Introduction
Joint Stock Company (JSC)(1), under Turkish law, is a company capital of which is divided into shares and its liability for its debts is limited with its assets.
A JSC can be established by one or more real or legal persons with a certain amount of capital under a trade name. Under Turkish law, there is no maximum limit on the number of shareholders.
Turkish law permits a 100% foreign ownership of a JSC. A foreigner who has never been to Turkey can become a shareholder of a Turkish JSC by way of a power of attorney.
Capital
Before July 2012, when the new Turkish Commercial Code came into force, a privately-held JSC could only choose a basic capital system. It is now possible either to go for a basic capital system or a registered capital system.
In the basic capital system, the share capital of a JSC cannot be less than 50.000 TRY.(2) The minimum share capital of a company that chooses the registered capital system is 100.000 TRY. Book value per share can be 0.01 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 of the share capital 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 The deposited amount can be withdrawn by the company upon presentment of the relevant establishing documents showing that it acquired legal personality.(3)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.
Approval to Establish a JSC
Under Turkish law, in principle, establishing a JSC is not subject to the permission of any authority. However, there are types of companies where the approval of the Ministry of Customs and Trade is sought. These companies are;
banks, insurance companies, financial leasing companies, factoring companies, consumer finance and card services companies, asset management companies, holding companies, independent auditing companies, etc.
Even for these types of companies, the Ministry of Customs and Trade will only be able to intervene if there is a contradiction to the mandatory regulations of the commercial code. Other than this, the commercial code expressly stipulates that neither the establishment nor any amendment in the articles of association of any JSC is subject to the permission of any authority.
Shareholders
The shareholders of a JSC 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 JSC as well.
The former commercial code stipulated that at least 5 shareholders were required to establish and maintain a JSC. With the new commercial code (in force since July 2012), a one shareholder JSC is now possible.
In case the JSC 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.
The organ of the JSC 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 board of directors or the holders of at least 10% of the share capital can call extraordinary meetings.(4) The general assembly has the powers to amend the articles of association, appoint and dismiss the members of the board of 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.
Board of Directors
The managing body of a JSC is its board of directors. According to the new Turkish Commercial Code, a one-member board of directors is now permissible.
Foreigners can be appointed as board members.(5) A person who is not a shareholder of the JSC can also be appointed as a board member. Even legal persons can be appointed as board members. In this case, however, a real person must act as the representative of such legal person in the board meetings.
Liability
The liability of shareholders for the debts of the company is limited to their participation in the share capital of the JSC. Furthermore, their responsibility is directly towards the company itself, not to third parties.
Articles of Association
As being the constitutional document of the company, the articles of association must be prepared in order to establish a JSC. 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 JSC 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 duration of the company,
f) The capital of the company, number of shares, nominal value of each share, how the capital will be subscribed,
g) The names and surnames of the members of the board of directors, how they are appointed, their duties, authorities, terms of office and how often they will meet,
h) How the auditors will be appointed and their duties,
i) How the general assembly meetings are made
j) How the announcements about the company are made,
k) How the profit is distributed, details regarding the accounting periods, reserves, etc.
In practice, the trade registry offices are providing draft articles of association texts.
Articles of association of a JSC 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 JSC 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.
The approval of the Ministry of Customs and Trade is also sought if the company is one of the aforementioned types of company, e.g. a bank, insurance company, financial leasing company, etc.
Required Documents
After completing the preliminary preparations, the following documents(6) must be submitted to the relevant trade registry office:
a) A letter of application signed by the members of the board of directors or those members who have the authority to represent the company. 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(7) unless the founders sign the articles of association before trade registry officers,
d) “Chamber Registration Declaration”(8) 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 members of the board of directors,
f) Notarized signature specimens(9) of those who have the authority to represent the company unless they sign written declarations before the trade registry officers,
g) Notarized acceptance letters proving that the non-shareholder members of the board of directors accepted their roles as the members of the board of 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) The bank letter that includes the name of the company and its shareholders and the amount deposited in total and by each of the shareholders,(10)
j) The contracts made between the company and the shareholders or third parties (if any),
k) An approval letter from the Ministry of Customs and Trade (in case such approval is required because of the type of the company).
Completion
Once the registration process is completed, the registration of the JSC is announced in the Turkish Commercial Registry Gazette.
The JSC registration process is typically completed in a couple of weeks. The JSC must also be registered in the relevant tax and the social security offices once the company registration process is completed.
(1) “Anonim Şirket” is the Turkish term used for Joint Stock Company. The abbreviated version in Turkish is “A.Ş”.
(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 can withdraw the money they deposited.
(4) This ratio is 5% for publicly-traded JSCs. A lower ratio may be determined in the articles of association.
(5) They have to apply for a work permit if they wish to reside in Turkey.
(6) 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 this article.
(7) There is an exemption from certain notarial fees for the notarization of the articles of association.
(8) This is the application document for registering the company at the relevant chamber of commerce.
(9) Such signature specimens must also include the name of the company.
(10) It should be noted that the trade registry offices do not accept bank receipts alone without a specific letter from the bank.
