COMPANY FORMATION IN TURKEY

As NMO Law, we represent various private and public companies in a variety of sectors in Mugla, Fethiye.

We regularly assist foreign corporations and investors to form new companies and branches in Turkey as well.

Thanks to the Regulation on the Direct Foreign Investment currently in force in Turkey, foreign investors can incorporate or participate in all types of companies in Turkey which are available for local investors in accordance with the equal treatment principle.

Pursuant to Turkish Commercial Code, major incorporations are structured either as joint stock or Limited Liability Company.

In joint stock companies, the shareholders’ sole liability is to inject the capital participations they undertake to the company and they are not held liable for the debts or operations of the company, whereas, shareholders in limited liability companies are liable for the public debts of the entity with their personal assets to the extent such payables can’t be collected from the company. The above referred liability is limited with the capital participation amount of each shareholder.

Furthermore, the minimum capital to be injected in Limited Liability Companies is determined as 10,000.-TL (corresponding to approx. 3,550.-EUR as of April 2, 2015) whereas, the minimum capital for joint stock companies is set forth as 50,000.-TL (corresponding to approx. 17,800.-EUR as of April 2, 2015). On the other hand, it should be significantly noted that minimum capital requirement can be different in accordance with the activities of the companies to be established, such as insurance, financial, fund companies.

It should be noted that it is possible to incorporate both companies with sole shareholder.

A joint stock company is managed by its board of directors. It is possible to have a single person within the board of directors. A limited liability company does not have board of directors but is managed instead by its general manager/s and shareholders. All authorities of the shareholders relating to the management of the limited liability company can be granted to a general manager or one of the shareholders.

In addition to the above referred explanations, a brief summary of other structural differences between the two types of incorporations is set forth herein below:

Management and Operation of the Company

In a Limited Liability Company
All the resolutions are adopted by the Shareholders forming the “Shareholders Committee”. Turkish Commercial Code foresees qualified quorum and decision majorities for specific shareholders’ resolutions.

By a Shareholders Resolution, a Manager can be appointed either amongst the shareholders or from outside. If not appointed, all shareholders of the company will act as managers and will be deemed jointly authorised to represent and bind the company.

In a Joint Stock Company
One of the bodies of the company is a General Assembly which convenes at least once a year, within 3 months after the expiry of each fiscal year where all the ordinary decisions of the Company can be adopted. (i.e. appointment or extension of the terms of the Board of Directors, appointment or extension of the term of the Auditor, approval of the balance sheet and activity report for the past year, amendment of the Articles of Association, release of the Board of Directors from their past duties, decision on whether to distribute profit or not). Turkish Commercial Code foresees qualified quorum and decision majorities for specific resolutions.

The Board of Directors is the management tool of Joint Stock Companies. The Director needs to be a real person (or a representative of a legal entity shareholder). Unless otherwise stated in the Articles of Association of the company, the quorum in Board meetings is met by the participation of one plus half of the total number of the Board members. The decisions are adopted with the affirmative votes of the members attending the Board meeting.

Share Transfers
In a Limited Liability Company
The transfer of the shares is required to be done in the presence of a Notary Public with written Share Transfer Agreements certified by the notary public. The transfer of the shares can only be valid and binding for the company if they are registered in the books of the company and published in the Trade Registry Gazette. In order to register the decision to the books of the company, a shareholders resolution approved by at least 3/4th of the shareholders holding 3/4th of the capital is require

Should the company issue shares, these will not be considered as negotiable instruments; accordingly, the share transfers cannot be realized through transferring these issued share certificates.

In a Joint Stock Company
The share certificates (representing bearer or registered shares) issued by the company are construed as negotiable instruments. The shareholders are entitled to transfer their shares without complying with any of the formalities stipulated for the limited liability companies. The share transfers need to be recorded in the share book in order to be valid and binding towards the company; Turkish Commercial Code does not foresee a special majority for the Board decisions to be adopted for recording the share transfers in the share ledger.