Majority of companies in Turkey are family owned companies as
their equivalents around the world. It is predicted that over 70 %
of companies are family owned companies in the world. Family owned
companies differ from other companies by their policies and
management. Mostly, in family owned companies "the boss"
(mostly the founding partner of the company) takes over whole
management of the company and wants to carry out all business by
his hand even daily products purchase and expenses. Since the
founding partner carries out all business and holds power, company
becomes an asset for the founding partner and his family;
therefore, it becomes usual that company's assets and resources
can be used freely by the family members who own the company.
Borrowing money from the company or application of a fund can be
examples to this.
Borrowing from company or shareholders can lead to several
results in scope of corporate and income tax and commercial
Relationship among shareholders and company is regulated under
Corporate Tax Legislation. Pursuant to corporate tax legislation, a
company can borrow from shareholders but it is limited due to
preventing tax loss. The limit that regulated by law is triple the
amount of equity capital of the company.
In regard to Income Tax Legislation; differences against the
enterprise borne due to improper and unmatching real market value
and value used at the sale or purchase of goods violating
"value of equal principle" for the transaction with
related parties by the enterprise owner are regarded as withdrawn
from the enterprise. Enterprise owner's wife, ancestors,
descendants, third level in laws, directly or indirectly related
firms, and partner's of those firms, other firms under the
management, supervision and control by the means if capital is
regarded as affiliated. At the application of this clause,
production and construction, renting or leasing, borrowing and
lending money, transactions require salary; bonus and kind payments
are regarded as purchase or sale of goods and services in any case.
Affiliated parties taxation operation will be corrected if the
differences regarded as withdrawn from the enterprise are
calculated at the declared tax base for income or corporate tax by
the affiliated party.
Turkish Commercial Code limits shareholders to borrow money from
their company. Shareholders cannot become indebted to the company
unless they fulfill the debts arises from capital subscription and
unless the company's earnings, including non-dedicated
reverses, meet loss from previous year. Therefore, shareholders can
borrow money from company under these two conditions.
Current Commercial Code article offers much easier way than
previous article. By this amendment, borrowing does not become an
unlimited resolution however in case of emergency it is an
opportunity for shareholders to meet their urgent needs. In
addition, long term, high rate and unsecured borrowing will be
against the letter of the law. In Commercial Code, urgent needs or
emergency concepts are not described so that these rights that are
ensured by these articles can be abused easily. Persons, who
infringe this law and borrow money from company, are sentenced due
to malpractice provisions under Criminal Law.
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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