Company Formation

The Joint Stock Company is the most prevalent company type for big-sized investments. JSCs usually operate in regulated sectors such as banking, insurance, financial services and energy, as well as certain other sectors that require a higher amount of capital.

Minimum one shareholder and minimum 50.000 TRY Capital  are needed to set up an JSC. The capital can be any economical value such as money, intellectual property rights, immovables etc. If the committed capital is cash, 25% of the total capital must be deposited in the bank account of the company within three months following the company’s establishment. The remaining capital must then be paid within two years. The capital can be increased or decreased by changing the articles of association.

There are no limits for the number of shareholders in a JSC. The shareholders of a JSC are not liable personally for debts of the JSC in any case other than the payment of the committed capital.

JSC is directed and represented by a board of directors, together with the supervisory board.  The duration, powers and duties of the board of directors can be determined by the articles of association. But under the Turkish Commercial Code, the duration can be decided from one year to three years.  There is no need for the members of the board of directors to be Turkish citizens or obtain a residence permit in Turkey.

JSC is regulated in the Turkish Commercial Code, therefore, any issues about the JSC is to be resolved under the Turkish Commercial Law. However, when a JSC offers its shares to the public, then the provisions of the Turkish Capital Market Law  also apply to the company. It is therefore important for public JSCs to determine which provisions will be applicable to a particular dispute.

The other mostly used company type for foreign investors is the “Limited Liability Company”.  Limited Liability Company can be  established by one or more real or legal persons under a trade name. The shareholders of the Limited Liability Company are not liable for the debts of the company, they are only obliged to pay the basic capital shares they have committed and to fulfill the additional payment and side performance obligations stipulated in the articles of association. But according to the exception which is regulated under the Procedure for Collection of Public Receivables Law, The shareholders of the Limited Liability Company are directly liable for the public receivables that cannot be collected from the company in whole or in part or understood to be uncollectible, in proportion to their capital shares.

The amount of required capital for establishing an Limited Liability Company is TRY 10.000 and additionally the  number of the shareholder can be from one shareholder to fifty shareholders.   The nominal value of the capital shares may be determined as at least TRY 25 in the articles of association. It may be below this value in order to improve the status of the company.

Limited Liability Companies are managed and represented by a director or a board of directors.  According to the Turkish Commercial Code, at least one shareholder must become one of the board of directors. On the other hand, the members of the board of directors may be a third person or the whole shareholders may be members of the board of directors. If any foreigner shareholder of the Limited Liability Company wishes to become a member of the board of directors, he/she must obtain a work permit.

The provisions of Limited Liability Company are regulated in the Turkish Commercial Code. Therefore, the Turkish Commercial Law shall be applicable code in any disputes. It should also be stated that Limited Liability Company cannot offer its shares to the public.

The branch office is defined under the Union of Chambers and Commodity Exchanges of Turkey Law no. 5174. According to this definition, an enterprise which has below elements can be defined as a Branch Office:

-The branch office is attached to the headquarters.

-The branch office runs the works in places other than the headquarter.

-The branch office is independent.

-The branch office has its own accounting.

There is no minimum capital requirement for establishing a branch office and a branch office is an extension of the parent company in the same business organization under the Turkish Commercial Code. Therefore, a branch office is attached to the company and works for the income of the company inherently.

Branch offices are represented by the branch manager, who is assigned by the company. Turkish citizens and foreigners may both be branch managers, but it is compulsory for foreigners to reside in Turkey to be appointed as branch office manager.

The branch of the company that resides abroad is registered as a domestic enterprise without prejudice to the provisions of the laws of their own countries for trade name.  Furthermore in the registered trade name of the Branch Office of the said Companies, it is obligated that trade name contains the location of the headquarters and the branch office of the company.

The provisions of the branch office have been regulated under both the Turkish Commercial Code and the Union of Chambers and Commodity Exchanges of Turkey Law.

The Liaison Office is the last alternative for doing business in Turkey, albeit with a rather limited scope. The liaison office is an option for investors who do not wish to establish an LLC or JSC.

Liaison office is regulated under The Foreign Direct Investments Law numbered 4875 and dated 17.06.2003. A Liaison Office may be established with the permission of the Ministry of Industry and Technology.  This establishment and management license granted by the Ministry of Industry and Technology is valid for a period of three years.

While liaison offices offer a number of advantages and exemptions to foreign companies in Turkey, they are also subject to additional restrictions compared to branch offices and affiliates under Turkish law. In particular, certain activities that can be done through branch offices and affiliates cannot be done by liaison offices, since they are an extension of their foreign parent company and do not have an independent legal personality. The main purpose of liaison offices is marketing, promoting, representing, hosting, information transfer, technical support etc. According to the Turkish Foreign Direct Investments Law no.4875:

“The Undersecretariat is authorised to permit foreign companies established under the laws of foreign countries to open liaison offices, provided that they do not engage in commercial activities in Turkey.”[4] 

As a result of the prohibition of commercial activities, the expenses of  a liaison office are covered up by the parent company. In connection with the above-referred limitations, liaison offices are not obliged to pay VAT (Value Added Tax), corporate tax, and stamp duty. Also foreign employees brought from abroad and paid by the foreign company are exempt from income tax.[5]

There is no required minimum capital requirement for establishment of a liaison office.  A liaison office is represented by a liaison office representative who may be a Turkish citizen or a foreigner.