Corporate entities regulated under Law No. 6102 of the Republic of Turkey, the Turkish Commercial Code (TCC), are referred to as commercial companies. There are five types of such companies: joint stock companies, limited liability companies, cooperatives, limited partnerships, and general partnerships. Among these five types of commercial companies, the most commonly preferred in practice are joint stock companies and limited liability companies. This article provides informational materials regarding the establishment of a joint stock company in the Republic of Turkey, as one of the most widespread types of commercial companies.
Pursuant to Article 329 of the Turkish Commercial Code (TCC), a joint stock company is defined as a company whose share capital is fixed and divided into shares, which is liable for its obligations solely with its own assets, and whose shareholders are liable to the company only to the extent of the shares of the capital they have undertaken and paid.
Joint stock companies may be established:
with at least one shareholder, regardless of whether such shareholder is a natural or legal person;
for the purpose of carrying out any type of economic activity and objectives not prohibited by law;
with a minimum share capital of TRY 50,000 or, depending on the selected capital system, a minimum registered capital of TRY 100,000.
As stated above, a joint stock company may be established with at least one shareholder, provided that there is no legal prohibition, that there is an objective of generating economic profit, and that the minimum capital requirement prescribed by law is met. The procedure for the establishment of a joint stock company is regulated by Article 335 et seq. of the Turkish Commercial Code (TCC), as well as Articles 69–70 of the Regulation on the Trade Registry (Ticaret Sicili Yönetmeliği, TSR), which was enacted pursuant to the authority granted by the TCC, published in the Official Gazette No. 2851 dated 27.01.2013 and entered into force.
In accordance with Article 335 of the TCC, a joint stock company is established when the founder or founders undertake an unconditional commitment to pay the entire share capital, prepare the articles of association (articles of incorporation) in compliance with the law and secondary legislation, and declare their will to establish a joint stock company. At the establishment stage, the most important elements requiring special attention are the articles of association, the share capital, and the official registration (registration in the trade registry).
The articles of association, also referred to in practice as the company agreement, constitute one of the mandatory elements for the establishment of a joint stock company. The articles of association must include the following provisions:
the trade name of the company;
the exact address of the company’s headquarters (registered office);
the company’s purpose and scope of activity, formulated in a clear and explanatory manner;
the amount of the company’s share capital, the number of shares into which it is divided, the nominal value of each share, and the method of payment of the capital shares undertaken by the founders;
an indication of whether the founders’ shares are registered or bearer shares, as well as information on any privileges attached to the shares (if any) and restrictions on the transfer of shares by shareholders;
benefits and advantages to be granted from the company’s profits to founding shareholders, members of the board of directors, and, if applicable, third parties;
information on the number of members of the board of directors, the members of the founding board of directors, and which of them are authorized to sign on behalf of the company;
provisions regarding the procedure for convening the general assembly of shareholders and the voting rights of participants;
the term of the company, if it is established for a definite period;
information on the method and/or platform for the company’s official announcements and notifications;
the company’s accounting (financial) period.
The articles of association must be prepared in written form, signed by all founders, and notarized, or signed in the presence of the director of the trade registry at the place of establishment of the company or his/her deputy.
In joint stock companies, one of two capital systems may be chosen: the fixed (basic) capital system or the registered capital system. Under the fixed capital system, the company’s capital amount is fixed and remains unchanged unless it is increased or decreased by a resolution of the general assembly of shareholders. Under the registered capital system, the authority to increase the capital, provided that it does not exceed the upper limit determined by the general assembly, may be granted to the board of directors in addition to the general assembly.
As for the form of capital contribution, the most common practice is the formation of capital in cash. For example, a joint stock company may be established by the founding shareholders undertaking to contribute cash capital in the amount of TRY 50,000. However, Article 127 of the Turkish Commercial Code (TCC) allows not only cash but also certain assets having economic value, capable of valuation and transfer, to be contributed as capital to commercial companies. Pursuant to Article 127 of the TCC, the following may be contributed as capital to a joint stock company:
cash, receivables, securities, and shares in the capital of other companies;
intellectual property rights;
movable property and all types of immovable property;
rights of use and usufruct over movable and immovable property;
commercial enterprises;
lawfully used, transferable electronic environments, domain names, names, and signs, as well as other similar assets;
licenses (permits) for the exploration of mineral resources and other rights having economic value;
any other assets that can be transferred and valued in monetary terms.
However, the contribution of such assets as non-cash (in-kind) capital constitutes a more complex and time-consuming establishment procedure compared to establishing a company solely with cash capital, as it requires compliance with an additional sequence of legal actions.
Pursuant to paragraph 1, subparagraphs (d), (e), (f), and (g) of Article 69 of the Regulation on the Trade Registry (TSR), the following documents must be prepared and submitted at the establishment stage of the company: valuation reports prepared by an expert (appraiser) appointed by the court regarding the value of the non-cash contribution and the enterprises to be acquired upon establishment; a document obtained from the relevant registry confirming that there are no restrictions on the assets contributed as non-cash capital; documents evidencing that the relevant annotations (registrations) have been made in the appropriate registries with respect to immovable property, intellectual property rights, and other assets contributed as non-cash capital; as well as agreements concluded between the company to be established, the founders, and other persons directly related to the establishment, including agreements on the transfer of non-cash assets and enterprises, which must also be prepared and submitted at the establishment stage.
Both natural and legal persons may be shareholders of a joint stock company and members of the board of directors. However, if a legal entity is appointed as a member of the board of directors of another joint stock company simultaneously with its establishment, such legal entity must designate a natural person who will represent it on the relevant board of directors. Information regarding the designated natural person must be officially registered (entered into the trade registry) simultaneously with the establishment of the company.
Accordingly, at the establishment stage, another legal entity may be appointed as a member of the board of directors, provided that a natural person authorized to act on behalf of and in the interests of such legal entity within the board of directors is appointed.
The final stage of the establishment of a joint stock company is the official registration of its establishment with the trade registry directorate at the place where the company is established. After the preparation of the articles of association and all required annexes and the submission of the relevant application to the trade registry directorate at the place of establishment, the company’s establishment is registered by this authority and published in the Turkish Trade Registry Gazette (Türkiye Ticaret Sicili Gazetesi).
In order to establish a joint stock company in the Republic of Turkey, it is first necessary to determine the company’s location (registered office) at the place of its establishment.
Subsequently, the amount of the company’s share capital and the method of its contribution must be determined. In the event that a non-cash (in-kind) contribution to the capital is chosen, a valuation report regarding the non-cash contribution must be obtained from the competent commercial court of first instance (Asliye Ticaret Mahkemesi) at the place of establishment of the company.
If a legal entity is included among the members of the board of directors appointed simultaneously with the establishment of the company, a natural person authorized to act on behalf of such legal entity must be designated.
After the official execution of the articles of association by all participants in the form prescribed by law, including the provisions set out above, the establishment of the company must be registered with the trade registry directorate at the place of its establishment.
The law firm Ergün Hukuk Bürosu, with its experienced and qualified team, will be pleased to provide you with comprehensive support and assistance in carrying out the procedures for the establishment of a joint stock company. For detailed information and legal consultation, please contact us.
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