Turkey: Foreign Ownership Of An Aviation Company In Turkey

Last Updated: 21 November 2013
Article by Safak Herdem

The aviation industry has grown up in Turkey after 2002 with the liberalization policies in the market. This potential has attracted the foreign investment to this fast-growing industry even the rules and regulations allows to the certain limits. Not only the airliners, air taxi operators, helicopter companies have been focused on aviation related projects in several times and ways.

In this article you will find information on restrictions to foreign ownership of an aviation company in Turkey.

In parallel to the Turkish Civil Aviation Law, the Regulation on Commercial Air Transportation defines the procedures and principles for individuals and legal persons to perform commercial air transport airline, air cargo and air taxi operations and granting of permits and operation licenses in Turkey.

As the requirement of aviation corporate law, passenger transporting operators whom intend to carry out operations with more than twenty seats aircrafts and cargo operators must be established in form of joint stock company and maintain it through operations. Operators carrying out or engaged in aviation business with more than twenty seats aircrafts shall not refer in articles of association to any other scope of business not related to aerospace and aviation businesses.

The individual and legal person founding partners, except for those whom shares are traded on the Istanbul Stock Exchange, the individual or legal person shareholders and the individuals whom are indirect shareholders of legal person shareholder, legal representatives of an operator are not allowed if i) declared insolvent or bankrupted during commercial air transportation operations activities, ii) acted as direct or direct shareholder or board member in the last two years or accountable manager in the last one year at any airline company operator's certificate cancelled, iii) except for those who committed negligent offenses or sentenced a short-term alternative sanctions to imprisonment other than the following crimes or has been suspended, jeopardized national security or public order and punished for simple or qualified embezzlement, extortion, bribery, theft, fraud, forgery, breach of trust, fraudulent bankruptcy, infamous crimes, such as trafficking, smuggling and excise offenses other than using the official bidding or purchasing rigging, money laundering or the crimes committed against the state, disclosure of state secrets, the state against the sovereignty and dignity of the organs of crimes, crimes against state security, constitutional order, and this crimes against the operation of the order, crimes against national defense, espionage, crimes against relations with foreign countries, the abduction or detention of vehicles.

Minimum 51% of the shares of an operator should be nominative and the majority of those whom are

i) authorized to represent and manage the company and;

ii) majority shareholders must be Turkish.

However, the provisions of the Law on Privatization, Law No.4046, dated 24.11.1994 are reserved..

Transfer of nominative shares or increase in share ratio of a shareholder in operators having preliminary permit or operating license subject to prior permission of TCAA ("Turkish Civil Aviation Authority").

If it is deemed necessary by the TCAA; the indirect shareholding capital in operators carrying out with more than twenty seats aircrafts, shareholders or structure of legal persons intended to take over the shares, and legal entity shareholder of those, if any, are determined in sequence until it reaches the individuals.

The air taxi operators to carry out operations with aircrafts having up to nineteen seats require authorization by TCAA. Those operators should have at least one aircraft in fleet to be registered in the Turkish Civil Aircraft Registry. Operators not to exceed total of two millions USD are obliged to have all cash paid-in capital, per aircraft, for each of at least two hundred thousand USD. Letter of guarantee is not requested from such operators.

In the light of the aforementioned regulations, the primary obstacle against 100% foreign ownership of an aviation company is the requirement of minimum 51% Turkish shares and Turkish majority in management of the company. However, there is certain gap in law for operators whom intend to carry out operations with less than twenty seats aircrafts since the regulation does not define the corporate requirements for those and TCAA's authority to investigate the indirect capital shareholding.

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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Safak Herdem
 
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