Company Structures to be Established with Foreign Capital

Turkey has a non-discrimination and equal treatment. Foreign investors have the same status with a local company.

Types of Companies are (I) Joint Stock Company ("JSC") and (II) Limited Liability Company ("LLC")

There are no rules requiring a Turkish participation in the capital or management of a company with foreign capital; a company may be established with 100% foreign capital. Almost all sectors are open to foreign capital.

I. Joint Stock Company

A JSC be defined as a type of company having a specific business title and a capital, which covers an amount that has been determined before, and which has been divided into shares. The structuring and organization of JSCs are subject to the regulations set forth in the Turkish Commercial Code. JSCs having more than 250 shareholders or whose stocks and bonds are quoted in the Istanbul Stock Exchange are subject to the provisions of the Capital Market Board.

• Shareholding Structure. A JSC is established with the participation of a minimum of one (1) real or legal person (s) as shareholders.

• Capital. The minimum capital requirement for the establishment of a JSC is 50.000 TL. One fourth (1/4) of the capital has to be paid during the corporation and remaining part equal to 3/4 of the capital has to be paid within 2 years as of the incorporation.

• Shares. The capital of a JSC is divided into shares each having equal value. Share certificates having the nature of negotiable instruments can be issued for representing the capital of a JSC. Such share certificates may be bearer certificates or registered certificates. Unless a specific provision is incorporated in the articles of association prohibiting transfer of registered share certificates, such certificates are transferable upon the approval of the board of directors. Meanwhile, bearer share certificates may be transferred without any restrictions, subject to the provisions of the Turkish Commercial Code.

• Decision Mechanism. In a JSC, resolutions are passed with the majority affirmative vote. However, the Turkish Commercial Code contains certain provisions, which protect the rights of minority shareholders.

• Management & Representation. In a JSC, the Board of Directors has been granted the authority to represent and commit the company. Board of Directors consists of at least one member. However, dividend distribution, appointment of board of directors and auditors, capital increases, and other important issues to be determined by the articles of association require a General Assembly of Shareholders' resolution. 

• Audit. A JSC should have a statutory auditor whose responsibility is submitting specific reports to the shareholders of the company in annual general meetings.

• Articles of Association. The shareholding structure in the Articles of Association and the Commercial Gazette can be considered as an evidence for the share structure of the company.

• General Assembly. Furthermore a JSC must hold a general assembly meeting every. According to the Article 409 of the Turkish Commercial Code the ordinary general assembly must be held within 3 months after the end of every accounting year. The accounting year must be determined in the articles of association of the company.

• Share Transfer. The transfer of shares in the JSC is not subject to registration. By a share transfer agreement, shareholders may transfer their shares. But some restrictions like right of first refusal, call option, put option can be regulated for the share transfer in the Articles of Association of the company. The shareholder must comply with those restrictions in order to transfer the shares.

II. Limited Liability Company

• Shareholding Structure. A LLC may be formed of real persons or legal entities and consist of minimum of 1, maximum of 50 shareholders.

• Capital. The minimum capital must be 10.000 TL. One fourth (1/4) of the capital has to be paid during the corporation and remaining part equal to 3/4 of the capital has to be paid within 2 years as of the incorporation.

• Sectors. LLCs are unable to do business in banking and insurance sectors.

• Management & Representation. A LLC has two organs for management and representation of the company; board of shareholders and director(s). It is possible to delegate the responsibility of management and representation of the company to Director(s). The appointed director has the authority to run the company. The directors occupy a similar position like the members of the board of directors in JSC.

• Shareholders' Decision. Amendment of the articles of association, appointment and dismissal of directors & auditors and profit distribution requires a board of shareholders decision.

• Share Transfer. Share transfers may require the approval of other shareholders of LLC.  Share transfer of a LLC is subject to the Commercial Trade Registry's registration. To transfer the shares of a LLC a share transfer agreement must be executed in front of a notary. This share transfer agreement must be registered in the trade registry with a shareholders' resolution approving the share transfer.

• Articles of Association. While establishing a company in Turkey an Articles of Association, which must be issued, ratified in notary public and registered in the trade registry. This Articles of Association includes the shareholding structure of the company. Then the Articles of Association of the company shall be announced in Commercial Trade Gazette, which can be used as an evidence of the share structure of the company.

• Share Certificates. A LLC cannot issue share certificates. The share book records do not have constituting effect; records of the share book only have an explanatory effect.