COMPANY TYPES FOR FOREIGN INVESTORS

1.1.  The Joint Stock Company (JSC)

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 250.000 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.

 

1.1.2 Documents Required to Establish a Joint Stock Company

1. Letter of application
2. The Articles of Association: The articles of association have to be approved by a public notary or signed under the control of the trade registry officer. The article of association has to contain the following:

• Foundation
• Founders
• Trade name
• Purposes and objectives of the company
• Head office and branches of the company
• Duration
• Share capital and shareholders
• Board of directors and its term and liability
• General assembly
• Announcements
• Accounting year and distribution of the dividend
• Legal provisions
• Signature of founders

1. Signature declarations of persons authorized to represent and bind the company
2. Notarized copies of ID/passports of all shareholders.
3. Statement of registration with the relevant chamber of commerce
4. Receipt of capital that is paid: Receipt shows that at least twenty-five percent of the capital committed in cash is deposited in the bank. If capital is in kind, its value must be assessed and documented.
5. Receipt of payment indicating that the Competition Authority’s share has been paid.

 

1.2.  THE LIMITED LIABILITY COMPANY (LLC) 

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 50.000 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.

 

1.2.2         Documents Required For Setting Up A Limited Liability Company in Turkey

 

1. The letter of company establishment and notification form, which must include the following:

• Trade Name
• Address of the company
• Objectives and activities
• Amount of capital
• Source of capital
• Founders

1. The Articles of Association has to include as follow:

• Foundation:
• Founders:
• Trade name:
• Purposes and objectives of the company
• Head office and branches of the company  :
• Duration:
• Share capital and shareholders:
• Director/ Board of directors and its term and liability:
• Representative of the company:
• Announcements:
• Accounting year and distribution of the dividend:
• Legal provisions:
• Signature of founders:

1. Receipt showing that the share capital has been deposited. (If capital in kind is committed, a document certifying that the immovable property, intellectual property rights and other values subscribed as capital in kind are annotated to the relevant registries must be attached)
2. Signature declarations of company directors
3. Document of payment indicating that the Competition Authority’s share has been paid.

 

2.BRANCH OFFICE

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 headquaerter.

-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.

2.1. Documents Required to Establish a Branch Office in Turkey

1. Application Letter
2. Incorporation Notification Form
3. Chamber Registry Declaration
4. Passport and Residence Permit of the foreign representative of the company
5. Notarized Turkish translation of the following documents:

• The certified copy of the articles of association and the document containing the company registration records
• The parent company’s decision to set up  a branch in Turkey (which must be apostilled)
• A document given by the competent authority according to the Law of the place where the parent company is incorporated that the whole procedure has been completed (which must be apostilled). The original form has to be added.
• Power of attorney assigned by the parent company to the branch representative in Turkey together with the original document.
• A declaration that includes basic information regarding the parent company. It must contain trade name,  business subject, date of establishment, type and amount of capital, website, whether is from a member of the EU, also these informations for the branch office and must be signed by the authorized body of the parent company with the together original specimen.
• The parent company’s Certificate of Incorporation and Certificate of Good Standing.

1. Permission to establish a branch by the Ministry of Trade

 

3. LIAISON OFFICE

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.

3.1. Required Documents to Establish A Liaison Office in Turkey

1. Incorporation application must include the following:

• trade name, address and activity field of the foreign company,
• address, tel no, e-mail, tax no of the liaison office,
• the number of personnel (must be specified as foreigners and Turkish citizens)
• representative of the liaison office
• areas in which the liaison office shall carry out activities

b .Letter of the scope of the liaison office’s activity and a statement that the liaison office shall not have commercial activities.

These documents must be signed by an authorized person of the foreign company and must be translated into Turkish by a sworn certified translator.

1. The Certificate of Activity of the parent company approved by the relevant Turkish Consulate or apostilled.
2. The income statement of the foreign company
3. Power of attorney granted to represent and manage the liaison office.