Business Law Articles
Yamaner & Yamaner Law Office
As being a natural bridge between Europe and Asia; Turkey has attracted many direct and indirect foreign investors from all countries over the world for many years. Turkey keeps on preferred by foreign investors from the aspect of having successful and stable economy, qualified and competitive labor force, liberal and reformist investment climate, low taxes and incentives and large domestic market. Turkey is a member of Customs Union with the EU since 1996 and Free Trade Agreements with 27 countries.
In the year of 2015 and 2016, foreign investors have made USD 17.273.000 direct investment in Turkey. Many foreign investors prefer to make investment in Turkey by setting up a Company where one can find its advantages here below:
I. General Information
Joint Stock Company (“Anonim Sirket”) and Limited Liability Company (“Limited Sirket”) are the two types of companies especially preferred by foreign investors. They are both limited liability companies and the liability of shareholders for obligations of either an Anonim Sirket or a Limited Sirket is limited to their capital commitment, except for certain obligations of a Limited Sirket against the government. Both company types can be founded with 1 founder. Neither Anonim Sirket nor Limited Sirket requires necessarily the presence of Turkish shareholders, Board members and directors.
Main differences between Anonim Sirket and Limited Sirket are listed below:
- The minimum capital required for Limited Sirket is 10,000.- Turkish Liras which is approximately EURO 2.500. - as opposed to 50,000.- Turkish Liras which is approximately EURO 12.350 - for Anonim Sirket. In case registered capital system would be accepted for Anonim Sirket the initial capital amount has to be 100.000.- Turkish Liras which is approximately EURO 24.700.-. In both type of companies minimum 25% of the committed capital has to be paid before the establishment and the remaining amount has to be paid within 24 months after the establishment, whereby in the Articles of Association the minimum amount of the paid capital could be increased and the payment period could be determined less than 24 months.
- For Limited Sirket, each share must have minimum 25.- Turkish Lira value or its multiples; for Anonim Sirket the minimum nominal value of one share is 1.- Turkish Lira.
- Although both Anonim Sirket and Limited Sirket may be established for an unlimited period of time, in practice the Ministry of Industry and Commerce of Turkey does not allow the Limited Sirket to be incorporated for a period longer than 99 years.
- Anonim Şirket is managed by its Board of Directors. A Limited Sirket may be ruled by one or more managers. Limited Şirket does not have Board of Directors. Limited Sirket has only one organ which is the General Assembly of Shareholders. For the daily business managers can be appointed, however, always at least one shareholder must represent and bind the company. Anonim Şirket holds two organs: General Assembly of Shareholders and Board of Directors. The Board of Directors might delegate its duties to Managers provided that at least one Board member has an authority to represent and bind the company without any limitation. The shareholders of an Anonim Şirket are not obliged to be in the management of the company.
- In both Company type legal entities may be appointed as board members or managers. If a legal entity is elected as a member of the Board of Directors or Board of Managers an individual designated by legal entity shall fulfil duties on behalf of such legal entity and be registered and announced.
- The shares of Limited Sirket, unlike those of an Anonim Sirket, cannot be issued and represented by negotiable share certificates.
- Any transfer of shares in Limited Sirket must be approved by shareholders and the share transfer document must be notarized and registered with the Trade Registry Office and published in the Turkish Trade Registry Gazette. These procedures require notary, translation and trade registry fees. For a share transfer in Anonim Sirket it is not needed to comply with such requirements. A share transfer in Anonim Sirket can easily be made by endorsement and delivery if the shares are registered or only by delivery in case the shares are bearer without being subject to any notary and trade registry fees.
- Whenever the purchase price is higher than the nominal value a transferor of shares is always subject to the income tax in Limited Şirket. On the other hand the transfer of shares after two years period of time as of the date of purchase is not subject to income tax in an Anonim Şirket provided that the share certificates are issued.
- Shareholders of a Limited Şirket, unlike those of an Anomim Şirket, are liable for the company’s debts to government like taxes, social security premiums, etc. with their personal property. In an Anonim Şirket, including the government debts the shareholders’ liability is always limited to the capital contribution in the company. In Anonim Şirket members of the Board of Director are liable for the company debts towards the government.
- A Limited Şirket cannot offer its shares to public.
- The personal creditor of shareholder in a Limited Şirket may attach the shares of the debtor shareholder and request the liquidation of the company. This is not the case in an Anonim Şirket.
- A Limited Şirket may request the dismissal of some of its shareholders by making the necessary application to the court with giving justified reasons, which is not the case in an Anonim Şirket. In Anonim Şirket a shareholder may only be dismissed for its capital undertakings.
II. Procedure for Establishing a Company in Turkey by a Foreign Company:
In order to establish a limited liability (Anonim Sirket and Limited Sirket) company under Turkish Law, the following steps should be taken:
1.Preparation of the Articles of Association of the Company (the “AoA”).
- Execution of the AoA by each of the company’s founders or by their proxy and/or proxies on behalf of them before a Turkish Notary Public.
- Application to the Trade Registry where the Company’s head office is located in order for the registration of the AoA of the Company together with the other required documents.
- Publication and announcement of the AoA as well as the authorized signatories of the Company in the Commercial Registry Gazette in order to put third parties on notice of the establishment thereof.
- Application to the Tax Office in order to obtain tax number and certificate for the company.
- Issuance of the Signature Circular before the Notary Public (If the persons authorized to sign on behalf of the company resides in abroad this procedure shall be completed before the foreign Notary Public and thereafter the document shall be apostilled).
- Attestation of the Commercial Books by the Turkish Notary Public.
The company shall be deemed incorporated upon the registration of the Company with the Trade Registry.