Increasing Capital In Limited Liability Companies By Contribution Of Shareholders' Mature Cash Receivables To The Capital

According to Article 127 and 342/1 of the Turkish Commercial Code ("TCC"), shareholders' mature receivables from a company can be invested in that company as capital in-kind.

In order to increase capital in limited liability companies in such way, an application must be made to the relevant Trade Registry with the following documents:

  • A simple one page petition in the form of a cover letter, signed by the authorized signatory(ies) of the company of which the capital will be increased.
  • 2 notarized copies of the General Assembly resolution (i.e. meeting minute).

    The General Assembly of the company must convene and adopt a resolution regarding the capital increase, clearly stating that the increased capital amount is covered from the mature cash receivables of the relevant shareholder(s) and that the existence of such receivable is confirmed by the relevant certified public accountant (or an independent accountant and financial advisor as mentioned below).

    In the said General Assembly resolution, the new capital structure (with the increased capital) must also be shown (indicating the new capital amount, the number of shares, share value as well as the new shareholding structure).

    Shareholders can be represented by proxies in the General Assembly meeting.

    Unless a higher (cannot be lower) quorum is required in the articles of association, a capital increase decision in the General Assembly meeting can only be adopted with at least 2/3 of the votes that are represented in that meeting, which are cast by shareholders who are entitled to vote and who own shares that represent more than 1/2 of the entire capital of the company.
  • Report of the certified public accountant (or independent accountant and financial advisor)

    Based on the latest opinion of the Ministry of Customs and Trade General Directorate of Domestic Trade, it is no longer required to apply to a court to have an expert appointed to officially confirm the existence of the receivable which will be contributed to the capital. A report obtained from a certified public accountant (or an independent accountant and financial advisor) in this regard will be sufficient.
  • Good Standing Certificate (Activity Certificate) of the accountant
  • Bank receipt showing that 4/10.000 of the increased capital amount is deposited into the bank account of the Turkish Competition Board.

Unlike in joint stock companies; obtaining another resolution regarding the exercise of preemption rights of the other shareholders is not required in limited liability companies.

As a final note; unlike in joint stock companies, it is not required for a representative of the Ministry of Customs and Trade to sit in the General Assembly meetings held for increasing the capital in limited liability 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.