Ceyda Ceylan Uygun

Senior Attorney

21.11.2023

The Consequences Of Limited Company Partners Being Guarantors And Guarantees


THE CONSEQUENCES OF LIMITED COMPANY PARTNERS BEING GUARANTORS AND GUARANTEES
INTRODUCTION


In this article, the consequences of shareholders being guarantors and guarantees to the company debts in limited partnerships and the effect of the separation from the partnership on the commitments in these companies will be examined. 

I. In General 
A. Liability of Limited Company Partners for Company Debts

Company types and the obligations of which they are the members of the partners are regulated in the Turkish Commercial Code[1] (TCC) No. 6102. A limited partnership is a company established by one or more persons under  a trade name. The partners shall not be responsible for the debts of the company, only the principal capital shares they have committed to, and in the case of the company, they shall not be responsible for the additional payment and fulfill their subsidiary performance obligations.

In limited partnerships, three of the partners are personally responsible for the transactions they carry out with the third parties. This issue is regulated in Article 602 of the TCC titled "responsibilities of the partners”. In Theaforementioned article, the statement  "The company is only responsible for its assets due to its debts and liabilities."  was made. Within the scope of these regulations, the details of the responsibility of the partners have been examined.

1.     Responsibilities of the Partners

As a rule, the partners of the limited company are only responsible for the limited company. This responsibility arises from the capital share debt that the partners have committed to bring to the company and from the additional payment and side performance of the capital share they have committed to bring to the company.[2] Three third parties of the partnership in the limited partnership are personally responsible for the  transactions they carry out due to the partnership's special relationship. The creditors of the limited partnership can only be credited with the assets of the partnership. The exception to this is that the partners are responsible for their public receivables.[3]

2.     Responsibilities for Public Debts

In Article 35 of the Law on the Collection Procedure of Public Receivables No. 6183 (LCPPR), it is stated that theshareholders of the limited liability company will be directly responsible for the proportion of capital shares since they will receive the public receivables that cannot be collected or collected from the company in whole or in part. Thus, while the normal creditors of the partnership[4] cannot prevent the assets of the partners in a way, public institutions may referto the partners due to their public receivables. 

B.  Bail and Guarantee Agreements

Surety Agreement is defined in Article 581 of the Turkish Code of Obligations[5] (TCO) as follows: "it is the contract that ensures the guarantor is fully responsible for consequences of not the debtor fulfilling their debt against the creditor."   It is understood from the wording that the guarantor is fully responsible due to the contract. This process is subject to certain conditions. In order for there to be a surety guarantee in the middle, it is a priority condition for there to be a current and valid guarantee. However, in Article 582 of the TCO, the scope of this debt has been expanded and it has been regulated that it may be established in the future for natural or conditionally connected debts.

The conditions of a contract of surety are regulated in Article 583 of the TCO. In the aforementioned article, it is obligatory to specify the maximum amount for which the guarantor is responsible and the date of surety contract, which must be in writing. In addition, this maximum amount and the date of bail are presented in the  surety 's own handwriting. This form is essential.

            In accordance with the Code of Obligations, if the name "surety" is not given to the surety by the other parties, the provisions related to a surety would not be applied. However, with Article 603 of the Turkish Code of Obligations, the provision of bail has become applicable only to the side conditions made under other names.   [6] In the case of the article, the guarantor is required to get rid of the protective measures and to prevent them from being entangled.

           The guarantor is primarily responsible for the principal debt. The scope of the liability of the guarantor is determined in Article 589 of the Turkish Code of Obligations.

 “1) The legal consequences of the original debt and the defect or default of the debt. 

2) Provided that the creditor notifies the guarantor at an appropriate time before the payment of the debt, the costs of the proceedings and lawsuits against the debtor and the costs caused by the delivery of the pledges to the guarantor and the transfer of the pledge rights when necessary.

3) Contractual interest for one year and the year in progress, and interest for one year and the year in progress on the principal issued earlier than when required by bonds. The guarantor, who has not been determined in the contract, is only responsible for the debts of the guarantor after the establishment of the guarantee."

           
In the decision of the 19th Civil Chamber, Basis 2015/15490, Decision No. 2016/5018 dated 21.03.2016, it is stated that "[...] the termination of the shareholders in the principal debt company by transfer does not require the termination of the debts arising from the general loan guarantee against the bank [...][7]" and even after the partnership, the personal guarantee will continue to be born and evaluated on the basis of responsibility.

            In the decision of the 11th Civil Chamber, Basis 2008/11550, Decision No.2010/2284 dated 01.03.2010[8], it is stated that "[...]Even if the plaintiff later transfers the shares of the company and the partnership relationship ends, the responsibility of the receiver plaintiff, in which the loan relationship between the bank and the non-litigation company is in the first place, continues, that the TCC. 'In accordance with Article 532 of the Civil Code, the liability of the partners in the limited companies is limited to the capital they put forward and there is no possibility of advancing to the partner whose partnership has ended, but the reason for the plaintiff of the defendant bank is that the plaintiff is not the partner of the company, but is due to the fact that the negligence is due to the fact that the defendant bank signs the deferred debt with the invoice and the original debt is stipulated. It was decided to dismiss the case due to necessity.[…]” The personal liability herein shall continue despite the termination of the partnership, the personal surety of the partners of the limited liability company despite the termination of the partnership shall still be responsible for their operations. 

Although it is not regulated in the law that the limited company partner can make bail on behalf of the company, many old and new decisions have been made in the judiciary with decisions on how to work in practice.      For example, in the decision of the 11th Civil Chamber, Basis 1978/7, Decision No. 1978/354 dated 07.02.1978, it was written that the[9]collective company partner should guarantee the company on behalf of the company, the partner should guarantee the company on behalf of the company and it should not make a clan and detailed decision on what will happen after the liquidation of the company.        

In this context, the partners in the establishment of the personal bail over the company debts of the surety management may agree that their responsibility will continue due to the current responsibility even if the partnership ends. 

The termination of being a guarantor is regulated in Article 598 of the Turkish Code Of Obligations."For whatever reason, when the principal debt ends, the guarantor also gets rid of his debt. If the debt and surety invoice are combined with the same person , the special benefits arising from the surety for the creditor shall be reserved. Each and every bail given by a number of persons shall be automatically abolished for ten years starting from the establishment of the relevant organization. Even if the surety has been given for more than ten years, the surety can only be followed until the ten-year period expires, unless an extended or new surety has been given. The guaranty period may be extended for a maximum of ten years for a new period of time, provided that it is made one year before the earliest guaranty expires, with the bailee's written approval in accordance with the form of the bail period."     

A contract of guaranty is a sui generis[10] process that is not directly regulated in the law but is regulated in accordance with Article 128 of the Turkish Code of Obligations for many teachers in education. To Fikret Eren, gere guarantee is defined as "the processes in which the guarantor takes the risk of the other party for the purpose of referring a party to the guarantee without the intention of obtaining an acceleration".[11] It is understood that even if it is not defined in the law, the risk of the action of the third party is taken as a guarantee.  

            Again, in the Unification Decision of the Judiciary dated 1969, a contract of guaranty was defined as follows: "The guarantee contract is that a person guarantees that they will reach a certain result with a non-exclusive contract." [12]

In Article 128 of the Turkish Code of           Obligations, it is stated that "It is necessary to eliminate the damage arising from the real attachment of this act, which is stipulated against the beginning of the act of three people. In the execution of a certain period, it may be decided that the responsibility of the person concerned will end if he/ she does not start to perform his/her act until the end of the period.” 

When the wording of this law is interpreted, it is ensured that the guarantee can be applied. And again, based on this law, we can evaluate that the guarantee should be written as a condition. Apart from this, there is no set form for the guaranty contract due to the fact that there are no regulations on this matter. 

            Although the Ankara 12th Commercial Court of First Instance rejected the plaintiff's request in its decision dated E.2021/189 K.2021/397, T. 3.6.2021, it stated in the decision that in order to be guaranteed, the surety contract must be in accordance with the conditions of Article 583 of the Turkish Code of Obligations, which is born from Article 603 of the Turkish Code of Obligations and focuses on the need for the article, or that the person who has any personal responsibility for the original obligation will be responsible for the same surety as in their job, and that the surety must be in accordance with the conditions of Article 583 of the Turkish Code of Obligations.[13]

In other words, as in the case of the guarantee, the guarantee is subject to the same conditions as the guarantee and the Limited Company partners will continue their responsibilities as guarantors and guarantees.

            Although it is  subject to similar conditions and ends in a similar scope, there are basic differences between a guaranty and surety agreement.  First of all, while the liability of the guarantor with the wording of Article 582 of the Turkish Code of Obligations depends on the validity of the principal debt, there is a movement that is independent of the validity of the principal debt in the case of guaranty. In this context, the surety contract is a side agreement and depends on the principal debt. 

Since there are no legal conditions in the warranty procedures, there is no need to determine the amount to be responsible as in the guaranty contract. The last point reached by the debt determines the responsibility of the guarantor.[14]

III. Examination of Leaving the Partnership in terms of Surety and Guarantee Contracts

The creditors, whose details are specified above, will not be able to apply to the personal assets of the partners of the receivables arising from the limited liability company partnerships. However, exceptional cases may be the subject of bail and guarantee agreements. The judiciary has considered this in many different decisions. We see this most commonly for limited liability companies that want to get loans from banks. If the bank requests a guarantee in order to give a loan, the partners give a personal guarantee for the repayment of this loan. Because the company, of which all partners are the result, is entitled to be the  first and foremost guarantor of the loan to be received and gives it to this bank. 

In the event that the company becomes a guarantor of its debt, even if it leaves the surety partnership, the surety given by the company will not be terminated even if the surety expires. The personal guarantee is due to the partnership and the resultant position. The partners may be separated from the limited liability company partnership by dismissal or seperation, these are stated in Article 638 and the following articles of the TCC.   In other cases, the partnership may be terminated due to reasons such as the transfer of the share in accordance with Article 595 of the TCC or the sale of the share in accordance with Article 596 of the TCC by execution.  

The termination of the           surety is mentioned in Article 598 of the Turkish Code of Obligations. However, among these reasons for termination, separation from the partnership was not counted. Since there is no literal interpretation of the law, since these reasons are not counted as the termination of the joint venture as numerus clauses[15], the separation of the limited liability company partner from the partnership will not destroy the guarantee and responsibility given with the surety and guarantee agreements. However, if the end of the responsibility is added only in case of separation, then it will be released from the responsibility. As another exception, Article 35 of the Law on the Collection Procedure of Public Receivables may be amended. In this article, it is stated that they will have direct responsibilities in line with the share ratios as they will receive public funds.    

            In a decision of the Supreme Court, it has been stated that "..."the termination of the shareholders in the company by transfer does not require the termination of the debts born from the general loan guarantee against the bank.[16]It is understood from this situation that the personal bail problem has been interpreted by the judiciary that the debt will continue, especially in the bank debts. In another decision, it was stated that "... the plaintiff was responsible for 4 general loans in addition to the representative of the company in the form of a general loan and all of the registered debts, even if the plaintiff later transferred the company shares and the partnership relationship ended, the loan relationship between the bank and the non-litigation company was finalized. In accordance with Article 532 of the TCC, the responsibility of the receiver plaintiff, in which he/she is responsible for the transactions, continues, is limited to the capital that the partners put under the responsibility of the limited companies in accordance with Article 532 of the TCC, and although there is no possibility of advancement to the partner whose partnership has ended, the defendant bank It has been decided to dismiss the lawsuit due to the fact that the reason for the plaintiff's decision is that the plaintiff is the partner of the company, and that the reason for the plaintiff's decision is not due to the fact that the plaintiff has signed the inherited debt with the invoice." [17]

            In another decision, the judicial officer stated that he would not terminate the surety debt based on the transfer of the partnership share this time. The surety of the separation from the company partnership will not be terminated, the plaintiff has signed the contract as a registered surety, not as a company partner (personal surety), therefore, the responsibility will continue within the limit of the surety.[18]

In another decision, the decision was revoked with the reason that the trial court did not have a right of recourse although it was the guarantor by saying: "The court could not ask the plaintiff, who is the partner of the company, to say that the company paid the loan debt due to the loan debt, and it was also decided to reject the case with the fact that the defendant did not have the right of recourse even because he was a guarantor. As per Article 146 of the Code of Obligations No. 818, which must be applied as of the date of the lawsuit, each of the surety guarantors is responsible for all of the debt, just as each of the surety guarantors is entitled to pay more than their share due to the payments they havemade to the creditor, each of the surety guarantors is liable for all of the debt according to Article 488 of the same law, but they have the right to pay them for the shares of the others. In this respect, it is not necessary in the court decision that the plaintiff, who made more than their share due to the fact that the defendant is a guarantor, cannot pay the defendant. In this case, the surety agreement signed by the parties was brought and the responsibilities were investigated, it was evaluated whether the plaintiff did not make more than their share of payment, if they did, whether there was a right of recourse and it was necessary to decide on the result, while it was necessary to disrupt the entire facility in writing."[19]

CONCLUSION

With the details above, it is stipulated that the risk is stipulated as a person in the bail and guarantee agreements. The company confronts the commercial and ordinary phases of the person who is a surety partner independently of the company partnership as a natural responsibility for the life outside the commercial and commercial life.


In conclusion, this comprehensive review of the consequences of limited company shareholders acting as guarantors and sureties within the framework of Commercial and Company Law is important for both limited company shareholders and creditors who enter into contracts with them, especially banks. It is of vital importance for companies operating as limited companies and their shareholders that the guarantee and surety debts they undertake continue even if the partnership is terminated. In this context, it is necessary for limited company shareholders to have a deep understanding of their responsibilities under the guarantee and surety contracts they sign, and to integrate the information on the elements necessary for the termination of this responsibility into the contracts with strategic decisions.

SOURCES

ERDEN, Kuntalp, Credit Cards in the light of Judicial Board Decisions, Commercial Law and 

Judgment Decisions Symposium XIII, 1996, p. 298.

EREN, Fikret, Law of Obligations Prepared in accordance with 6098 Turkish Code of Obligations 

General Provisions, Ankara, 2018.

OĞUZMAN, M. Kemal /ÖZ, M. Turgut, Law of Obligations General Provisions, 

Istanbul, 2013.

POROY, Reha /TEKİNALP, Ünal / ÇAMOĞLU, Ersin, Partnerships and Cooperative Law,

Istanbul, 2009.

ŞENER, Oruç Hami, Theoretical and Practical Partnerships Law Textbook, 
ANKARA, 2015.

[1]OG., 14.02.2011, P. 27486.
[2]POROY /TEK İNALP /ÇAMOĞLU, P. 372.
[3]ŞENER, S.748.
[4]It refers to the creditors who are outside the public sector such as banks and merchants.
[5]OG., 11.01.2011, P. 27836.
[6]O ğ EXPERT /ÖZ, p. 415.
[7] Judgment on the 19th HD., E. 2019/2780, K. 2021/1132, T. 21.03.2016. For the decision, see https://www.lexpera.com.tr E.T. 10.11.2023.
[8] Judgment 11. HD., E. 2008/11550, K. 2010/2284, T. 01.03.2010. For the decision, see https://www.lexpera.com.tr E.T. 10.11.2023.
9 Judgment 11. HD., E. 1978/7, 1978/354 K., T. 7.2.1978. For the decision, see https://www.lexpera.com.tr E.T. 10.11.2023.
[9]
[10]Self-disclosure meansto oneself.
[11]EREN, Fikret, 6098 Turkish Code of Obligations Prepared in accordance with the Law of Obligations General Directorate, Ankara, 2018, p. 1107.
[12] Judicial Court Decision on the Unification of Internal Jurisprudence, E..1969/4, K. 1969/6, T. 11.06.1969. For the decision, see https://www.lexpera.com.tr E.T. 10.11.2023.
[13] Ankara 12th Commercial Court of First Instance, E. 2021/189 K. 2021/397, T. 3.6.2021. For the decision, see https://www.lexpera.com.tr. E.T. 10.11.2023.
[14]ERDEN, Kuntalp, Judicial Tay Decisions in the Light of Credit Card, Commercial Law and Judicial Tay Decisions Symposium XIII, 1996, p. 298.
[15]The limited number also means.
[16]16 Judgment decree 19. HD., E. 2015/15490, K. 2016/5018, T. 21.03.2016. For the decision, see https://www.lexpera.com.tr E.T. 10.11.2023.
[17]17 Judgment 11. HD., E. 2008/11550, K. 2010/2284, T. 01.03.2020. For the decision, see https://www.lexpera.com.tr E.T. 10.11.2023.
[18] Judgment on the 19th HD., E. 2015/5676, K. 2015/15082, T. 18.11.2015. For the decision, see https://www.lexpera.com.tr E.T. 10.11.2023.
[19] Judgment 11. Civil Chamber E.2012/14970 K.2013/15088 T. 05.09.2013. For the decision, see https://www.lexpera.com.tr E.T. 10.11.2023.