the approval of the general assembly. This special provision should not be confused with the form and approval rules of an ordinary voluntary transfer of shares. It cannot be said that the heir must enter into a new sale agreement as if purchasing the share in order to acquire it.
Nevertheless, the company must be presented with the information on the heirship and the death, and registration and representation steps are required. How the joint-ownership relationship among the heirs will be exercised is determined separately. The fact that the shares in the certificate of inheritance are shown does not in every case mean that each heir may exercise every corporate right independently of the others. In a similar situation, the steps in the article on inheritance of a company share can be compared.
The company’s three-month right of refusal
Under TTK Article 596(2), the company may refuse to approve the person to whom the share has passed within three months from the date it learns of the acquisition. For this, the company, a partner or a named third person must propose taking over the share at its real value. A statement that “we do not want the heirs as partners” alone does not satisfy all the statutory conditions.
If the refusal is not made openly and in writing within the period, the company is deemed to have approved. The refusal has retroactive effect, but it does not affect the validity of general assembly resolutions adopted before the decision. The date of learning, which organ of the company knew what, the procedure of the decision and the content of the offer should therefore be documented. Calculating three months automatically from the date of death is not correct in every case; the provision is based on the date the acquisition is learned.
How is the real value determined?
The real value is not the same as the nominal capital amount written on the share. The company’s assets, debts, business value, profitability, risks and the concrete valuation method are important. The book value and the market value of a property may differ. However, adding up only the highest property prices while leaving out all debts is not a sound valuation either.
TTK Article 597 provides that, if there is no agreement on the real value, the commercial court of first instance at the company’s seat may make the determination upon the request of one of the parties. The allocation of costs and the nature of the decision specified in the law are part of this special route. The request should clearly state whether it covers the value of the entire share or of a specific portion of it.
Court of Cassation example: can only the company bring the action?
In its decision dated February 6, 2025, E.2024/2322, K.2025/613, the 11th Civil Chamber of the Court of Cassation (Yargıtay 11. Hukuk Dairesi) examined a request for determination of the real value brought by a partner in the position of buyer designated by the company. The regional court of appeal dismissed the case on the ground that there was no active standing. The majority of the Court of Cassation accepted that the buyer designated under TTK Article 596(2) may also bring this action, and quashed the decision.
The dissenting opinion interpreted the concept of “parties” as limited to the heirs and the company. The reasoning for the dismissal should therefore not be presented as the Court of Cassation’s final acceptance. The subject of the decision is not what the real value of the share actually is, but who may bring the action for the determination of value. Full text of the decision and dissent.
Share register and trade registry procedures
For the registration of share transfers in a limited company, under TTK Article 598 the managers apply to the trade registry. Submitting the required documents and carrying out the registry procedure are important steps after the statutory acquisition. The absence of a registration does not mean in every case that the acquisition by inheritance never arose. On the other hand, a registration deficiency may cause serious problems in exercising rights and in relations with third parties.
In its decision dated November 16, 2020, E.2020/88, K.2020/5086, the 11th Civil Chamber of the Court of Cassation quashed a lawsuit in which the company sought, by action, the recording of the inherited shares divided in proportion to the heirs’ inheritance shares. The Chamber held that there was no legal interest in bringing the action without using the registry application available under TTK Article 598 and without including a request for partition in the action.
This result does not mean that every registration dispute must be brought before a court. What is decisive in the particular file is that a legal registry route which could first be used was skipped. In addition, the local court’s statement that the share is divided automatically should not be presented as if the Court of Cassation had independently and definitively resolved the matter. Full text of the decision.
Different rules for joint-stock company shares
Registered shares that are not listed on the stock exchange
For registered shares subject to the regime of TTK Articles 493–494, in the case of acquisition by inheritance the property and asset rights take effect immediately, while the rights to attend and vote at the general assembly are linked to the company’s approval. The company’s right of refusal depends on the proposal to take over the share at its real value upon inheritance. If the approval request is not refused within three months, or if the refusal is unjustified, approval is deemed to have been given.
These rules should not be summarized with the same wording as TTK Article 596 for limited companies. In particular, the moment of transfer of rights, the application and the valuation provisions are different. Listed shares, shares tracked in book-entry form and bearer shares are examined under their own special provisions and registry system. An old share certificate of a family company and a share tracked on the stock exchange are not subject to the same transaction file.
Registration and joint representation in relations with the company
TTK Article 499 contains special rules on the share register. The documents showing that the share was acquired by inheritance and the conditions for exercising rights against the company should be evaluated together. When the heirs show that they are entitled, they must also resolve any discrepancy in the share register or the registry system.
Where a share is co-owned by several persons, TTK Article 432 and, in limited companies, Article 599 regulate joint representation. The joint representative may be determined by agreement among the heirs; in case of disagreement, the need for an estate representative may be examined separately. The manager who runs the company and the representative exercising the rights arising from the share do not have to be the same person or the same office.
Dividends and the right to information
A profitable company does not always create an immediate payment claim
In joint-stock companies, TTK Articles 507 and 509, and in limited companies, Article 608, regulate the sources of dividends and the conditions for their distribution. The fact that there is money in the company’s cash box does not mean the heirs may withdraw any amount they wish. Distributable profit, reserves, the company agreement and the decision of the competent organ must be examined.
Dividend claims that arose before death and remain unpaid must be separated from the rights that will arise from the share after death. The fact that the company has made no distribution decision does not eliminate in every case a claim of abuse by the majority; but it also should not be assumed that a precise amount exists for which a direct action for payment may be brought. Annulment of a resolution, the right to information, liability or other claims are evaluated according to the concrete case.
Accounts and company secrets
In limited companies, TTK Article 614 regulates a partner’s right to request information about company affairs and accounts and to inspect them. Where there is a danger that the information may be used to the detriment of the company, there are statutory restrictions and procedural steps. In joint-stock companies, the right to information and inspection is handled within the framework of TTK Article 437 and related provisions.
The documents requested should be made specific: financial statements, general assembly minutes, dividend distribution decisions, related-party transactions and current accounts of partners, for example. Rejecting every request in full on the ground of company secrets, and the approach that the heir may obtain unlimited documents, are equally problematic. A clear representation document and a clear period for the requested records make the review easier.
Does an heir automatically become a manager or board member?
No. Shareholding and an organ position are separate. The fact that the decedent was a manager or board member does not show that the office passed together with the inherited share. The company agreement, the rules on electing organs and the power of representation apply. An heir acting like a director on the company’s bank account may create a problem of authority.
If the death of the sole manager prevents the company from functioning, the establishment of a new organ and, where necessary, a request to the court for appropriate measures are evaluated. The appointment of an estate representative does not in every case automatically remedy the company’s lack of an organ. The provisions of TTK Article 636 on the lack of a limited company’s organs and on termination for good cause provide separate solutions where their conditions are met.
Do company debts become the heir’s personal debt?
In limited and joint-stock companies, legal personality and the principle of limited liability are the starting point. However, the decedent’s unpaid capital debt to the company, any additional payment or ancillary obligation, personal surety and the decedent’s own liability as a manager should be examined separately. The statement “the company is limited, so there is no risk at all” is not correct.
For public receivables, in particular the limited company shareholder’s liability under Article 35 of Law No. 6183 and the special provisions on the legal representative are taken into account. Being a shareholder alone should not be confused with liability arising from the position of manager. A personal debt arising before death that passes by inheritance, and the liability of the heir arising from the heir’s own management activity after death, must also be assessed separately.
| Area to examine | Required documents | Possible legal issue |
|---|---|---|
| Acquisition of the share | Certificate of inheritance, company agreement | Transfer and joint representation |
| Refusal by the company | Record of knowledge, decision and offer | Three-month period and real value |
| Dividends | Financial statements and distribution decision | Arising and amount of the claim |
| Management | Registry and organ decisions | Authority and lack of organ |
| Debt risk | Surety, capital and public debt records | Separation of personal and company liability |
Action, time limits and an interim protection plan
In a dispute over a company share, the claim may concern registration, real value, the right to information, annulment of a general assembly resolution, dividends or liability. Jurisdiction, venue and mediation are determined according to the nature of the claim. It should not be assumed that an action including a commercial monetary claim and an action seeking only information or determination of value are subject to the same procedural requirements.
Time limits for challenging general assembly resolutions, the company’s refusal period and the statute of limitations for claims are separate timetables. Sending a formal notice does not automatically protect all of these time limits. If there is a danger that assets will be concealed or that an irreversible transaction will be made, a suitable interim protection may be requested; however, the necessity and proportionality of a measure that would completely halt the company’s activity must be separately demonstrated.
By way of hypothetical example, suppose the decedent’s thirty percent share passed to four heirs. First, the position of this share in the community of heirs is determined; then it is explained who will represent it before the company. Rather than requesting registration of thirty percent of the company’s real estate in the heirs’ names directly, the claim should be built on the share ownership and any personal claims. In this way the boundary between the company and the estate is protected.
Case example: the death of the sole manager and ongoing company business
If the sole manager of a limited company is also a shareholder, the death may create two different gaps. While the transfer of the share by inheritance is evaluated under the statutory succession rules, the company’s need for signatures and management is resolved under the provisions on organs. The fact that one of the heirs takes a certificate of inheritance to a bank branch does not, by itself, authorize that person to make payments from the company account alone. The company’s account and the decedent’s personal account must be kept separate.
The first review determines the current registry record, the company agreement, the form of representation, any other officers and the upcoming company transactions. Salaries, taxes and contractual due dates may show urgency; however, urgency does not give a power of management to an unauthorized person. A suitable organ decision or, where necessary, judicial protection is evaluated according to the company’s concrete situation. It should not be forgotten that the appointment of an estate representative and the appointment of a company manager are separate transactions.
Where there is a dispute among the heirs about the value of the share, halting the company’s activities is not always an appropriate solution. Continuation of business may preserve the economic value of the share. On the other hand, where there is an allegation that accounts are being kept back or that unusual payments are made to related persons, the preservation of concrete records and the routes for obtaining information come to the fore. The request should aim to remove the proven danger without disproportionately interfering with the company’s daily operation.
Conclusion
In the case of an inherited company share, the first question is the type of the company and the legal nature of the share. Statutory succession, registration, joint representation, dividends and the management function are separate stages. Documenting the company’s offer of real value and the time limits, reviewing the financial records, and not confusing the company’s assets with the heir’s personal right, are decisive for protecting rights.
Frequently Asked Questions
Can a limited company refuse to accept the heirs as partners?
The three-month period under TTK Article 596, the requirement of an open written refusal and an offer to take over the share at its real value are assessed together. It is not enough for the company simply to say that it does not want them.
Do the heirs become direct co-owners of the company’s real estate?
They do not become direct owners of properties belonging to the company as a legal entity. As a rule, the company share enters the estate; the position of sole proprietorships is different.
Does the position of company manager pass by inheritance?
It does not pass automatically. Shareholding and the management and representation function are separate. The election of organs and the company agreement are examined.
Is the price of the share the nominal capital amount?
The real value may differ from the nominal amount. The company’s assets, liabilities, income and risks must be valued by an appropriate method.
Can each heir vote separately at the general assembly?
The co-ownership status of the share and the representation provisions must be examined. A requirement for a joint representative may arise; the size of the inheritance share alone does not determine the entire procedure.
Can immediate payment be demanded from a profitable company?
The legal and contractual conditions for distributing dividends, the decision of the competent organ and the arising of the claim are examined. Money in the company’s cash box is not the personal money of the heirs.
Sources and legal bases
- Turkish Commercial Code No. 6102, Articles 432, 437, 493–499, 507–509, 596–599, 608, 614, 623, 636.
- Turkish Civil Code No. 4721, Articles 599 and 640.
- Turkish Code of Obligations No. 6098, Article 639.
- Law No. 6183, Article 35 and supplementary Article 35.
- Court of Cassation, 11th Civil Chamber, November 16, 2020, E.2020/88, K.2020/5086.
- Court of Cassation, 11th Civil Chamber, February 6, 2025, E.2024/2322, K.2025/613; majority and dissenting opinions.