Succession Planning Under Turkish Law
INTRODUCTION
Mentioning about death or thinking that every individual will die one day is not a topic that can be discussed easily and comfortably for all people. However, if we must look at life from a more realistic point of view death is part of life and everyone must be confronted with it. At this point the crucial issue is how and what way you leave all the things you have achieved by working hard throughout your life to the future. For all those reasons it is significant and valuable for everyone, especially wealthy people, to have a succession plan.
Succession planning, which is necessary for all wealthy individuals and where the most important element is timing, holds great significance for the future. Many people may think of it momentarily but either postpone or forget to do it later. Transferring your wealth to the next generation in the most effective and least conflict-ridden way and preparing a succession plan that is suitable for both the business and your personal situation when necessary are important. We would like to remind you that you can seek our assistance and legal advice for any kind of support in this regard.
Financial Times has an informative and guiding article titled “The rich are too slow with succession planning” about how important wealthy people to have a succession plan for the future. When considering that wealthy families are more crowded and they have more assets than averagely well-off families, not having a succession plan as the phrase goes creates chaos. Moreover, if you have a business or a company, you have higher risks as weakening the leadership and putting Employment and profit at risk, possibly for an extended period which is a situation that you will never want to happen. There will always be risks but succession planning can minimize conflicts.
According to a surprising and unexpected finding from Campden Research and UBS Bank’s survey of family offices according to countries, as reported in the mentioned article, while there is only 32% of the world’s wealthy individuals have a formal written succession plan another 24% have either an informal written plan or a verbally agreed plan and the remaining individuals have no written or verbally agreed plans at all.
The same survey reveals that the challenges associated with succession planning, particularly “Don’t know how to make a succession plan/lack of advice” is seen as a challenge by very few people while “Discomfort discussing a sensitive subject” seen as a common challenge for many people. Many wealthy individuals are aware of the concept of succession planning. However, it is emphasized that working with an attorney can make the crucial process of succession planning, which everyone is aware of but has trouble implementing, easier, faster, and more accurate.
Many wealthy individuals may not have implemented their succession plans, even though they know the meaning and importance of it, because they have not received the support of an attorney who can guide them in a way that aligns with their needs and satisfies their concerns.
GUIDELINES
- Family Constitution and Family Council
Succession planning can arise in various contexts. In cases where there is a dispute between spouses or when a family business is involved, it may be considered to create a family constitution and establish a family council. With a family constitution, criteria for the qualifications of the next
generation can be established. This way, the ownership and management of the company can be determined, specifying who and how it will be passed on to future generations, and potential conflicts of interest can be prevented, ensuring the continuity of the business.
- Preparing a Will
Everyone witnesses or heard inheritance dispute between family members after someone’s death. We, as lawyers, recommend you prepare a will to avoid these kinds of conflicts and leave the heritage which belongs to you to whomever you want and trust. With this will, you may request the establishment of a foundation, set rules for sharing the inheritance and conditions for specific goods or heirs and you can realize your wishes that will make you feel comfortable even in your absence. We want to inform and enlighten you about Türkiye has a liberal legal system that gives you an opportunity of freedom to dispose of your assets even in Turkish inheritance law. Drafting a will may seem a confusing process so please, for more detailed information, don’t hesitate to seek our legal advice throughout this process.
3. Succession Plan within the Context of Turkish Company Law
When it comes to companies owned by wealthy individuals, Turkish Commercial Code No.6102
(“TCC”) regulates subjects that can be and cannot be regulated in the articles of association of the company. However, another evidence that Türkiye has a liberal legal system is that you have freedom to make a shareholder agreement to design and ensure sustainability of your company’s future in every subject that TCC does not prohibit.
As companies play a significant role in succession planning, effective planning is necessary. To do this, a sound strategy, qualified and wise candidates with the desired attributes for succession, the identification of key positions, performance management, knowledge transfer, communication, and transparency, the establishment of a backup pool, and the provision of necessary development and training are crucial and highly important.
The succession plan goals should be reachable, explicit, measured, assertive, consistent and in a way that it will enable you to achieve your company’s long-term vision.
Company’s founder should always ask questions such as does your succession plan based on your expectations, your preferred timing and way? Do you have any other possible successors for other positions? Are they ready for that? Have successors only chosen by family members? Are other employees ready to expect other executives after you?
For more detailed information, you can always seek our assistance.
CONCLUSION
It should be emphasized that succession planning is subject to legal regulations. Therefore, the crucial aspect is determining under which country’s laws the succession planning should be carried out. Factors such as the citizenship of an individual, dual citizenship, and their place of residence can create confusion. Therefore, working with an attorney is not just an option but a necessity to ensure that a strong succession plan is implemented in compliance with the right laws without any obstacles or difficulties.
At this stage, it should be noted that due to the legal system of Türkiye being liberal, it is possible to dispose of assets as desired within the limits of the law. Turkish law provides many freedoms and flexibilities, enabling individuals to plan their properties and assets in a certain way. However, these freedoms and flexibility are always subject to legal regulations and specific procedures. Therefore, the guidance and support of an attorney are highly beneficial for those wishing to dispose of their assets and engage in succession planning in compliance with legal requirements.
The solutions presented in this information note, many of which can be accessed with legal support, should be updated, and implemented in accordance with Turkish law to the extent permitted by law, in a timely and organized manner when the need arises.
You can always refer to our extensive knowledge and experience to create a comprehensive family constitution, prepare a well-developed and accurate inheritance plan and to draw a roadmap to leave your cherished company in safe hands and so much more.
Stj. Av. Naz Torbaoğlu
Matters included in this information note are not legal advice and cannot be understood as legal advice. You can always contact us to get legal advice.
