Turkey: Incorporation Of Private Pension Companies And Funds


The private pension system is regulated mainly by the Private Pension Savings and Investment System Law No. 4632 ("Law"), the Regulation on the Incorporation and Working Principles of Pension Companies published in the Official Gazette, dated 08.01.2008 and numbered 26750 ("Regulation"), and the Regulation on the Principles regarding the Incorporation and Operation of Pension and Investment Funds, published in the Official Gazette dated 28.02.2002 and numbered 24681 ("Fund Regulation").

A private pension company ("Company") shall commence operation upon obtaining the required approvals from the Undersecretariat of Treasury ("Treasury") and the Capital Markets Board ("Board"), and shall establish a fund for the collection of contributions in compliance with the pension agreements executed with the participants. The contributions collected by the Company are put to use through a pension investment fund ("Fund"). The Fund consists of the assets put together with the purpose of managing the contributions collected from the participants, which are monitored in private pension accounts on behalf of the contributors within the scope of the pension agreement.

The Company may also obtain an operating license in the branches of life insurance and accident insurance. If the Company operates in any branch other than the pension branch, accounts shall be kept separately for each branch.


Permission for Incorporation

The application for permission to incorporate shall be made to the Undersecretariat and permission is granted by the Ministry. The Company seeking a license to establish is subject to certain requirements; it must:

  • be a joint stock company.
  • have an area of activity limited to the subjects stipulated in the Law.
  • have articles of association that are in compliance with the Law.
  • issue share certificates as registered shares to named persons and all of the share certificates must be issued in return for cash.
  • The real person founders of the Company and the real persons having the right to manage and audit legal person founders shall:
    1. not directly or indirectly hold a share capital of ten percent or more in any banker, banks, insurance companies and/or other institution operating in monetary and capital markets that has been subject to liquidation;
    2. not have their activities suspended, in whole or in part, permanently or temporarily, for a period of one month or more in the one year period prior to the date of application for incorporation in accordance with the applicable laws;
    3. not be bankrupt or have declared bankruptcy; and shall not have been sentenced to any heavy imprisonment or to imprisonment for more than five years due to infamous crimes such as simple or aggravated embezzlement, secret conspiracy, extortion, bribery, theft, swindling, forgery, breach of trust,, smuggling, conspiracy in relation to public tenders and purchases, money laundering, tax evasion or attempted tax evasion, or any other such crimes as stipulated under the Law.
    4. have the financial capabilities and reputation which a founder should be reasonably expected to have.
  • have a nominal capital of at least twenty trillion Turkish Lira and at least ten trillion Turkish Lira of capital paid-in; the remainder of which must be paid within a maximum period of three years.
  • ensure that at least fifty-one percent of the Company capital is held by legal persons with the adequate knowledge and experience about financial markets. The amount of capital required for the incorporation can be increased by the Undersecretariat, provided that it does not exceed an amount equal to twice the Wholesale Price Index established by the State Statistics Institute.

Company Organization and Bodies

There are also certain requirements which need to be fulfilled by the members of the Board of Directors of the Company. In this context, the Board of Directors must consist of at least five persons. The simple majority of the Board of Directors must have obtained at least an undergraduate degree and must have working experience in the areas of insurance and business management and administration.

The general manager, the deputy general manager and others executives who are authorized signatories are also required to have at least an undergraduate degree. General managers must have at least ten years work experience. Deputy general managers and other executives who are authorized signatories and hold offices equal to or higher than that of the deputy general manager must have at least seven years work experience.

Operation License

The Company must obtain an operation license ("License") in the pension branch in order to start its activities after incorporation. The License is granted by the Undersecretariat. The application criteria are as follows:

  • the Company must have devised its operation in a manner that will allow it to serve at least one hundred thousand contributors within two years;
  • the arrangements foreseen in the system design and business plan shall have been made;
  • human resources, the physical site, and the technical and administrative infrastructure shall be compatible and function in complete harmony.

The License application and the required documents must be provided and complete within one year of the incorporation date; otherwise the permission of incorporation shall automatically become invalid. If the Company does not apply to the Board to establish a Fund within three months after obtaining the License, or if the application is rejected, both the incorporation permission and License shall automatically become invalid.

Amendments to the articles of association, Transfer of shares and assets, Mergers

Amendments to the articles of association, the transfer of shares and assets and mergers are subject to permission. Registrations without any permission are deemed invalid.

The approval of the Undersecretariat is required to amend the articles of association. Without approval, amendment drafts cannot be negotiated in the general assembly and cannot be registered to the trade registry. The following are also subject to prior consent from the Ministry (to which the Undersecretariat of Treasury is attached):

  • Transfer of shares granting privilege for appointing members to the board of directors and auditors or granting a usufruct right;
  • Transfer of all the company's assets and liabilities to another pension company or the merging of the company with one or more pension companies;
  • The direct or indirect transfer of capital shares of the legal entity shareholders holding ten percent or more of the company capital.

Permission will be granted for share transfer transactions on the condition that the new shareholder fulfills the same set of criteria as the Company's founders. In the event that the capital shares that determine the control and management of the legal entity are owned by another legal entity, these provisions shall be enforced until real person shareholders are determined.

The following share transactions are subject to the permission of the Prime Ministry:

  • obtaining shares representing directly or indirectly 10% or more of the capital of the Company by a real or legal person;
  • obtaining a share pledge and right to vote exceeding the ratios of 10%, 20%, 33% and 50%;
  • share transfers resulting in a capital share of the shareholders which exceed or fall below 10%, 20%, 33% and 50% of the company capital.


ThePrime Ministry may require the Board of Directors to take certain actions in the event that the rights and benefits of the participants are endangered by Company practices, the Company neglects the obligations arising from the agreement or the financial structure of the company is weakened in a way that may endanger the rights and benefits of the contributors. Once such actions are required by the Prime Ministry, the Company is obliged to prepare a recovery plan within ten days following notification and must notify the Undersecretariat of said plan.

Should the Company fail to take the actions provided in the recovery plan on time or if there is no improvement in the present condition although the required actions have been taken, the Prime Ministry is entitled to require the realization of heavy measures such as the declaration of the Company as bankrupt, the cancellation of the operation license and the transfer of the funds as deemed appropriate.

Pension Investment Fund

The Fund is not a legal entity and it cannot be established and used for purposes and obligations other than those stated in the Law, the pension agreement, the fund by-laws and the related legislation. The fund is established for an indefinite period of time. The Fund's assets cannot be subject to pledge, provided as a guarantee for transactions other than those regarding the portfolio and cannot be seized by the third parties.

In order to establish a fund, the Company should apply to the Board with the Fund by-laws, the pension agreement and other documents as required by the Board. The Fund by-laws is an agreement between the contributors and the Company, the portfolio keeper and the portfolio manager which contains general provisions and regulates the keeping of the portfolio in accordance with the principals of fiduciary ownership and the management of the portfolio in accordance with the provisions of the proxy agreement.

The portfolio is managed by portfolio managers within the framework of the Fund by-laws, the pension agreement and related legislation.

For the establishment of the Fund, the fund by-laws shall be registered with the trade registry where the Company is registered within six business days following obtaining of the approval document received pursuant to the approval of the Board and shall be published in the Turkish Trade Registry Gazette ("TTRG").

In order for the Fund to commence its operation, an application shall be made to the Board within six months after the Company receives incorporation permission, along with a request to register the contribution documents and other required documents. If the application is not made on time, the Fund by-laws are removed from the trade registry.

If the approval of the Board is obtained, at least three Funds consisting of different investment instruments as determined by the Board and which have different portfolio structures will be established. At least 5% of the capital will be registered with the Board for each Fund and the established Fund will amount to the shares that are 5% of the capital. In the event that the total amount of shares that are provided by the contributors exceed the amount of the registered shares, an application shall be made with the Board for the registration of the excess shares with the Board.

The Board shall collect a registration fee, which shall not exceed 0,005% of fund's net asset value, upon receiving the approval of the Undersecretariat by the last business day of the aforementioned three-month period.

The accounts and the transactions of the Fund are subject to independent audit at least once per year.


The private pension company and its Funds are subject to the regulation of the Undersecretariat and the Board upon receipt of a license of establishment. The requirements which need to be fulfilled by the company during incorporation must be maintained at all times with an end to maintaining continuity and reliability with respect to the rights of the contributors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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