- Avukat Baran DELİL
Corporations - Joint Stock Companies According to Turkish Regulations
Delil Hukuk Bürosu / Delil Law Office
Terim çevirileri makalenin sonundadır/Translated terms are below the article
AoA: Articles of Association
JSC: Joint Stock Company or Corporation
TCC: Turkish Commercial Code
Establishment Process of Corporations/Joint Stock Companies in Turkey
In order to found a JSC, founding members must prepare the articles of association of the Joint Stock Company/Corporation.
Articles of association must contain following information and can later be changed by the general assembly:
1-) Trade name/Commercial name and registered seat of the corporation
2-) Field of operations of corporationmust be defined to the point of it’s essential aspects
3-) Company capital in general, shares of the capital and the value of each share of the capital
4-) Whether the shares will be registered shares or bearer shares
5-) Information about the forms of capital other than "capital in cash" that can be invested to the corporation. This means "capital in kind".
6-)How the directors and officers of the corporation will operate, what their duties and responsibilites are and et catera.
Contrary to general partnerships, business reputation or labour are not considered as a form of “capital” in corporations. Investors can only provide capital in cash or capital in kind.
Only one existing founding member is enough to establish a JSC according to the Turkish Commercial Code.
Which kind of capital system will the JSC be based upon must be chosen in order to determine how much the minimum founding capital will be: In the basic capital system, the founding capital of a corporation cannot be less than 50.000 Liras. But in the registered capital system, founding capital must be 100.000 Liras or more.
At least 25% of the nominal value of the shares subscribed in cash must be paid before registration. The rest of the share capital in cash must be payed in the following 24 months after the registration. This amount will be blocked in the bank until the necessary documents about the foundation of corporation are prepared and presented.
Under Turkish Law, a JSC is not subject to the permission of any authority with the exception of following types of companies: holding companies, insurance companies, independent auditing companies, banks, financial leasing companies, factoring companies, consumer finance and card services companies, asset management companies. Even for these types of companies, Ministry of Customs and Trade will only be able to intervene if there is a contradiction with the mandatory regulations of the commercial code.
Once the articles of association are ratified by the trade registry office or a notary public, the company must apply to the relevant tax office for getting a potential tax identity number. This potential tax identity number is necessary for opening a bank account in order to deposit the share capital of the JSC.
A letter duly prepared by the bank which 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.
Following documents must be submitted to the relevant trade registry office after completing the aforementioned preliminary preparations:
A letter of application signed by the members of the board of directors or those members who have the authority to represent the company as it is stated in the AoA. 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.
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.
Notarized copies of the articles of association unless the founders sign the articles of association before trade registry officers,
"Chamber Registration Declaration”which must be filled and signed by the founders of the company
Notarized copies of the passports and certificates of residence as well as special tax ID numbers of foreign shareholders and members of the board of directors,
Notarized signature specimens of those who have the authority to represent the company unless they sign written declarations before the trade registry officers,
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,
The bank receipt with respect to the payment of the Competition Authority fee which is 0,04% of the share capital,
The bank letter that includes the name of the company and its shareholders and the amount deposited by each shareholder and the total deposited amount.
"General Assembly" and "Board of Directors" are compulsory organs of a JSC.
Authorities and Responsibilities of Directors
Members of the Board of Directors of a JSC must behave like prudent merchants when conducting company business. They must monitor and supervise the management and the business of the company to ensure that it is in compliance with the principles of good faith and the interests of the company and its shareholders.
A restriction on a director’s power of representation has no effect against third parties acting on that representation in good faith, unless the power of the said director's representation is restricted to the affairs of the company headquarters or company branch or is restricted with joint signatures clause and this restriction is duly registered and published in the trade registry as it is stated in the article 371/3 of TCC.
Other duties and responsibilities of directors are:
To keep confidential information obtained during and after the term of duty.
To refrain from attending board meetings regarding their own interests or the interests of certain close relatives.
Not to engage in transactions with the company unless authorised by the general assembly meeting, which can be for a maximum period of five years in relation to the repurchase of shares.
Protecting employees’ safety and health by preventing occupational risks. • Providing appropriate training.
Making risk assessments.
Hiring occupational safety specialists or physicians.
Article 553 of the TCC sets out conditions for the legal liability of directors for their actions as follows:
The director must have breached his/her duties under the legislation or the articles of association.
They must have acted with fault (including negligence).
The company, shareholders or creditors must have suffered a loss/damage as a result of the breach,
There must be a causal link between the loss/damage and the director’s breaches.
Authorities and Responsibilities of General Assembly
General assembly of the corporation will hold ordinary or extraordinary meetings. In these meetings, subjects below can be discussed:
Appointment of company’s bodies.
Discussion and approval of financial reports.
Annual report of the board of directors.
Usage of profits.
Determination of the amounts of dividend shares/profit shares.
Releasing the directors.
Other issues concerning operation of the company.
Board of Directors can call for a meeting for General Assembly. If the Board of Directors cannot be gathered to call the General Assembly for a meeting, a shareholder can also call the general assembly for a meeting with court order.
Dissolving and Liquidating Process
1) In general, corporations will be dissolved:
A) If the corporation did not imlicitly become a corporation for undetermined term by continuing it’s activities despite the fact that the term of the company that was stated in the articles of association expired. TCC 529/a
B) If the realization of the company purpose that was stated in the articles of association became impossible TCC 529/b
C) If any of the reasons that were stated to provoke the company’s dissolution in the articles of association occurs TCC 529/c
D) If the general assembly duly decides for the dissolution of the corporations with quorum of meeting and quorum of decision provided according to the 421st Article of TCC
F) If the corporation bankrupts
2) Special reasons for dissolution are:
A) If the compulsary organs couldn’t be established
B)In the presence of valid grounds/just causes, shareholders who have 1/10th of the shares or shareholders who have 1/20th of the shares in publicly traded companies can ask for the dissolution of the corporation
Liquidation of the corporation will be conducted by the board of directors unless it was decided otherwise on the articles of association or with a general assembly decision.
If the liquidation takes place because of a court decision, a liquidator will be appointed by the court.
The debt of the corporation will be payed at first and then the remaining capital will be distributed to the shareholders in proportion with their shares of the capital.
Articles of Association: Şirket Sözleşmesi, Şirket Ana sözleşmesi, Şirket Esas Sözleşmesi, Şirket Mukavelesi
Basic Capital System: Esas Sermaye Sistemi
Bearer Shares: Hamiline Yazılı Senet
Board of Directors: Yönetim Kurulu
Chamber Registration Declaration: Oda Kayıt Beyannamesi
Corporations/Joint Stock Companies: Anonim Şirketler
Dividend Shares: Temettü Payı
Founding Capital: Kuruluş Sermayesi
Founding Members: Kurucu Ortaklar
General Assembly: Genel Kurul
Incorporation Declaration Form: Kuruluş Bildirim Formu
Registered Capital System: Kayıtlı Sermaye Sistemi
Registered Shares: Nama Yazılı Senet
Turkish Commercial Code: Türk Ticaret Kanunu