Turkey: Establishing Joint Ventures In Turkey

Last Updated: 30 May 2008
Article by Bener Law Office

The considerable increase of foreign investors into the market, particularly in the form of joint ventures has played a significant role in the reform and liberalization of the laws governing foreign investors as part of Turkey's economic program adopted after 2001. These reforms have been significant in Turkey's pursuit for EU accession. Today, Turkey boasts the 17th largest economy in the world attributable to its commitment to sustain a strong economic framework to foster an environment enabling businesses to prosper. Alongside other factors, its outward-oriented economic development strategy has spurred Turkey to adopt investment incentives that have certainly been a contributing factor to the increase of investment. This has also expedited the process in which foreign investors are able to establish joint ventures in Turkey.

Reasons for establishing a Joint Venture in Turkey

Aside from its ability to maintain a stable intra/extra-economic market, Turkey is the 13th most attractive country for foreign direct investors, probably due to its demographic dynamism. These are, to name a few; a populace of over 70 million of which 65% are below the age of 35 years, a large potential workforce, a sophisticated infrastructure (legal support, financial and consultancy services), an ever increasing number of professionals with purchasing power, Turkish work ethics and the local market within Turkey itself.

Another influential reason for the attraction of foreign investors into Turkey is its strategic position. Turkey lies on the borders between Europe and Asia and is used as a gateway to achieve strategic goals to enter into the Asian or European market. This will be of particular importance for those wanting to access new markets in EU member states as Turkey signed the European Customs Union (ECU), which has been effective since 31st December 1995. The ECU involves preferential trading agreements between EU member countries where goods and services imported are exempt from any duties, and a common export tariff. A by-product of such membership has meant Turkey has had to harmonize its intellectual and industry property rights and to adopt standardization, quality and accreditation controls. This has had an incremental impact on the overall trade environment and the international standard a foreign investor would expect to operate in.

To exemplify, one of the main concerns among foreign investor's venturing with domestic companies is that of transparency. Being able to obtain accurate data on which to base valuations and other decisions may be of concern for the foreign investor as the accounting standards of the domestic partner may be vary to that used in international standards. Turkey has alleviated this problem by establishing the Turkish Accounting Standards Board, having its own legal status and administrative and financial autonomy, established by Law No: 4487, which regulates accounting and financial reporting. The Turkish Accounting Standards Board decided to adopt and be in full compliance with the International Financial Reporting Standards (IFRS) to allow integration of international accounting practices, and to be in harmony with the EU legislations and standards.

The Turkish Accounting Standards Board requires that all enterprises established under the Turkish Commercial Code in Turkey must prepare statutory financial statements in compliance with the Turkish Accounting Standards Board. The implication of this for foreign investors is that the valuations of local enterprises will be valued on the same principles adopted by international standards. This makes all accounting data transparent and more reliable for all parties involved.

Further efforts to modernize the legal infrastructure of Turkish law can be illustrated in the recent proposal to modernise the Turkish Commercial Code which is in the pipeline, envisaged to be effective some time this year. The main reasoning behind the revision of the Commercial Code was to modernize it in line with the EU harmonization attempts.

Turkey has an impressive track-record of some of the most successful joint ventures established with foreign companies and illustrates the reasons as to why Turkey is becoming an increasingly popular contender for foreign investors as an attractive place to invest in. A few examples of successful joint ventures, in the form of partnerships and consortiums that have taken place to date are provided below:



October 2000


Toyota, a Japanese company, one of the world's largest automobile manufacturer's, made a strategic joint venture with Sabancı Holding, a Turkish to form the ToyotaSA. ToyotaSA is the distributor of Toyota branded automotive products in Turkey and conducts its marketing, sales, and after-service of locally produced Corolla products.


The joint venture was established as part of Toyota's objectives for expansion and increasing sales volume in Europe, their goal to hold 15% of the global automobile market and to be in the world's top 3 automobile producers.


The establishment of ToyotaSA enabled Toyota entry into the European market and the Turkish automotive factory has been the leading supplier of Corolla Verso's into Europe. New markets include Germany, Italy, France and the UK.

The Corolla plant in Turkey is one of the world's best state-of-the-art automotive plants and runs at 100% capacity.

The branch employs more than half a million people.

The Turkish factory alone has produced over €2.2 billion worth of automobiles

The venture enabled an 8% holding of the automobile market share and announced its 11th consecutive year of sales in Europe, with the Toyota Carolla Sedan, produced in Turkey, being the 3rd best-seller in Europe.

Borusan Mannessman Boru


Year 2004


A joint venture was established between Borusan, a Turkish steel company and Mannessman Boru, a German company, namely, Borusan Mannessman Boru which welds steel pipes and profiles as well as plastic pipes.


Annual manufacturing capacity rose to 70 thousand tons upon realization of the merger.

They achieved USD 520 million in 2006 and now stand as one of the top five steel pipe producers in Europe.

Koç-Shell: Tüpraş


January 2006


Koç, one of Turkey's largest holding companies and Shell, a worldwide group of oil, gas and petrochemical companies, established a consortium and won the tender for the privatization for a 51% stake in Tupras (Turkiye Petrol Rafinerileri), an oil refinery company and Turkey's largest industrial enterprise, for USD 4.14 billion. Operations are undertaken under the joint stock company name; Enerji Yatırımları A.Ş.


To strengthen its superior position in the oil refinery market.


They have now reached coverage throughout Turkey including areas far from the location of the Tüpras refineries, and currently control all of Turkey's refining capacity.

Samsonite & Desa


October 2007


Samsonite Group, the world leader in travel bags, luggage and accessories and Desa, the leading manufacturer in the production, distribution and retail of luxury leather goods and travel goods in Turkey. Samsonite acquired a majority stake of the strategic partnership.


Samsonite wanted to expand into Eastern Europe and strengthen its market presence in Turkey, Georgia, Azerbaijan, Armenia and Syria.

Legal Aspects of Joint Ventures in Turkey

Although there is no specific legal definition of a joint venture under Turkish commercial law, the very general understanding that can be derived from common commercial practice under the scope of Company Law and Obligation Law, is that a joint venture is the engagement of two or more individuals or legal entities pooling together their resources for the purpose of executing a particular commercial undertaking.

Under the Foreign Direct Investment Law, Law No: 4875 ("new FDI Law"), dated17th June 2003, the burden for foreign investors with foreign capital to acquire certain permits in order to establish or participate with a company established under Turkish Law has been removed. To this extent, all transactions for establishing a JV by foreign investors impose the same procedure as that of domestically owned companies established under the Turkish code of Obligations. The rationale behind the new FDI Law was to establish an equal and non-discriminatory avenue in advocating local and foreign relationships by removing the initial screening process, share transfer and minimum capital requirements.

Vehicles for Establishing the JV in Turkey

Joint ventures are relatively easy to establish in Turkey thanks to the introduction of the new FDI Law in 2003. Once all the requisite documentations have been prepared and furnished to the relevant authorities, official establishment of the joint venture takes approximately 1-3 days.

There are several ways in which joint ventures can be formed in Turkey. The structure in which the joint venture is to be established is significant to the operation of the venture and must therefore be chosen carefully..

Under Turkish Law, a joint venture may be formed under two 'umbrellas';

  • a Commercial Company (ticaret şirketi), governed by the Turkish Commercial Code or

  • an Ordinary Company (adi şirket), governed by the Turkish Code of Obligations.

Commercial Company

A Commercial Company is registered and recognized as having a legal identity separate from its shareholders. According to the Turkish Commercial Code, the commercial enterprise JV may be established under five titles; an unlimited partnership (general partnerships), limited partnerships (special partnerships), companies limited by shares (stock corporations), limited liability companies (corporations without shares) and cooperative companies (cooperative societies).

The most common types of Commercial Companies in Turkey established by foreign investors are Joint Stock companies (Anonim Şirket), Limited Liability companies (Ltd.Sti.), Branch offices and Liaison offices. Limited liability companies would seem more suitable and probably more attractive for companies that require a simple shareholding structure and management i.e. between family members. For example, a limited liability requires an initial capital of TRY 5,000 and 2 shareholders at a limit of 50 shareholders, whereas a joint stock requires an initial capital requirement of TRY 50,000 and 5 shareholders. This aside, a joint stock is the preferable route for a JV as opposed to limited liability as it allows for a more complex structure and is especially more flexible for transfers of shares due to its more flexible nature.

Ordinary Company

The other form of joint venture, which is an Ordinary Company governed by the Turkish Code of Obligations, is not recognised as having a legal identity. In most cases, a contract will bind the understanding between the parties but where no contract or agreement is assigned, the venture will be governed solely by the provisions governing Ordinary Companies under the Turkish Code of Obligations or Commercial Code. The two types of Ordinary Companies are normal ordinary partnerships and consortiums. Normal ordinary partnerships and consortiums are used as a vehicle for foreigners who want to partner with Turkish entities or participate in a tender and are ideal for achieving relatively short-term specific objectives e.g. construction of a bridge.

These types of Ordinary Company may be established in two forms;

Normal Ordinary Partnership


  • All parties to the company are jointly responsible for the success or failure of the project.


  • Consortium is distinguished from the normal ordinary partnership because each party may be liable only for their contribution to the project conditional on the consent of the creditor.

  • However, the parties' separate liability is exclusively applicable to liabilities owed to the creditors. All other liabilities owed to any other parties shall be shared jointly.

Once the necessary procedure has been administered, the joint venture is officially established and the project or undertakings may commence. The next step will be to inform the General Directorate of Foreign Investment of the establishment of the joint venture (this is merely a formal procedure for records). However, when establishing a joint venture, it is imperative that the parties involved must observe the Turkish competition law regulations as to its applicability to them.

Competition Law

Joint ventures are wide in their spectrum of their cost-benefit ratio. The cost being their potential negative influence on the market they operate in and the benefit being their potential pro-competition effect. For this reason, joint ventures warrant assessment in terms of their competitive effect. Turkey's competition laws are parallel to the European Union Council Regulation on competition.

The Turkish competition law and regulations have a monetary and capacity threshold for joint ventures, its purpose being to safeguard competition in the respective market. These laws and regulations provide that permission from the Turkish Competition Board does not need to be sought as long as; the combined contributions of the parties do not exceed TRY 25 million nor will the joint venture result in it occupying 25% or more of the relevant Turkish market it will enter into. However, if it does exceed these thresholds, then the joint venture must apply to the Competition Board where they may allow the joint venture under a two phase application, namely, "exemption" and "negative clearance".

An exemption sets out certain sector-specific criteria's which may exempt the applicant joint venture to be established. If the applicant joint venture does not fall under "exemption", then an application for "negative clearance" would be sought. However, the likelihood of reaching this stage is very small and only becomes necessary in very exceptional cases. In a case of negative clearance, the merits or eligibility for qualification of the joint venture is highly case-specific and is generally based on the requirement, amongst others, that although the applicant joint venture is above the threshold, its presence will not affect the dynamics of the respective market. If the Competition Board authorizes the joint venture, then the company may officially proceed with its intended undertakings.

Reasons for the Success of Joint Ventures in Turkey

In principle, when examining the pro's and con's of a joint venture, joint ventures seem destined for success. However, in practice, there is no concrete rule that assumes all joint ventures to be successful. Aside from the financial and corporate strategic aims of the parties involved, success of a joint venture is highly dependant on the relationship between the involved parties prior and subsequent to the joint venture, not to mention their differing cultural business ethics.

Considering this, the gap between international and Turkish practice codes is narrowing rapidly. Turkey has been able to set the pace for developing countries by adopting international standards in many respects. At the rate at which globalisation is occurring, it is vital that all countries position themselves to be more accessible and to welcome investments in order to receive the benefits that cross-border transactions may yield. This firstly requires establishing an environment in which businesses are firstly attracted to enter into, and then striving to maintain a healthy business environment where those businesses may operate successfully in. Turkey has not only recognised this concept but has also taken the steps to realize it.

Turkey is continually undergoing legal and regulatory reforms and restructuring in an attempt to modernize the way businesses are able to operate in as a response to businesses become increasingly complex and dynamic in order to achieve their objectives. Naturally, along with the reforms and new legislations that have been adopted in compliance with international standards, the business ethics and practices used in Turkey have also evolved to that of international standards. This, naturally, will enable common understanding between foreign and local partners which can greatly ease the strain and remove the reservations foreign investors have to partner with companies in developing countries. The favourable economic environment, Turkish business ethics and the Turkey's socio-economic qualities, combined, has probably contributed to the vast growth in the investments it has experienced over the past few years.

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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