The Central Bank of Turkey has issued a Circular numbered 2013/YB-7 and removed the term "capital advance" from the Circular 2002/YB-1. This Circular is the main administrative regulation instructing Turkish banks about transfer of foreign capital payments.
2002/YB-1 was allowing Turkish banks to transfer payments classified as "capital advance" to Turkish companies owned by foreign residents.
Removing "capital advance" may create a legal ambiguity for Turkish banks in terms of how to process any "capital advance" payments in the future.
Due to this ambiguity, Turkish banks may treat payments referred as "capital advance", as capital payment or capital increase payment.
In accordance with the current Turkish Commercial Code, when a new company is established, capital contribution shall be blocked in a bank account until the establishment process is being finalized and once the establishment process is completed, the capital contribution shall be released.
However, this provision is being interpreted by some Turkish banks as to be applied not only for new establishment, but also for any capital increase.
Considering this interpretation and the legal ambiguity of "capital advance", transferred amount titled as "capital advance" might be blocked by Turkish banks until the recipient company finalized a capital increase process.
Therefore, in order to avoid any difficulty, Turkish companies are advised to obtain legal opinion before initiating any capital increase that would be done through "capital advance".
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.