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ESTABLISHING A COMPANY WITH FOREIGN CAPITAL
Turkey has a non-discrimination and equal treatment. Foreign investors have the same status with a local company. There are no rules requiring a Turkish participation in the capital or management of a company with foreign capital; a company may be established with 100% foreign capital. Almost all sectors are open to foreign capital.
company establishment procedures have been simplified to a great extent
through shifting from screening system to monitoring system for foreign
investments and through eliminating the unnecessary procedures to set up a
business for both the local and foreign investors.
The Principle Forms of Business
Units in Turkey
are the main features of main forms of business units in Turkey.
Joint Stock Companies
joint stock company is established with the participation of a minimum of
5 real or legal persons as shareholders.
The minimum capital requirement for the establishment of a joint
stock company is TRY 50.000 (USD 37.0K).
joint stock company may be defined as a type of company having a specific
business title and a capital, which covers an amount that has been
determined before, and which has been divided into shares. The structuring
and organization of joint stock companies are subject to the regulations
set forth in the Turkish Commercial Code.
Joint stock companies having more than 250 shareholders, or who
issue stocks and bonds that are quoted in the stock exchange, are subject
to the provisions of the Capital Market Board
capital of joint stock companies is divided into shares each having equal
value. Share certificates having the nature of negotiable instruments can
be issued for representing the capital of a joint stock company. Such
share certificates may be bearer certificates or registered certificates.
Unless a specific provision is incorporated in the articles of association
prohibiting transfer of registered share certificates, such certificates
are transferable upon the approval of the board of directors. Meanwhile,
bearer share certificates may be transferred without any restrictions,
subject to the provisions of the Turkish Commercial Code.
joint stock companies, resolutions are passed with the majority
affirmative vote. However, the Turkish Commercial Code contains certain
provisions, which protect the rights of minority shareholders.
joint stock companies, the Board of Directors has been granted the
authority to represent and commit the company. Board of Directors consists
of at least three members. However, dividend distribution, appointment of
board of directors and auditors, capital increases, and other important
issues to be determined by the articles of association require a General
Assembly of Shareholders’ resolution.
stock companies should have a statutory auditor but there are no specific
functions of the auditor other than submitting some reports to the
shareholders of the company in annual general meetings.
are two types of legal reserves. The first legal reserve is 5% of the
after tax profits. The first legal reserve is set-aside until the
accumulated first legal reserve reaches 20% of the company’s paid-up
capital. The second type of legal reserve is calculated only in case of
dividend distribution. 10% of the amount distributed to shareholders is
allocated to a second legal reserve. There is no maximum limit for this
type of legal reserve.
liability companies may be formed of real persons or legal entities and
consist of minimum of two, maximum of 50 shareholders. The minimum capital
must be TRY 5.000 (USD 3,704).
companies are unable to do business in banking and insurance sectors.
companies have two organs for management and representation of the company;
board of shareholders and director(s). It is possible to delegate the
responsibility of management and representation of the company to director(s)
appointed director has the authority to run the company. The directors
occupy a similar position like the members of the board of directors in
of the articles of association, appointment and dismissal of directors and
auditors (required only in case of having more than 20 shareholders), and
profit distribution requires a board of shareholders decision.
held in a limited liability company are non-negotiable and may be transfer
of shares requires the approval of other shareholders of limited company.
Transfers must be approved by at least a 75% of the shareholders,
representing at least 75% of the capital.
of a foreign organization is not a separate legal entity, but is an
establishment of its parent body. The official business title must
indicate that the entity is a branch. Special rules apply to branches of
foreign banks and insurance companies.
branch’s obligations are not limited to the branch’s capital, but it
is limited to its parent company’s assets.
offices are managed by a fully authorized commercial representative
residing in Turkey.
are not subject to the legal reserve requirements. There is no minimum
amount of capital either.
offices have a special status in Turkey. They are not allowed to carry on
any commercial activity. Their
activities in Turkey are limited mainly to accumulate information about
investment opportunities in Turkey, and to conduct market research and
feasibility studies. (See Chapter 2, page 3 for further information).
Unlimited liability Companies (Partnerships)
are ordinary partnerships (consortiums) and commercial partnerships
(Komandit Sirket and Kollektif Sirket).
ordinary partnership is not a legal entity, but a group of entrepreneurs
like a consortium. Two or more individuals may form an ordinary
partnership by entering into an agreement. Ordinary partnerships may not
have their own trade name, nor may they appear in the Register of Commerce
or the Register of Title Deeds. All partners have equal rights and they
are jointly and severally liable for all the debts and obligations. No
statutory rules provide a detailed legal framework for the management or
operation of ordinary partnerships.
commercial partnership is a legal entity with a legal personality
independent from its partners, and may be either a limited or general
partnership. In a limited partnership (Komandit Sirket), the general
partners are fully liable for the debts of partnership, but there are also
one or more limited partners liable for the debts only up to the amount of
the capital contributions they have made to the partnership. This type of
business organization is rarely used
registration and establishment procedures have been simplified to a very
great extent, after the enactment of Foreign Direct Investment Law and
revisions made in the Commercial Code and various other Laws. The complex
and time consuming procedures have been eliminated for both local and
foreign investors and the number of transactions have been minimized to
the following steps.
Registration of a Company
to the Trade Registry
documents are required to be submitted to the Trade Registry Office. (The
documents required may vary depending on if the shareholders are legal
entities or if they are real persons)
to Tax Office
application to the tax office is required wherein the company headquarters
is located, on the same day or the day before the registration date. A tax
registration number is received and legal books are certified by a Public
rent contract certified by the Notary Public as well as the notarized
Circular of Signatory should be submitted to the related Tax Office.
these registrations, the establishment procedures are completed and the
company may start to operate. Expected period for finalizing the above
registrations is 2-3 days.
Registration of a Branch
to the Ministry of Industry and Commerce
to the Trade Registry and Announcement
documents are required to be submitted to the Trade Registry Office. (.
Depending on the structure and the country at which the mother company is
resident the documents required may vary considerably
to Tax Office
procedure for a branch is the same as for the companies.
of a Liaison Office
procedure of a liaison of office is briefly as follows:
one month after obtaining the permission from the General Directorate of
Foreign Investment an application must be made to the tax office. Although
the liaison office itself is not subject to taxes and the employees are
exempt from income tax, tax office registration is required for the
withholding tax liabilities over the rental payments to be extended to
real persons and for the stamp tax liabilities over the salary payments
foreign investor may also buy the shares of an existing company wholly or
partially, without a need for a prior permission or approval. There are no
special arrangements or restrictions imposed on foreigners for the
acquisition of an existing firm.
may freely purchase shares on the Istanbul Stock Exchange as well.
are the general conditions for purchasing shares in a joint stock company:
Following are the general conditions for purchasing shares in a limited liability company:
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