Main Company Types under Turkish Law
There are two types of limited liability companies under Turkish law, namely, Limited Company and Joint Stock Company.
A. An Outline of Joint Stock Companies
A Joint Stock Company (“JSC”) is a limited liability company which acquires legal personality upon registration with the Trade Registry. JSCs may be established by a minimum one real person or legal entity shareholder and require a minimum capital of 50.000 Turkish Liras. A higher initial capital requirement is set for JSCs which adopt the registered capital system (the registered capital system allows the BoD to increase the capital up to the capital cap stipulated in the AoA or specified in a shareholders’ resolution) which is 100,000 Turkish Liras at minimum. At least ¼ of the capital must be paid-in at the incorporation stage, whilst the remaining ¾ can be paid within 2 years. The liability of JSC shareholders is limited to the amount of their respective contribution to the share capital. (TCC Art. 329)
Capital contributions to JSCs can be made in cash or in kind. Non-cash assets, which are (i) not encumbered by way of pledges or any other similar restrictions, (ii) convertible to cash, and (iii) transferable (including intellectual property rights and virtual environments) can be contributed as capital in kind. Service performances, personal efforts, commercial reputation and unmatured receivables cannot be contributed as capital.
The share capital can be divided into groups, so long as there exists a provision in the Articles of Association (“AoA”) to this effect.
JSCs can go public in accordance with the capital markets legislation.
There are two mandatory organs which must exist in a JSC; General Assembly of Shareholders (“GAS”) and the Board of Directors “(BoD”). GAS is the highest decision-making body within a JSC and is also responsible for supervising the performance of Directors to ensure that the company is run in due compliance with the applicable laws and AoA and by adhering to the principles of objective good faith, justice and equity.
The BoD is appointed at the stage of incorporation by the initial AoA and it can be dismissed and elected at subsequent stages by a GAS resolution. The BoD is responsible for day-to-day management of a JSC. Besides, the BoD has the power and authority to represent and take binding actions and decisions on behalf the company.
Unless a higher quorum is specified in the law or the AoA, the GAS shall convene with the attendance of the shareholders who represent at least ¼ of the share capital. If this quorum requirement cannot be met at the first meeting, a second meeting will be held without observing quorum requirements. (TCC Art. 418).
The GAS and BoD meetings can be held via electronic environment (TCC Art. 1527 and the Communiqué on Electronic General Assembly System Applied to the General Assembly Meetings of Joint Stock Companies).
As a mandatory provision of law, shareholders’ resolutions on certain subjects, including amendments to the AoA, must be taken in presence of a duly appointed representative of the Ministry of Customs and Trade namely, a “government commissar.”
B. Outline of Limited Companies
A Limited Company (“Ltd. Co.”) may be established by a minimum one real person or legal entity shareholder. The number of the shareholders cannot exceed 50 (TCC Art. 573, 574). The minimum capital requirement for Ltd. Co. is presently 10.000 Turkish Liras. This minimum amount can be increased up to its ten times by a resolution of the Council of Ministers (TCC Art. 580). Similar to JSC, at least ¼ of the capital of a Ltd. Co. must be paid-in at the incorporation stage, whilst the remaining ¾ can be paid within 2 years and the share capital can be divided into groups, so long as there exist a provision in the AoA to this effect. In respect of any outstanding liabilities of Ltd. Co. owed to private sector entities Ltd. Co. shareholders are also insulated from personal liability and as long as they have duly made their respective contributions to the share capital. However, with respect to liability for public receivables which cannot be collected from a Ltd. Co., Law no. 6183 stipulates that shareholders shall be personally liable for such debts in proportion to their shareholding in the Ltd. Co.
As in JSC, capital contributions in a Ltd. Co. can be made in cash or in kind.
A Ltd. Co. cannot adhere to the registered capital system. Hence, capital increase always requires a duly taken resolution by the GAS.
Ltd. Cos. cannot be opened to public.
There are two mandatory organs in a Ltd. Co.; Shareholder’ Assembly (“SA”), which consists of the shareholders and the manager/managers who are designated by the initial AoA or assigned by the SA.
Unless a higher quorum is specified by law or by the AoA, all shareholders’ resolutions, including appointment of the managers and auditors can be passed by simple majority of the votes which are represented in the shareholders’ meeting (TCC Art. 620)
Since the Ltd. Co.s are capital stock companies, meetings of the SA and Board of Managers can be held in electronic environment (TCC Art. 1527).