Turkey: The Term Business Partnership And The Legal Status Of Business Partnerships

Introduction

As a result of developing commercial activities and large-scale investments, especially concluded in the fields of construction, energy and mining, companies are seeking to participate in these investments by uniting their powers and expertise to take advantage of financial opportunities together. This tendency among companies has caused the term "Business Partnership" to appear more frequently in commercial life. In this regard, it is necessary to determine the legal status of the term Business Partnership and to study the legal structure of the Business Partnership to be established. This article will assess the legal nature of Business Partnerships between parties and in relation to third persons.

The Definition of Business Partnership and its Legal Status

A "Business partnership" is defined as the relationship established by the gathering of more than one economically and legally independent real or legal persons within the context of an agreement, for the purpose of performing the contractual activates that has been committed to the project owner, mostly in the construction business, provided that each partner of the Business Partnership is separately liable to the project owner, for the fulfillment of the work in full1.

In line with this definition, in practice, Business Partnerships are formed by the gathering of two or more companies that are legally and financially independent from each other, within the context of an agreement concluded between themselves, for the purpose of conducting certain business together without distinguishing the parts related to their expertise areas and thus jointly and severally sharing the risk of that business.

The characteristic of the business partnership and the aspect distinguishing it from a consortium is that in business partnerships, the partners assume liability for the whole business against the project owner rather than being liable for certain parts of the business. Even if the business as a whole does not fall into the area of activity or expertise of a partner and the work is shared in interior-relation, the partners shall be severally liable to the project owner for the entirety of the work.

The conclusion of a written contract between the parties is important in order for the Business Partnership to be established to rely upon strong basis. A Business Partnership agreement may explicitly provide that each partner shall be jointly and severally liable for the performance of the commitments and businesses within the scope of the contract concluded with the project owner and of the obligations arising from that Contract but headed towards the partnership.

A Business Partnership is a special type of Joint Venture, which is solely depending on an agreement. In other words, a Joint Venture is a broader term which includes Business Partnerships.

The doctrine defines a Joint Venture as follows: "An establishment of a commercial partnership or a contractual agreement joining together two or more real or legal parties which are independent from each other legally and economically, for the purpose of executing a particular business or a continuous activity in order to generate income. All parties agree to be severally liable for the risks of such activity."2

Within the scope of the above definition, Joint Venture agreements are separated into two as "Joint Venture Solely Depending on an Agreement" and "Joint Venture Through Capital Participation". Under the Joint Venture Solely Depending on the Agreement, the relationship is merely a law of obligations agreement concluded between the parties; fulfillment of the participation stipulations by the partners is sufficient for achieving mutual purpose and the establishment of a commercial company with legal personality is not required. In a Joint Venture model through Capital Participation, the parties joining the venture by concluding a Joint Venture agreement first and establishing a partnership relation which qualifies as an ordinary partnership; subsequently establish a commercial company with legal personality or join an already-existing partnership as such.

Definition of Business Partnership under the Relevant Legislation

The definition of Business Partnership is set forth under Article 4 of the Law dated 04.01.2002 and numbered 4734 on Public Tender ("PTL"), with the amended heading "Definitions" under Article 2 of the Law numbered 5812. The definition pursuant to the said provision is as follows: "the real or legal persons active in the said tender area, who may be eager and who bought the tender or prequalification documents or the joint ventures formed by these".

Article 10 of the Law dated 30.07.2003 and numbered 4964, amended by Article 14 of the PTL titled "Joint Ventures", includes both business partnerships considered as Joint Venture and consortiums in technical sense. In this provision "joint venture" has been used as a covering concept which involves both business partnership and the consortium. The Article stipulates as follows:

"joint ventures may be established by more than one real or legal person either in the form of a business partnership or as a consortium. Members of a business partnership carry out the whole business jointly having equal rights and responsibilities while members of consortium carry out the business with separate rights and responsibilities according to their expertise field for the purpose of performing relevant parts of the business. Business partnerships may participate in any kind of tender. However, in cases where different expertise are needed, the contracting authorities shall indicate in tender documents whether the consortium are allowed or not to submit tenders. At the tender stage, the joint venture shall be asked to submit an agreement indicating the mutual agreement of the parties to form a business partnership or a consortium. The pilot partner and the coordinator partner shall be specified in business partnership agreements and in consortium agreements respectively. In case the contract is awarded to the business partnership or consortium, a notary-certified business partnership or consortium agreement shall be submitted prior to signing the contract. In both business partnership agreement and contract, it has to be stated that the real or legal persons establishing the business partnership are jointly and severally liable in the fulfillment of the commitment, whereas in consortium agreement and contract it has to be clarified which part of the business has been committed by real or legal persons establishing the consortium and they would ensure the coordination among them through coordinator partner in fulfilling the commitment."

In accordance with the explicit expression of the provision, the partners of a Business Partnership shall be severally liable for the whole business, rather than being liable for a particular part of the committed business. However, the liability of the parties of a consortium agreement shall be limited since their commitment covers only their area of expertise.

The term Business Partnership is defined under the corporate tax legislation as well. Subparagraph (d) of Article 1 and paragraph 7 of Article 2 of the Corporate Tax Law dated 13.06.2006 and numbered 55203, and Article 2.5 of the General Communique on Corporate Tax Serial No. 14("GCCT") regarding the implementation of this Law comprise legal provisions on "Business Partnerships" which are accepted as a special type of Joint Venture. In accordance with this, Business Partnerships within the concept of corporate tax legislation are understood as "the partnerships that are established by the corporations, cooperatives, public economic enterprises and enterprises belonging to associations and foundations between each other or among the private partnerships or real persons for the common accomplishment of a specific project and for sharing the income."5

The principle of partners of the business partnership being liable to the project owner for the whole business is explicitly stipulated under Article 2.5.2 of GCCT. This provision is important for the determination of the nature of the business partnership and the provision demonstrates that it is not a consortium in the real and technical sense, but a Joint Venture solely depending on an agreement.6

Whether the Business Partnership- Joint Venture Formed by Solely Depending on an Agreement – Has Legal Personality or Not

Since the Joint Venture formed by solely depending on an agreement has a simple structure, there is no question as to its legal status. Such agreements are ordinary partnership agreements pursuant to the Turkish Code of Obligations Article 620, which constitutes an ordinary partnership without legal personality.

Business Partnership carries all the elements of an ordinary partnership. There is no limitation as to the parties of the agreement in a Business Partnership. The presence of at least two real or legal persons is sufficient. The validity of the agreement is in principle, not subject to a form. There isn't a different provision other than the provision for the ordinary partnership regarding the partners' participation shares. The collective purpose and mutual endeavor for this purpose are present as well. In this regard, it is indisputable that the Joint Venture solely depending on an agreement constitutes an ordinary partnership relationship which does not have a legal personality; there is overall uniformity in the doctrine7 and in judicial decisions with respect to this issue.

Conclusion

In light of the explanations made above, since participants in a Business Partnership do not undertake specific parts of the business, do not limit their liabilities in this context and are severally liable for the whole work, these Business Partnerships do not qualify as consortiums.

Since participants in a Business Partnership can build up a partnership by solely concluding agreements, instead of creating a legal person or joining an already established company, these Business Partnerships qualify as a "Joint Venture solely based on the conclusion of an agreement".

Lastly, since Business Partnerships that qualify as a "Joint Venture solely based upon the conclusion of an agreement" are considered ordinary partnerships according to the doctrine and judiciary judgments, it shall not have a legal personality.

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.

1 Nami Barlas, Adi Ortaklık Temeline Dayalı Sözleşme İlişkileri, 3. Bası, İstanbul 2012, p. 277.

2 Barlas, p. 262, 263.

3 Official Gazette. 21.06.2006, p. 26205.

4 Official Gazette. 03.04.2007, p. 26482.

5 Barlas, p. 279.

6 Barlas, p. 280, 281.

7 Reha Poroy/ Ünal Tekinalp/ Ersin Çamoğlu, Ortaklıklar ve Kooperatif Hukuku, N. 19b, Şener Akyol, Borçlar Hukuku(Özel Borç İlişkileri), II. Fasikül, Know How, Management, Joint Venture ve Büyük Çaplı İnşaat Sözleşmeleri, İstanbul 1997, p. 75, Sıtkı Anlam Altay, Anonim Ortaklıklar Hukuku'nda Sermayeye Katılmalı Ortak Girişimler, İstanbul 2009, p. 36, 51, Kemal Dayınlarlı, Joint Venture Sözleşmesi, Ankara 2007, p. 290,291, Fahiman Tekil, Adi, Kollektif ve Komandit Şirketler Hukuku, İstanbul 1996, p. 80, Ünal Tekinalp/ Gülören Tekinalp, Joint Venture, Prof. Dr. Yaşar Karayalçın'a 65. Yaş Armağanı, Ankara 1988, p. 155, 164.

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.

Authors
 
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 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
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.