What is the Establishment Process of Joint-Stock and Limited Companies in Turkey?

What is the establishment process of Joint-Stock and Limited Companies in Turkey?

In Turkey, establishing a company is carried out by following the legal procedures and submitting the necessary documents. Joint-Stock and Limited Companies are the most common types and can be used for many different purposes. Joint-Stock Companies (JSC) are generally preferred for large and profitable businesses, while Limited Liability Companies (LLC) are a viable option for smaller businesses. Both types of companies differ in their legal obligations, financial obligations, and responsibilities.

Establishment Process of Joint-Stock and Limited Companies in Turkey

Turkish legislation regulates Ordinary Companies under the Turkish Code of Obligations (TCO), while Collective, Limited Partnership, Joint-Stock, Limited, and Cooperative Companies are governed by the Turkish Commercial Code (TCC).

In the TCC, the collective and the limited liability company are individuals; Joint-Stock Companies, Limited Liability Companies, and limited partnerships whose capital is divided into shares are considered capital companies. This article will discuss the establishment method of Joint-Stock and Limited Companies, which are Capital Companies. The following steps are followed for both types of companies.

Preparation of The Articles of Association (AoA) when Establishing a Company in Turkey

Preparation of the main contract is the most important stage of company establishment. The principals of the newly established company, title, registered address, capital, purpose, and matters to be included in the AoA should be determined.

Title

The trade name must be confirmed by querying the Central Registry System (MERSIS) and the Turkish Trade Registry Gazette. The title to be selected must be different from the existing company titles. When making a similar title inquiry, the core and the first word based on the sector to be included in the following field should be written together. The trade name can be freely determined, provided that the phrases indicating the type of company are in Turkish. The company’s title must be compatible with the activities included in the articles of association.

Address

Depending on the company’s registered address, a company establishment application will be made to the relevant Trade Registry Office. After the company’s establishment, the registered address of the company is reached by the Tax Office for the inspection procedures. The company’s authorized person or the person given Power of Attorney (PoA) must be present with the relevant documents. Office rental/purchase transactions should be made before proceeding with the preparation of the main contract. In this context, the use of virtual offices is very common.

Capital

Depending on the company type, the company’s minimum capital costs are to be established, and the minimum value of each share should be checked.

Minimum Capital Requirement

The minimum capital fee may vary based on the intended business activity and any licenses to be obtained. A Joint-Stock Company must deposit one-quarter of the capital value into a bank account in its name before establishment.

Purpose Subject

The main contract of the company should specify its purpose. The purpose, subject matter, company name, and selected Nace Code (a six-digit code that determines the hazard classification of workplaces based on the industry they operate in) must be aligned. The company’s activities are not limited to what is stated in the Articles of Association unless required by the relevant authority for specific license applications. Therefore, the company may also undertake activities not listed in the Articles of Association.

Representation and Scripture

Representatives of Joint-Stock Companies and Limited Liability Companies can carry out all kinds of business and legal transactions according to the purpose and scope of the company, in accordance with the TCC, subject to the restrictions in the TCC. The ability of persons with management and representation authority (Board of Directors, General Assembly, managers, representatives appointed by the Internal Directive, etc.) to transfer their authority in Joint-Stock and limited companies are also limited by the TCC. In this context, the delegation of authority can only be made except for the “non-transferable and inalienable” powers listed in the TCC and the powers, if any, stated as non-transferable in the company’s Articles of Association.

Per the TCC, Joint-Stock Companies are managed and represented by the Board of Directors. The Board of Directors is authorized to make decisions on all kinds of business and transactions necessary for the accomplishment of the company’s business, except those left under the authority of the General Assembly under the Law and Articles of Association. Members of the Board of Directors can be elected to serve for a maximum of 3 (three) years.

The main contract can shorten this period but not extend it. The starting date of the term of office is the General Assembly date for the company and the registration and announcement date for third parties. In Joint-Stock Companies, as a rule, the authority to represent belongs to the Board of Directors, to be used with two signatures unless otherwise stipulated in the company’s Articles of Association or if the Board of Directors is not composed of a single person.

However, the Board of Directors may delegate its representation authority to one or more executive members (the member to whom the powers are delegated) or to third parties as a manager. Despite this period, at least one member of the Board of Directors must have the authority to represent. For the Board of Directors to delegate authority partially or completely to one or more board members or third parties, there must be a provision in the Articles of Association and an Internal Directive. The internal directive organizes the management and organizational chart of the company, defines the required tasks, and shows their places.

In particular, it determines who is affiliated with whom and is responsible for providing information. For this reason, the text of the internal directive should be carefully prepared according to the company’s field of activity. The Board of Directors is obliged to submit the notarized copy of the decision showing the persons authorized to represent and how they are represented to the trade registry for registration and announcement.

The Articles of Association of the company regulate the management and representation of limited companies. The management and representation of the company may be given to one or more partners holding the title of manager or to all partners or third parties. As in Joint-Stock Companies, the prerequisite for issuing an Internal Directive regarding limited delegation of authority is the presence of such a provision in the Articles of Association. However, unlike Joint-Stock Companies, a partner must have the right to manage and represent the company instead of at least one member of the Board of Directors.

Therefore, in Limited Liability Companies, it is only possible to transfer the company’s representation and management to a third party who is partially a partner. In such cases, representation and administration authority will be used jointly with at least one partner. In addition, following the Law, it is possible to establish Limited Liability Companies as a single partner.

For this reason, it is impossible to leave the company’s representation and management completely to a third party in limited companies established with one partner by the Law. The representation and management of the company can be given to a third person with this partner. The body responsible for the issuance and management of Internal Directives and processes of limited companies will be the unlimited authorized director/managers board. Appointment and dismissal of directors are within the inalienable powers of the General Assembly. The General Assembly may dismiss the manager or directors and limit the authority of representation.

Contrary to the limitation that the members of the Board of Directors can be elected for a maximum period of three years in Joint-Stock Companies, since there is no provision in the TCC regarding the term of office of the representatives of Limited Liability Companies, if a term is not determined in the Articles of Association or the General Assembly resolution, the assigned duty is considered to be indefinite. However, such a determination has been made in the Articles of Association or the General Assembly resolution. In that case, this period should be included in the company’s internal directive, and the signature circular should be prepared accordingly.

Making an Online Application (MERSIS)

The company’s Articles of Association are formed over MERSIS. The issues that should be included under the provisions of the TCC, especially the issues specified under the title of the above article, are regulated. After the main contract is prepared, it is sent for the approval of the Trade Registry Office, and an appointment is made to make a physical application.

The Trade Registry Directorate evaluates the matters included in the main contract until the date and time of the appointment. If a contrary situation is detected, a notification is made regarding the revision until the date and time of the appointment. After the necessary corrections are made, the relevant documents are sent to the Trade Registry Office on the date and time of the appointment.

Application to the Trade Registry Office

In order to carry out the registration and announcement processes, the last step is to go to the Trade Registry Directorate on the appointment day and time, submit the necessary documents and sign the main contract. The relevant documents vary according to the type of company. The list below contains the documents required to establish a Joint-Stock and Limited Company.

Power of Attorney (PoA)

• If the establishment procedures are carried out by proxy, a Power of Attorney issued by a notary public must be submitted. Suppose a Power of Attorney is issued abroad. In that case, the apostille-approved Power of Attorney must be translated and notarized in Turkey. If the transactions are not carried out by proxy, the partner(s) of the company must be present at the appointment day and time. A sworn translator must also be present if one of the partners is a foreigner.
• A copy of the permission or approval letter is necessary for businesses that require permission or approval from a ministry or other official organization.

Petition

• It is a printed document containing information about the new company to be established.
• It is possible to sign by proxy.

Chamber Registration Statement

• It is a printed document containing information about the new company to be established. Photo(s) of the partner(s) of the company must be pasted.
• It is possible to sign by proxy.

Organization Notification Form

• This form must be filled out if the newly established company has a foreign partner. It is a printed document containing information about the new company to be established.
• It is possible to sign by proxy.

Bank Letter

This document is valid only for Joint-Stock Companies. Depositing at least twenty-five percent of the capital in accordance with the TCC, the shareholders of the company who deposit money in the opened bank account, name-surname/title, the amounts deposited by each partner, and the total deposited amount must be shown.

Putting Capital in Kind

The decision to appoint an expert regarding the valuation of the capital in kind, the expert report, the court decision, the original of the letter to be taken from the relevant registry stating that there is no restriction on the capital in kind, annotation to the registries where the real estate, intellectual property rights, and other values placed as capital in kind are registered, agreements with the company being established, the founders and other persons, including those related to the establishment, are required.

If the Partner of the Company / Authorized Signatory is a Foreign Real Person

The notarized version of the passports of foreign natural person partners/signature officials translated into Turkish, tax identification numbers to be obtained online from the interactive tax office, and a notary-approved residence permit if residing in Turkey.

If the Partner of the Company / Authorized Signatory is a Foreign Legal Person

• Notarized versions of the foreign legal entity’s apostille-approved Articles of Association, activity certificate, and trade registry summary translated into Turkish, tax identification numbers to be obtained from the tax office, and notarized version of the apostille-approved decision regarding the selection of the natural person representative of the legal entity partner, translated into Turkish.
• The notarized version of the body’s decision regarding the election of the natural person representative of the legal entity manager/Board of Directors is required.

Non-Shareholder Real Person

• A document and signature statement indicating that the real person foreign directors/members of the board of directors who are not shareholders accept this duty is required.
• Signature declaration and duty acceptance procedures of non-shareholder real person directors/board members are made via e-government via MERSIS.

Conclusion

The establishment process of Joint-Stock and Limited Companies in Turkey is completed by submitting the necessary legal procedures and documents. Both types of companies offer different advantages and disadvantages, and it’s important to choose the company that best suits your needs. To complete the establishment process correctly and ensure your future success, we recommend that you seek professional support.

The Turkish version of this article is available on Türkiye’de Anonim ve Limited Şirketlerin Kuruluşu Süreci Nedir?

Tagged with: MGC Legal, Gözde Gökyıldırım, Commercial & Corporate, Anonim Şirket, Limited Şirket, Joint-Stock Companies, Limited Companies