Turkey: Company Law In Turkey

Last Updated: 20 March 1997

Certain types of legal entities are classified in the Turkish Commercial Code (the "TCC"), as business associations (ticaret sirketleri) . They are (a) General Partnership (kollektif sirket); (b) Limited Partnership (komandit sirket); (c) Limited Partnership in which the Capital is Divided into Shares (sermayesi paylara bolunmup komandit sirket); (d) Limited Liability Company (Limited sirket) and (e) Joint Stock Company (Anonim sirket).

These associations acquire separate legal personality upon registration in the Trade Registry where the head quarter of the association is located.

The Joint Stock Company (hereinafter referred to as "JSC"), being the most commonly used form of business associations shall be the first subject of consideration.

JOINT STOCK COMPANIES

THE APPLICABLE LAW:

A JSC is the business association where the liabilities of the shareholders are limited to their contribution to share capital and where the capital is divided in shares. JSCs may be established by way of immediate formation under the provisions of the TCC or the shares may be offered to the public by the founders pursuant to the of Capital Market regulations. If there is a foreign founding shareholder, the provisions of Law Concerning the Encouragement of Foreign Capital shall apply.

STEPS FOR ESTABLISHING A JOINT STOCK COMPANY

The following requirements should be accomplished for the establishment:

  • A Turkish JSC should have at least five founding shareholders and the share capital can not be less than 5 billion Turkish Liras. In cases where there are foreign founding shareholders, each foreign shareholder should subscribe and pay to the JSC at least US$ 50.000 or its equivalent in another foreign currency. Such payment should be realised pursuant to the permission of the General Directorate of Foreign Investment which is a department of the Undersecretariat of Treasury ("GDFI").
  • If the investment is eligible for an "Incentive Certificate", such certificate may be obtained together with the requisite permit from the GDFI.
  • The Articles of Association of the Company should be prepared in written form, signed by all the founders or their respective authorised representatives and notarised.
  • Permission from the Ministry of Industry and Commerce
  • After obtaining a permit from the municipality where the Headquarter of the Company shall be located, the Company shall be registered with the Trade Registry at the place of the head office of the Company and duly announced in the Trade Registry Gazette of Turkey. Upon registration, the Company will gain its legal-entity.

Following the registration and publication, the Company will then be registered with the Chamber of Commerce or the Chamber of Industry , the books of the Company will be certified by a Notary Public; and the Company will be registered with the tax office. The establishment of the Company should be notified to the Ministry of Industry and Commerce , and to the GDFI.

Share certificates will be issued and delivered to the shareholders only after the completion of all the formalities relating to the formation of the Company.

ORGANISATION OF THE JOINT STOCK COMPANIES

I- General Assembly of Shareholders:

The General Assembly is the organ with the ultimate control of a JSC. The General Assembly of the Company must meet at least once a year within the first three months of the fiscal year upon invitation of the Board of Directors or the Auditors. The General Assembly is vested with the powers that are highly important for the Company including among many others; the amendment of the articles of association, election and removal of the members of the Board of Directors and the auditors, increase and decrease of capital, issuing bonds and resolving on the distribution of net profit.

II- Board of Directors:

The Board of Directors is the executive organ responsible for the day-to-day business, and representation of the Company. Unless within the realm of the General Assembly, all decisions related to the administration of the company are taken and implemented by the Board of Directors (the "Board"). The Board is composed of at least three directors elected by the General Assembly. The Board is also responsible for designating the Officers of the Company, and for exercising control and supervision over such Officers.

Under Turkish Law, members of the Board and managers of a Company also have personal liabilities for Corporate acts in the following cases where:

(1) the payments made by shareholders as purchase price of the shares are not exact;

(2) the dividends distributed and paid are fictitious;

(3) the statutory books of the Company are deficient, irregular or non-existent;

(4) the resolutions of the General Meeting are not executed without any acceptable reason;

(5) the other duties given to the Board by the TCC or the Articles of Association are not fulfilled intentionally or negligently.

III- Auditors:

A JSC may have at least one but no more than five auditors to be elected by the General Assembly. The main responsibility of the auditors is to verify that, the balance sheet and profit and loss account are in compliance with the books of the Company, that these books are properly kept, and that the legal provisions concerning valuation are complied with.

THE REPRESENTATION OF THE COMPANY

  • The representatives of the Company are authorised by the Board of Directors. They shall be entitled to execute all business within the scope of the objects (intra vires) of the Company.
  • In the absence of any clause to the contrary in the articles of association, the signatures of the two representatives authorised by the relevant board resolution to represent the Company are sufficient for the validity of documents executed on behalf of the Company.
  • The limitations of the power of representation are not effective as regards bona fide third persons.
  • An ultra vires transaction, although executed by the authorised signatures of a corporation, might not be binding for the Company.

RIGHTS OF SHAREHOLDERS

(i) Administrative Rights:

Shareholders possess a wide range of administrative rights under the TCC.

  • The right to vote,
  • The right to obtain information about the business of the Company,
  • The right to file complaints with the Auditors,
  • The right to institute legal action against Directors and/or Auditors,
  • The right to institute legal action for the cancellation of the General Assembly resolutions.

(ii) Monetary Rights:

Shareholder possesses a wide range of monetary rights.

  • Right to dividends: Every shareholder is entitled to participate to the net profits set aside for distribution to shareholders.
  • To exercise pre-emptive rights: When capital is increased, shareholders are entitled to a number of new shares in the capital of the company.
  • The right of having proceeds of liquidation after the payment of any debts.
  • To receive payments of interest, if provided in the Articles of Association during the period preceding the "full activity".

(iii) Privileged Shares Authorised Under Turkish Law

In matters such as dividends, or the distribution of assets on the liquidation of the company, or "other privileges," it is possible for the investor to create privileged shares.

(iv) Vested Property Rights of Shareholders

Those rights belonging to shareholders which are not subject to the resolutions of the General Meeting or of the Board of Directors, are considered "vested" property rights. These rights include:

  • being a member;
  • voting;
  • bringing a law-suit for cancellation;
  • receiving dividend;
  • participation in the proceeds of the liquidation No alteration may be made in the vested rights of individual shareholders without their consent.

(v) Minority rights

Minority rights have been granted to shareholders or a shareholder owning one tenth of the corporate capital.

  • To postpone deliberations of the ordinary General Assembly of Shareholders related to the approval of the balance sheet
  • To institute actions for damages caused to the Corporation by Directors and/or Auditors on behalf of the Corporation
  • To refuse the release of Founders, Directors and Auditors in connection with the liabilities incurred.
  • To appoint an ad hoc Auditor
  • To complain to the Auditors
  • To call the General Assembly for an extraordinary meeting.
  • To add an item to the agenda of the General Assembly meeting

LIABILITIES OF SHAREHOLDERS

The company is liable for its debts to the extent of its assets. The liability of shareholders is towards the Company and limited with the shares they have subscribed.

Next Issue: Book Keeping Requirements; Distribution of Dividend; Dissolution and Liquidation of the Company

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions