Koca & Ersöz Hukuk Bürosu / Anwaltskanzlei

Company Law in Turkey

Company Formation in Turkey

In Turkey, a company is generally an association of several individuals who collaborate for a common purpose, with the exception of one-person start-ups in corporations. The legal structure follows the “numerus clausus principle,” which limits the number of company forms to those defined by the legislature.

Legal Considerations

During the establishment process, relationships between shareholders are governed by the general rules of interpretation outlined in Art. 2 of the Turkish Commercial Code. These customary rules, akin to Paragraph 346 of the German Commercial Code, regard the significance and consequences of actions and omissions in the trade. The purpose of a company can be entrepreneurial or idealistic as long as it is legally permissible. The common purpose pursued by shareholders is crucial, as stated in Art. 331, 573/3 of the Turkish Commercial Code. Shareholders must also contribute towards the common purpose, usually through capital or services.

Company Forms in Turkey

1. Partnerships

A. General Partnerships

A general partnership is a specific form of a civil law partnership, as Art. 214 of the Turkish Commercial Code makes reference to it. Once the prerequisites for a general partnership are satisfied, the partners must register the company as a general partnership in the commercial register, as per Article 215 of the Turkish Commercial Code. The partnership attains legal personality through this registration, and the announcement is made in the Commercial Register (Ticaret Sicili Gazetesi).

The partnership agreement must be written and include basic content like company name, corporate purpose, powers of representation, and more. The partners’ signatures must be certified by a notary. There is no requirement for a minimum share capital.

Liability

In a general partnership, partners are personally liable with all their assets, without any limitations.

Termination

A general partnership concludes with dissolution, or the death or withdrawal of a partner. Subsequently, liquidation follows where the company’s assets are wound up. Eventually, the company is removed from the Turkish commercial register.

B. Limited Partnerships

Limited partnerships operate a trade similar to general partnerships. The formation and termination details are the same as general partnerships. However, limited partnerships must have at least one partner with limited liability, contributing only to the extent of their share, as specified in Art. 304/2 of the Turkish Commercial Code. Other partners have unlimited liability.

Limited partners can make contributions in different forms, but contributions in the form of labor are not considered.

C. Partnerships under Civil Law

These partnerships are the original forms of partnership and can be external or internal. External partnerships present themselves uniformly to the outside, while internal ones do not participate in legal relations externally.

Partnerships under Civil Law require only the conclusion of articles of association and have no formal requirements, notary involvement, or need for commercial register entry.

2. Stock Corporations

A. Joint-Stock Company (Inc.)

A joint-stock company (Inc.) is a corporation and a legal person under civil law. It is established through the agreement of the shareholders’ declaration of intent and entry in the commercial register, as set out in Article 335 of the Turkish Commercial Code.

The establishment of an Inc. involves the conclusion of the articles of association and the notarization of signatures. The minimum share capital is 250,000 TL, as per Art. 332 of the Turkish Commercial Code. All shares must be subscribed by the founders.

Liability

An Inc. is liable to its creditors only with the company’s assets.

Termination

An Inc. can be terminated through a court order or the shareholders’ resolution.

B. Limited Liability Company

A Limited Liability Company (LLC) is similar to an Inc. but has simpler administration.

3. Cooperatives

These companies are formed by at least seven individuals or legal entities for economic purposes.

Foundation

A foundation is not an association, but an entity with its own legal personality. It doesn’t have to be a contractual association of people and is based on assets designated for a particular purpose.

A Comparative Analysis of Limited Liability Company and Joint-Stock Company in Turkey

When considering establishing a business in Turkey, it’s important to choose the appropriate legal structure. In this article, we will delve into two popular forms of legal entities in Turkey – Limited Liability Company (LLC) and Joint-Stock Company (Inc.). We will examine their characteristics, similarities, and differences to help you make an informed decision.

Introduction to Limited Liability Company (LLC)

Limited Liability Companies in Turkey are widely preferred by investors, mainly due to their limited liability feature and low share capital requirements.

Legal Status and Establishment

The Limited Liability Company, akin to the Inc., is recognized as a legal entity under civil law. Establishing an LLC requires a partnership agreement, which must be certified by the commercial register. The minimum share capital for an LLC is 50,000 TL. It comes into existence upon registration in the commercial register.

Key Organs and Management

An LLC has mandatory organs such as managing directors and shareholders’ meetings. The managing director doesn’t need to be a partner and has significant powers. Shareholders have rights mainly related to profit distribution and management oversight.

Liability

In an LLC, only the company’s assets are liable for the company’s obligations. The personal liability of shareholders is generally excluded, but they may be liable for public claims if the company’s assets are insufficient, subject to certain limitations.

Termination

The termination of an LLC is akin to that of an Inc. It can be dissolved through bankruptcy, shareholder resolution, or court order.

Comparing Limited Liability Company (LLC) and Joint-Stock Company (Inc.)

To further elaborate on the distinctions and make a fair assessment, here is a tabulated comparison:

CriteriaLimited Liability Company (LLC)Joint-Stock Company (Inc.)
Formation by a Single EntityPossiblePossible
Annual General MeetingsRequiredRequired
Management StructureAt least one managing directorAt least one board member
Share TransferBefore a notary and entry in commercial register, more expensive and time-consumingEasier, no need for a notary, cheaper and faster
Taxation on Share SaleBased on increase in valueNo taxation if sold within two years of acquisition
Liability for Public DebtsManaging directors have unlimited liability; shareholders limitedOnly board members are liable; shareholders not liable
Duration of Management AuthorityNo fixed termBoard members appointed for 3 years
Decision-making for Statutory ChangesRequires approval of 2/3 of the capitalRequires presence of half of the represented capital and simple majority approval
Representative of the MinistryNot required in General AssembliesRequired for certain decisions in General Meetings
Forced Withdrawal of ShareholdersPossible through court decisionNot possible through court decision
Social Security ContributionsShareholders are required to payShareholders are not required to pay; board members are
Minimum Share Capital50,000 TL, no obligation to pay before establishment250,000 TL, 1/4 of the capital must be paid before establishment
Obligation to Authorize a LawyerNoneRequired for share capital above 1.250,000 TL

Conclusion

The choice between establishing a Limited Liability Company or a Joint-Stock Company in Turkey depends on various factors such as the size of the business, financial capacity, and management preferences. Understanding the nuances of each legal structure is critical for making an informed decision that aligns with your business goals and objectives.

A Comprehensive Guide for Foreign Companies and Individuals Looking to Establish a Business in Turkey

Turkey, with its strategic location bridging Europe and Asia, as well as its growing economy, has become an attractive market for foreign investors. Companies and individuals from around the world are recognizing the advantages of doing business in Turkey and are considering establishing a company. This article offers a detailed guide touching on the key issues for foreign companies and individuals wanting to establish a company in Turkey.

Understanding the Turkish Market

Before diving into the establishment process, it’s important to understand the dynamics of the Turkish market. Familiarize yourself with the country’s economy, consumer behavior, and competition within your sector. Also, learn about any cultural aspects that might affect your business.

Selecting the Industry and Sector for Your Company

It’s crucial to determine the field in which your company will operate and the sector it will target. Turkey offers special incentives and supports in certain sectors such as manufacturing, technology, and agriculture. Research these incentives to see if they align with your business plans.

Defining the Scope of Your Company’s Operations

What will be the main functions and areas of activity for your company in Turkey? Define your target audience and understand the needs your products or services will address. This will help in shaping your business model and strategy.

Choosing the Location of Your Company

Turkey is a geographically diverse country and different regions have varying advantages. When selecting a location for your company, consider logistics, availability of a skilled labor force, business ecosystem, and proximity to your target market.

Financing and Investment Strategies

Carefully plan the financing structure for your company. Are you considering self-financing, seeking investors, or applying for business loans? Additionally, look into government supports and investment incentives that might be available for your business in Turkey.

Determining the Legal Structure and Obtaining Permits

There are several legal structures available for company establishment in Turkey, such as joint-stock companies and limited liability companies. Choose the legal structure that best suits your business model and objectives. Also, ensure that you obtain all the necessary permits and licenses needed to operate in your selected industry.

Navigating Taxation and Accounting Standards

Understanding Turkey’s taxation system and accounting standards is crucial. Hire a local accounting firm or seek advice from an expert to ensure your company complies with all tax regulations and maintains efficient financial operations.

Hiring and Employment Considerations

If you plan to hire local personnel, familiarize yourself with Turkey’s employment laws, recruitment processes, work permits, and social security regulations. Providing a healthy and legal work environment is essential for the success of your business.

Understanding Import and Export Regulations

If your business involves trade between Turkey and other countries, it’s vital to understand customs procedures, as well as import and export regulations. This will help you avoid unnecessary delays and costs.

Securing Ongoing Legal and Business Support

Consider engaging legal and business consultants to provide ongoing support beyond the establishment phase. Legal consulting is critical to ensure your company operates smoothly and complies with local regulations.

Cultural Adaptation and Networking

Adapt to the local culture and engage in networking to build relationships with potential partners, customers, and other stakeholders. Join business associations and attend events to immerse your company in the local business community.

Conclusion

Establishing a company in Turkey can be a rewarding venture, but it’s important to approach it with careful planning and support. By understanding the market, choosing the right location and legal structure, and navigating the regulatory environment, you can build a successful and profitable business in Turkey.

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