Turkish Commercial Code No. 6102 ("TCC") brings important changes to the establishment of a limited liability company. Within the framework of this article, I will treat the novelties for the establishment of a limited liability company (or "company") as per the TCC, as well as the establishment process.
Number and Qualities of the Shareholders
Pursuant to Article 573 of the TCC, limited liability companies may be established with one or more shareholders; and pursuant to Article 574, the number of shareholders may not exceed fifty. Therefore, a sole shareholder limited liability company may be established as per the TCC.
Moreover, shareholders may be real persons or legal entities. A legal entity shareholder may at the same time be a director of the company, even within sole shareholder limited liability companies. In this case, a real person shall be appointed to represent the legal entity director. It should be emphasized that in the event a legal entity director shall be entitled to represent and bind the company, authorities related to the representation of the company should be clearly attributed to this legal entity director in the articles of association.
Minimum Capital Amount
The initial minimum capital of a limited liability company must be at least TRY 10.000, as per Article 580 of the TCC. The nominal value of the shares in the capital should be at least TRY 25 and multiples of 25.
It is also possible to contribute assets as capital in kind. Assets, including intellectual property rights, virtual environments and domains, which are marketable, transferable and free of any encumbrance, attachment or lien, may be contributed as capital in kind. However, services, personal labor, goodwill and undue receivables may not be contributed as capital.
Where the capital of the company shall entirely or partially be undertaken in cash, ¼ of the nominal value of the shares to be contributed should be paid before the registration, while the remaining amount shall be paid within 24 months subsequent to the registration. In other words, in a limited liability company that shall be established with the minimum capital amount, and where this capital is undertaken in cash, at least TRY 2.500 should be deposited to the bank account to be opened in the name of the limited liability company to be established.
As per Article 39 of the TCC, each merchant should perform its commercial activity under a trade name and use its trade name when signing any deed related to its commercial enterprise.
The registered trade name should be written in a legible manner and placed in plain sight within its workplace. Also, the documents used in relation to the commercial enterprise should specify the trade registry number, trade name, head office, and if required its registered internet address.
Furthermore, the trade name of the company should contain the words limited liability and refer to the company's activities.
Articles of Association
Pursuant to Article 575 of the TCC, the articles of association of the company should be in written form, and notary public should approve the founders' signatures. Within this framework, the following shall be clearly stated in the articles of association:
- Company's trade name and location of its head office;
- Scope of company business with main points defined and specified;
- Nominal value of the capital, number of shares in the capital, their nominal values, privileges attached thereto, if any, and groups of shares in the capital;
- Names, surnames, titles and nationalities of the managing directors;
- Form of notices to be made by the company
Also, the TCC includes provisions that shall be binding if they are stipulated in the articles of association:
- Regulations diverging from the statutory provisions regarding restrictions on the transfer of shares;
- Granting to the shareholders or the company the right of pre-emption, right of first refusal and option to purchase regarding the shares in the capital;
- Imposing additional payment obligations, and the form and scope thereof;
- Imposing ancillary performance obligations, and the form and scope thereof;
- Provisions granting veto rights to designated shareholders or superior voting rights to certain shareholders in the event of a tie on a general assembly resolution;
- Penalty provisions that may be applied when the liabilities set forth in the TCC or in the articles of association are not fulfilled at all or in due time;
- Provisions pertaining to non-compete obligations diverging from the legal provisions;
- Provisions granting privileged rights as to the convocation to a general assembly meeting;
- Provisions diverging from the legal provisions regarding the decision making at general assembly meetings, voting rights and the calculation of voting rights;
- Provisions authorizing the assignment of company's management to a third party;
- Provisions diverging from the legal provisions regarding the disposal of balance sheet profits;
- Granting the right to withdraw and terms of its exercise, and the type and the amount of cash payment to be made in such cases;
- Provisions determining special cases regarding the dismissal of a shareholder from the company;
- Provisions governing dissolution on grounds other than those specified under the TCC
It should also be noted that the ultra vires principle would no longer be applied to the purpose and scope of company activities. Therefore, the company is in principle not limited to the work and operations specified in the articles of association.
As per Article 586 of the TCC, the following documents must be attached to the application:
- A notarized copy of the articles of association of the company;
- Founder's declaration with its annexes; and
- The document indicating the persons authorized to represent the company together with their addresses and the appointed auditor
Further, the following information shall be provided in the application:
- Names and surnames or titles, addresses and nationalities of the shareholders;
- Shares in the capital subscribed by each shareholder and total amount that they have undertaken;
- Names and surnames or titles of each managing director, whether they are a shareholder or a third party;
- Representation method of the company
We would like to emphasize that even though the TCC provides a general framework for the required documentation, the content and form of the documents should be checked with the related trade registry.i
The establishment of a limited liability company is now easier and more efficient under the TCC since it is possible to incorporate a sole shareholder limited liability company and the necessary minimum capital has been lowered. Subsequent to the crystallization of the trade name, consensus on the articles of association of the company and determination of the capital and structure of the company, the required documentation may be prepared. These documents shall be delivered to the relevant trade registry where they will be scrutinized. If no changes or additional documentation is required, the company shall be registered and therefore established.
i Within this framework, a detailed list with explanations (in Turkish) may be found on the Istanbul Chamber of Commerce's website for companies to be established in Istanbul: http://www.ito.org.tr/wps/portal/tescil-ilan-kurulus?WCM_GLOBAL_CONTEXT=limited_sirketler
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.