As it is the case all around the world, Limited Liability Company (LLC)(1) is the most common form of business in Turkey.
An LLC can be established by one or more real or legal persons with a certain amount of capital under a trade name. Under Turkish law, the maximum number of the shareholders that an LLC can be established is 50.
A 100% foreign ownership in an LLC is permitted. A foreigner who has never been to Turkey can become a shareholder of a Turkish LLC by way of a power of attorney.
The minimum share capital for an LLC is 10.000 TRY.(2) Book value per share can be 25 TRY or multiples of it.
At least 25% of the nominal value of the shares subscribed in cash must be paid before registration and the rest in the following 24 months after the registration.
The cash contributions for the share capital must be deposited into a special bank account to be opened in the name of the company that is being established. A bank letter proving that the subscribed share capital has been deposited into an account will be submitted to the relevant trade registry office. The deposited amount can be withdrawn by the company upon presentment of the relevant establishing documents showing that it acquired legal personality.(3)
Contribution in kind is permissible.
The shareholders of an LLC can be real persons as well as legal persons. They do not have to reside in Turkey; non-residents can become shareholders of a Turkish LLC as well.
The former commercial code stipulated that at least 2 shareholders were required to establish and maintain an LLC. With the new commercial code (in force since July 2012), a one shareholder LLC is now possible.
In case the LLC is established with one shareholder or the number of the shareholders is decreased to one afterwards; the name, address and citizenship details of the shareholder must also be registered in the trade registry office and announced in the trade registry gazette.
As it is the case for a Turkish JSC, the organ of the LLC where the shareholders are represented is called the general assembly. The shareholder resolutions are taken in the general assembly meetings. The general assembly can convene in ordinary or extraordinary meetings. The ordinary meetings must be held at least once a year, in three months’ period following the end of the fiscal year. The directors or the holders of at least 10% of the capital can call extraordinary meetings.(4) The general assembly has the powers to amend the articles of association, appoint and dismiss directors, approve financial statements, determine the allocation of profits, dissolve the company, etc.
The decision quorum for matters concerning ordinary business of the company is simple majority of the share capital represented in the meeting. The commercial code requires higher decision quorums for matters of major importance such as merger, demerger, capital increase or decrease, voluntary dissolution etc.
Director constitutes the managing body of an LLC, just as the board of directors does in a JSC. Director is the one who manages and represents the company before third parties.
A foreigner who has a permit to work in Turkey can be appointed as director. A person who is not a shareholder of the LLC can be appointed as director as well.
Director can be dismissed any time by a resolution of the general assembly.
An LLC’s liability for its debts and obligations, unless it is expressly stated in its articles of association, is limited with its assets. The shareholders are not responsible for the debts of the LLC.
However, there is an important exception to this general rule:
The shareholders of an LLC are personally responsible for public debts of the company. They are jointly responsible for the taxes in proportion to their shares in the capital. On the other hand, their responsibility towards the social security premium payments for the employees of the LLC is for the whole debt and not in proportion to their shares in the capital. However, such liability will only occur if such debts cannot be collected from the assets of the company.
One of the most significant differences between an LLC and a JSC is the liability regime regarding the public debts. Hence, it should be seriously considered when deciding the type of the company to be established.
Articles of Association
As being the constitutional document of the company, the articles of association must be prepared in order to establish an LLC. Several copies of the articles of association have to be signed by all the shareholders (or their representatives by way of a proxy) of the LLC before the trade registry office (unless the shareholders or their representatives are illiterate or handicapped or cannot speak Turkish in which case the AoA must be signed before a notary public).
The articles of association wording must include the following;
a) The names and surnames, address and citizenship details of the founders,
b) The commercial name of the company,
c) The main area of activity and the subject matter of the company,
d) The address of the company,
e) The capital of the company, number of shares, nominal value of each share, how the capital will be subscribed,
f) The names, surnames, and nationalities of the director(s),
g) How the announcements about the company are made,
In practice, the trade registry offices are providing draft articles of association texts.
Articles of association of an LLC may be changed by a resolution of its general assembly.
The Establishment Procedure
In Turkey, trade registration transactions for all types of companies are made through a Central Registration Recording System called MERSİS.
The commercial name of the LLC chosen by the shareholders must be submitted via MERSİS and its approval will in principle be taken electronically. The commercial name can neither be misleading nor offensive.
The Company must apply the relevant tax office for getting a potential tax identity number once the articles of association are attested by the trade registry office or a notary public. This potential tax identity number is necessary for opening a bank account in order to deposit the share capital of the Company.
A letter duly prepared by the bank where the subscribed share capital of the company is deposited must be taken. This letter should include the name of the company and its shareholders and the amount deposited by each of them.
0,04% of the share capital must be deposited in an account in a public bank as a fee for the Turkish Competition Authority.
After completing the preliminary preparations, the following documents(5) must be submitted to the relevant trade registry office:
a) A letter of application signed by the director. The application letter has to include the request for registration and details regarding the name, share capital, address, establishment date as well as the name of the tax office where the company will be registered and a list of the annexes.
b) Incorporation declaration form. Three copies of this document must be filled and signed by the authorized persons. If there is a foreign shareholder, four copies of the form must be filled and signed.
c) Notarized copies of the articles of association(6) unless the founders sign the articles of association before trade registry officers,
d) “Chamber Registration Declaration”(7) which must be filled and signed by the founders of the company,
e) Notarized copies of the passports and certificates of residence as well as special tax ID number granted to foreigners for the foreign shareholders and director,
f) Notarized signature specimens(8) of the directors unless they sign written declarations before the trade registry officers,
g) Notarized acceptance letters proving that the non-shareholder directors accepted their roles as the directors of the company,
h) The bank receipt with respect to the payment of the Competition Authority fee which is 0,04% of the share capital,
i) A bank letter that includes the name of the company and its shareholders and the amount deposited in total and by each of the shareholders,(9)
j) Contracts made between the company and the shareholders or third parties (if any).
Once the registration process is completed, the registration of the LLC is announced in the Turkish Commercial Registry Gazette.
The LLC registration process is typically completed in a couple of weeks.
The LLC must also be registered in the relevant tax and the social security offices once the company registration process is completed.
(1) “Limited Şirket” is the Turkish term used for Limited Liability Company. The abbreviated version in Turkish is “LTD ŞTİ”.
(2) Current EUR/TRY and USD/TRY exchange rates can be found here and here respectively.
(3) In case the company cannot acquire legal personality in three months, the depositors have the right to withdraw the money they deposited.
(4) A lower percentage may be determined in the articles of association.
(5) In case there is a contribution in kind or in some other situations, there are some other documents to be prepared. In order not to create confusion, we are ignoring that kind of details in our article. Please kindly get in touch with one of our team members in case you need information that is not covered in our article.
(6) There is an exemption from certain notarial fees for the notarization of the articles of association.
(7) This is the application document for registering the company at the relevant chamber of commerce.
(8) Such signature specimens must also include the name of the company.
(9) It should be noted that the trade registry offices do not accept bank receipts alone without a specific letter from the bank.