Turkey: Is Capital Increase A Straight Forward Process?

Last Updated: 13 January 2014
Article by Sezil Şimşek

Capital increase within Turkish equity companies is considered as a straight forward process, which is actually a complete misperception.

The basic procedures are followed in accordance with the provisions of the Turkish Commercial Code. In other words, as a part of these basic procedures, the general assembly meeting of shareholders should convene and resolve to amend the articles of association of the company. Solely the registered capital system embraced companies may increase capital through adopting a board resolution.

Such resolutions are subject to registration before the trade registry office where the headquarters of the company is located. At the time of this registration application, a report certifying the full payment of the previous capital and prepared by a certified public accountant or independent accountant or auditor for companies subject to independent audit should also be submitted.

Such report is also necessary to reflect the financial status of the company. Based on such financial status, the capital increase may be either feasible or not practical at all. On the basis of this, it is essential to question certain matters before deciding on a capital increase and therefore the companies are recommended to be aware of the below:

  1. Is there any internal fund in the company that may be capitalized and are all shareholders intending to increase the capital?

Article 462 of the Turkish Commercial Code stipulates capital increase by way of adding internal funds of the company.

As is known, in order for an injection via capital subscription, the amount of the existing shares must be fully paid-up and in addition to this, there should be no funds in the balance sheet of the company, which may be capitalized. If existing, such funds must be capitalized at first. The funds that may be capitalized are exemplified in the Turkish Commercial Code's preamble as funds of re-valuation, subsidiary and immovable sales revenues, and inflation difference accounts.

Such rule is necessary for joint stock companies as a type of equity companies and not a compulsory rule for limited liability companies.

Although it is required in the first place to capitalize the internal funds at the time of a capital increase in joint stock companies, the general assembly of shareholders may resolve to directly & only proceed with a cash injection provided that all shareholders are present in the general assembly meeting and their resolution is adopted unanimously. This exception sort of stipulation is brought by the Ministry of Customs and Trade's Circular dated January 25, 2013 and relieved the companies.

  1. Could the capital amounts be used until the registration?

Another essential point to be considered at the time of the capital injection is the blockage practice of the Turkish banks on the capital amounts sent by foreign shareholders.

As to the Circular of Central Bank of the Turkish Republic numbered 2013/YB-7 and also taking Article 345 of the Turkish Commercial Code into account, the amounts sent by foreign shareholders in order for a capital increase are blocked and tracked in the bank accounts until the registration of the capital increase before the relevant trade registry office. In consequence of this, the amounts sent for this purpose are not able to be used until the completion of the registration of the new capital.

The registration period is envisaged as three months as of the adoption of the resolution according to Article 456 of the Turkish Commercial Code. If the registration process may not be completed within this three months period, the resolution adopted in this respect becomes invalid and the banks will then be required to send those amounts back to their owners as per Article 345 of the Turkish Commercial Code. For this purpose, the companies having the intention of increasing their capital should approach with caution to the amounts to be sent and used.

  1. Is company in the technical insolvency situation?

Another matter to be questioned for a capital increase is whether the company intending to increase its capital is in the technical insolvency situation as per Article 376 of the Turkish Commercial Code. This Article 376 refers to capital losses with a view to consider the loss ratio. For instance, if a company lost its half capital and legal reserves, the general assembly should convene and discuss the curative actions. Else, if a company lost its capital and legal reserve's two thirds, the general assembly should decide to continue with the one thirds of the capital or to complete the capital or otherwise the company shall deem automatically terminated. Last of all, if the company starts to give signs as insolvent, the company is required to issue an interim balance sheet taking into account the potential sales amounts of its existing assets on the basis of companies' continuity principle. If still the assets of the company cannot be positioned to cover the debts of the company, the board should notify the commercial court at the address of the company's headquarters of this issue and request its bankruptcy.

In light of this Article, the companies having such positions should proceed with the mentioned steps and cannot increase their capital right away. An option to increase the capital under such circumstances can be transferring a loss compensation fund into the company in the first place. By this way, unsecured capital of the company may become stronger and be replenished and thereafter the capital may be increased and registered to the relevant trade registry office in Turkey. At this point, the companies must be aware of the recent tax rulings given by the Ministry of Finance stating that the loss compensation funds should be treated as an income in corporate tax calculations; even it is not directly recorded to the income statement. Although the tax rulings do not mention VAT, it is also possible for such to be criticized for VAT purposes as well.


Considering the above crucial criteria, companies must make an assessment before deciding to increase their capital and understand the necessary actions and outcomes.

Based on such assessment, companies may realize that the time determined to increase their capital may not be a perfect one. In the upcoming days, internal funds, technical insolvency situations and the use of sent & blocked amounts will be more important as there have been certain financial fluctuations in Turkey, which may also affect the financial status of the companies.

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.

Sezil Şimşek
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”

Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
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.


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.


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.


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.


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.


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.


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.