Different types of entities according to the Turkish law:
1. Ordinary Partnerships.
Ordinary partnerships are governed by Article 620 and the following articles of the Turkish Code of Obligations No.6098 (“TCO”, published in the Official Gazette No.27836, dated 4 February 2011; entry into force as of July 1, 2012).
An ordinary partnership agreement is defined as an agreement whereby two or more persons undertake to join efforts and/or goods to reach a common goal, which ultimately is to generate a profit. A partnership, which does not meet the criteria of legally designed partnerships set forth under the Turkish Commercial Code No.6102 (“TCC”, published in the Official Gazette No.27846, dated 14 February 2011; entry into force as of July 1, 2012), is deemed to be an ordinary partnership.
Unlike companies under TCC, an ordinary partnership does not constitute a legal entity. Subsequently, ordinary partnerships cannot acquire rights and undertake obligations themselves separately from their partners. Thus, an ordinary partnership cannot stand as a plaintiff or defendant in a lawsuit. A lawsuit to be filed against an ordinary partnership must be filed against all partners and a lawsuit must be filed jointly by all partners on behalf of the ordinary partnership. On the other hand, partners of an ordinary partnership may apply to the tax office and obtain a tax number in order to conduct commercial activities and to issue invoices.
The main goal of the TCC, is to develop a corporate governance approach that meets international standards; to foster private equity and public offering activities; to create transparency in managing operations; and to align the Turkish business environment with EU legislation, as well as for the accession process. Accordingly, the types of entities are listed below:
i. Joint-stock company (Anonim Şirket, A.Ş.)
ii. Limited liability company (Limited Şirket, Ltd. Şti.)
iii. Limited Partnership (Komandit Şirket)
iv. Collective company (Kolektif Şirket)
v. Cooperative company (Kooperatif Şirket)
Types of Companies:
1. Joint Stock Company.
The company’s stock capital is divided into shares and the liability of the shareholders is limited to the subscribed capital and paid by the shareholder. At least one shareholder (real person or legal entity) and a minimum capital of TRY 50,000.00 (fifty thousand) are mandatory. The mandatory company shall include a general assembly and a board of directors.
2. Limited Liability Company.
It is a company established with at least one shareholder (real person or legal entity) and the liability of the shareholders is limited to the subscribed capital and paid by the shareholder. A minimum capital of TRY 10,000.00 (ten thousand) is mandatory. The company shall be managed and represented through the general assembly and directors.
3. Limited Partnerships.
It is a company established to operate a commercial enterprise under a trade name. Whereas the liability of some shareholders is limited to the capital subscribed and paid by the shareholder, for some shareholders there is no limitation of liability (commandite). Legal entities can only be commanditer [Limited Partners]. No minimum capital is required. The rights and obligations of the shareholders are determined by the articles of association of the company.
4. Collective Company.
It is the company established to operate a commercial enterprise under a trade name and, the liability of none of the shareholders is limited only to the capital subscribed and paid by the shareholder. No minimum capital is required. It is mandatory that all shareholders shall be real persons. The rights and obligations of the shareholders are determined by the articles of association of the company.
5. Cooperative Company.
The cooperative companies are defined under Cooperative Law No.1163 as the partnerships having the legal personality which are established by at least 7 partners consisting of real persons or legal entities with a convertible partner and capital structure, for the purposes of ensuring and protecting certain economic interests and especially manpower and financial injects made for professional and livelihood necessities of the partners in mutual assistance, solidarity and security. The cooperative companies gain legal personality as of the registration of the company to the trade registry.
In Turkish commercial law practice joint-stock companies and limited liability companies are more often used than other types of companies.
It is possible to establish a company in a single day by applying to the relevant trade registry office with the required documents. The company is established once the founders declare their intent to set up a company of their preference in the articles of association, which have been issued in accordance with the law, and where they, with their notarized signatures, unconditionally acknowledge and undertake to pay the whole capital. The company receives its “legal entity” status upon registration with the trade registry.
The above mentioned registration procedure and the required documents for such procedure are briefly stated below. Due to the fact that the essential parts of the establishment procedures for limited liability companies and stock companies are mainly similar, the procedure shall be presented for both of them by stating some of the significant differences:
Documents for the Company Establishment:
• A company establishment petition and a notification form duly filled in and
signed by persons authorized to represent the Company.
• Notarized translation of passport in case the foreign shareholder is a real person;
apostilled [authenticated] and notarized translation of registry document issued
by the competent authority in case the foreign shareholder is a legal entity.
• Three copies of notarized articles of association (one copy original).
• Notarized specimens of signature of persons authorised to represent the
company, namely the directors of the limited liability Company.
• Founders’ statement signed by the founders.
• For the limited liability companies, documentation for the appointment of the
directors of the Company.
• The bank receipt indicating that 0.04% of the company capital has been
deposited to the account of the Turkish Competition Authority at a state bank.
• Chamber registry statement.
• Relevant documentation for the specification of the values of the assets.
• Permit or letter of compliance for companies whose corporation is subject to the
permit or letter of compliance issued by the relevant ministry or other official
One fourth of the capital shall be paid before the registry; and the remaining three quarters shall be paid in 2 years as of the establishment of the company.
For founders who are real persons of non-Turkish nationalities, it is required that a copy of the person’s passport shall be presented together with the passport or a copy of the notarized and authenticated translation of the same. Also for foreign legal entity shareholders, the original copy and a notarized and authenticated translation of the Certificate of Business Activity and/or Certificate of Incorporation issued by the competent authorities approved by the related [relevant] Turkish Consulate are required.
In cases where those non-Turkish nationals of the company are assigned as representatives and shall start residing in Turkey, residence permit and work permit shall also be required.
The management and representation of the limited liability companies are stipulated by the articles of association. The authorization of the management and representation may be bestowed upon one or more partners with the title of directors or third parties. At least one partner is required to be authorized for the management and representation (Article 623 of TCC). The appointment of the directors is conducted with a petition and general assembly resolution. In the event that the directors who are not partners of the company are appointed, it is required that a letter documenting that these directors accept such appointment shall be presented. Also it is required that documentation indicating the citizenship information or in case of foreign directors, the passport and residential information are required. In the event that a legal entity is appointed as a director, it is required that the representative real person of the legal entity shall be appointed and the above mentioned information shall be presented for the subject matter real person. It is possible for this legal entity to be of foreign origin and in such cases, documentation that includes the current information about his criminal record, which has been obtained from that person’s state of origin and has been translated to Turkish and legalised accordingly, is required to be presented. In the joint stock companies, the management and representation of the company is undertaken by the board of directors consisting of one or more real persons or legal entities. In cases where a legal entity is appointed as a board member, it is required that the representative real person of the legal entity shall be appointed, registered and announced. The board of directors can fully or partially bestow the management upon one or more board members or a third party, in compliance with the internal regulation, which regulates the management of the company, to be issued pursuant to the articles of association. In the event that the management is not transferred, the management authority belongs to the entire board members. The board of directors is required to submit the notarized copy of the resolution showing the authorized representatives and the way of their representation for registration and announcement purposes.
The authorization for the severally and jointly representation of the company in any matter can be revoked by the resolution of the board of directors or the general assembly for the joint stock companies and by the resolution of the general assembly for the limited liability companies.
In the joint stock companies, the By-laws modifications (except for the decrease or increase of the capital) are conducted with a general assembly resolution with the presentation of an amendment draft. Also the Ministry permission letter is required to be presented in the event that the By-laws modification is subjected to ministerial permission.
In the limited liability companies, a petition and a general assembly resolution are required. The relevant procedures for the invitation of the partners are required to be followed. If the By-laws modification is regarding the extension of the company period, relevant documentation demonstrating the existence of the activities of the company after the expiry of the period, are required to be presented.
Contrary to the former code, the existing TCC allows the establishment of joint stock companies or limited liability companies with only a single shareholder; whereas in the past it was possible joint stock companies could be established with a minimum of five shareholders, while limited liability companies required a minimum of two partners.
Therefore, the existing TCC removes the obligation for foreign companies to secure mandatory minority shareholders in order to comply with the minimum shareholder number requirements by the former TCC. The shares of previously established companies can now be held by a single party.
Board of Directors.
Under the TCC, in compliance with EU legislation, the board of directors can be comprised of a single person, joint directors, joint and several directors or a board. Legal entities can also be appointed as board members. This means foreign shareholders no longer have to deal with red tape such as excessive legal documents or holding shareholder meetings in order to change board members. Different representatives may be appointed as a board member on each occasion if he or she is entitled to by the legal entity.
The appointment of the representatives shall be done through either the internal regulation (in joint stock companies) or a general assembly resolution stating whether or not the representative/s is/are authorized solely/jointly and severally; whether or not the representative/s will bind the company with his/her sole signature or with a joint signature.
The TCC does not require physical presence of board members; it allows board meetings to be held in an electronic environment and board resolutions may also be approved via electronic signatures.
According to the TCC, any independent individual can become a board member; the obligation that board members must be shareholders has also been abolished. This ensures a professional board of directors that can act separately from shareholders, and in turn, boosting corporate governance.
The details of the authority of the representatives shall also be determined through either the internal regulation (in joint stock companies) or a general assembly resolution stating the authorities and their limits bestowed upon the director/s.
In Turkey there exists a one-tier board system and the legislations allow that only such unitary structure may be applicable.
Firstly, a decision for liquidation is required to be taken. This action is possible with a petition signed by the authorized representatives of the company and a general assembly resolution for both limited liability companies and stock companies. If necessary, the relevant procedures regarding ministerial permission are required to be followed. Upon taking such a decision, the balance sheet and income table are required to be issued, before the liquidation. Thereafter, the necessary registrations are realized in the trade registry. The corporate tax return and the post-closing trial balance are issued until the 25th day of the fourth month following the registration date of the liquidation. After the registration of the initiation of the liquidation and after the publication of the third announcement, if no obstacles exist against the liquidation, the registry of the liquidation is removed from the trade registry in one year, at the earliest.
This information was compiled by Odabas Tavares Law Office.