A partner’s failure to fulfill their capital contribution commitment in a limited liability company (LTD) has remained one of the most common disputes between companies since the Turkish Commercial Code entered into force in 2012. A recent development has made the topic even more pressing in 2026. Presidential Decree No. 7887 raised the minimum capital requirement for limited liability companies from TRY 10,000 to TRY 50,000. Provisional Article 15, added to the Turkish Commercial Code by Law No. 7511, requires existing companies to raise their capital to this amount by 31 December 2026, failing which the company will be deemed dissolved. This has brought the question of how to deal with a partner who fails to honor their commitment during a capital increase to the forefront for nearly every limited liability company. In brief, a partner who fails to pay is first placed in default, triggering an obligation to pay default interest; the company’s management then issues a one-month formal notice demanding payment; and if that period also passes without result, the partner may be forfeited of their share by a decision of the company’s director(s) and stripped of their rights to it.
The Capital Contribution Commitment and the Current Minimum Capital Requirement
When a limited liability company is established, each partner commits to contribute a specific amount to the company in exchange for a share of the capital. This commitment is not merely a promise on paper, it is the fundamental obligation underlying both the articles of association and the company’s registration. The increase of the minimum capital requirement to TRY 50,000 as of early 2024, together with the transition period granted to existing companies until 31 December 2026, has forced many company managements to call on their partners for additional capital.
A concrete example helps illustrate this. Consider a software company with three partners. The general assembly resolves to increase capital, and each partner’s additional share is determined. Two partners make their payment within the deadline, while the third drags the process out by saying “I’ll pay later.” This is precisely where the default and forfeiture (ISKAT) mechanism comes into play. Rather than regulating this situation separately within the provisions on limited liability companies, the Code provides for the provisions on joint stock companies to apply by analogy, so the process must be carried out following the logic of joint stock company law, while bearing in mind the personal, closely-knit structure of a limited liability company.
If a Partner Fails to Pay: Default and the Obligation to Pay Interest
A partner who fails to fulfill their capital contribution obligation on time becomes liable for default interest automatically, without any need for a separate formal notice. This is an automatic consequence arising from the Turkish Commercial Code’s provisions on joint stock companies, applied by analogy to limited liability companies. In other words, interest begins to accrue the moment the due date passes, without the company having to send any warning letter.
In practice, company management should not rush into this. For example, if the reason for the partner’s delay is genuinely a temporary cash-flow problem, clarifying the matter first through a written notice, rather than moving straight to forfeiture, both preserves relationships within the company and forecloses any later objection that “no proper notice was given.” Charging interest is a sanction, but where it alone is not sufficient, the company has a more powerful tool available: forfeiture (ISKAT).
How the Forfeiture (ISKAT) Procedure Works
Forfeiture means stripping the partner of the rights arising from their capital commitment and any partial payments made, and removing them from their share. The decision to forfeit belongs to the director or board of directors, the limited liability company equivalent of a joint stock company’s board, and this authority cannot be delegated to the general assembly. The procedure is subject to the strict formal requirements set out in Article 483 of the Turkish Commercial Code. For this sanction to be applied, the company’s management must send the partner a formal notice giving a one-month period, which must expressly state that forfeiture will be applied if payment is not made within that period. If payment is still not made once the period expires, the partner is stripped of their rights.
Suppose the company’s director sends the notice properly, a month passes, and the partner still has not paid. In that case, the company may cancel that partner’s share and sell it to a new buyer or offer it to the existing partners. The critical point here is strict compliance with the form and duration of the notice. The most common error seen in practice is sending a notice that does not grant the one-month period or does not expressly state the consequence of forfeiture, which creates the risk that the forfeiture decision will later be held invalid.
Is Forfeiture Always the Right Solution? The Partner’s Rights and Its Limits
There is a genuinely debated point here, one on which practitioners also differ. In joint stock companies, tools such as share certificates and public offerings make the transfer of a forfeited share to a new holder a relatively mechanical process. A limited liability company, by contrast, is a structure built on personal trust, with a small number of partners and close relationships between them. Applying the joint stock company provisions by analogy can, in some cases, disproportionately increase the risk of a partner losing their share.
In my view, company management should seriously consider more measured alternatives, such as the forced sale of the share or its transfer to the other partners, before exercising the power of forfeiture. Where a partner’s payment difficulty is temporary and their intention to remain in the company is clear, proceeding straight to forfeiture may escalate the internal dispute and increase the risk that the general assembly resolution will later be challenged in an annulment action. On the other hand, where a partner systematically refuses to pay and this is paralyzing the company’s operations, forfeiture is a necessary tool to protect the interests of the company and the other partners. What matters is that forfeiture be used as a mechanism to protect the company’s capital structure, not as a punitive measure.
Are Forfeiture and Expulsion from Membership the Same Thing?
Forfeiture is a sanction applied only against a partner who fails to pay their capital contribution, and it is carried out by a decision of the director(s). Expulsion from membership, by contrast, is a separate route under Article 638 of the Turkish Commercial Code. If the articles of association set out grounds for expulsion, a partner may be expelled by a general assembly resolution; where expulsion is based on just cause, the company must apply to the court. An expelled partner’s right to an exit payment is assessed separately under Article 640 of the Code. Which route to follow when a capital debt remains unpaid must be determined by examining, together, the portion already paid by the partner and the provisions of the articles of association.
A Practical Roadmap for Companies and Partners
For a company management facing a partner who has failed to pay their capital contribution, the steps can be summarized as follows: first, notify the partner in writing once the payment deadline has passed; then, if necessary, apply default interest; if this produces no result, properly serve a formal notice giving a one-month period that expressly states the consequence of forfeiture; and once that period expires, complete the forfeiture process by decision of the director or board of directors.
- Support every step with written documentation, a verbal warning creates evidentiary problems later.
- State the one-month period and the consequence of forfeiture expressly in the notice, otherwise the notice may be held invalid.
- Distinguish whether the partner is genuinely experiencing payment difficulty or actually wants to end their relationship with the company, the solution should be shaped accordingly.
- Especially for capital increases tied to the end-of-2026 compliance deadline, document the capital increase resolution, the payment schedule and the forfeiture notice consistently with one another.
Where a partner’s exit from the company arises in the context of a capital increase, the valuation and transfer of the share also require separate attention. Likewise, providing for such disputes in advance in the articles of association is the most practical way to prevent conflicts between partners down the line.
In conclusion, the issue of a partner who fails to pay their capital contribution is not merely a collection problem, it concerns the protection of the company’s capital structure and the balance between partners. A properly conducted default and notice process can protect both the company and the partner from an unnecessary forfeiture decision.
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