Navigating Business in Turkey: A Guide to Company Structures

Starting a business can be an exciting yet complex journey, and understanding the legal landscape is crucial. If you're considering setting up shop in Turkey, it's essential to grasp the various company types available. This guide provides an overview, drawing from the Turkish Commercial Code and relevant regulations, to help you choose the structure that best suits your needs.

Types of Companies in Turkey

According to the Turkish Commercial Code, there are five primary company structures:

Joint Stock Company (Anonim Şirket)
Limited Company (Limited Şirket)
Collective Company (Kollektif Şirket)
Limited Partnership (Komandit Şirket)
Cooperative (Kooperatif)

Capital Companies vs. Private Companies

Turkish law categorizes these companies into two main groups:

Capital Companies: These include Joint Stock Companies, Limited Companies, and Limited Partnerships divided into shares. In these structures, partners are liable only to the extent of their committed capital.
Private Companies: These include Ordinary Limited Partnerships and Collective Companies. In these structures, partners have secondary and unlimited liability for the company's debts.

Key Company Structures in Detail

Let's delve deeper into the most common company structures:

Joint Stock Company (Anonim Şirket)

A joint stock company's capital is divided into shares, and it's liable for its debts only with its assets.
It can be established for any legal economic purpose.
Share transfers are generally free, without the need for General Assembly approval.
Joint stock companies can issue registered or bearer shares. They can also issue bonds and similar debt instruments.
A joint stock company can be formed with a single shareholder.
Shareholders are only liable to the company with the capital shares they have committed.
It is the only type of company whose shares can be offered to the public and traded on the stock exchange.
Minimum capital requirement is 250,000 Turkish Liras, and for non-public Joint stock companies accepting the registered capital system the initial capital may be at least 100,000 Turkish Liras.
At least one quarter of the nominal value of the shares committed in cash must be paid before registration. The remaining amount shall be paid within 24 months following the registration of the company.
The company has two main organs: a General Assembly and a Board of Directors.
Some specific types of Joint Stock companies require approval from the Ministry of Trade, such as banks, insurance companies, and other financial institutions.
Similar structures exist in other countries, such as "Corporation" in the US and Canada, "Aktiengesellschaft" in Germany, and "Public Limited Company" in the UK.

Limited Company (Limited Şirket)

A limited company's capital is also fixed and divided into shares, with liability limited to the company's assets.
A limited company can be established with a single shareholder, but the number of shareholders cannot exceed fifty.
Bearer shares cannot be issued.
Share transfers are subject to approval from the General Assembly.
Limited companies are not allowed to offer their shares to the public.
Shareholders are only obliged to pay their committed capital shares and fulfill additional obligations as specified in the company contract.
Shareholders are responsible for capital debts due to uncollectible public debts in the rate of their capital shares.
The minimum capital required is 50,000 Turkish Liras.
The payment of the capital can be made within 24 months after the company registration.
Like joint stock companies, they have a General Assembly and a Director/Board of Directors.
Similar structures exist worldwide such as the "Limited Liability Company" (LLC) in the United States, "Gesellschaft mit beschränkter Haftung" (GmbH) in Germany, and "Private Limited Company" in the UK.

Collective Company (Kollektif Şirket)

Only real persons can be partners in a collective company.
Partners are second degree unlimited liable to the creditors of the company.
There is no minimum capital requirement for collective companies.
The company is established with at least two partners.

Limited Partnership (Komandit Şirket)

Limited partnerships have both limited and unlimited responsible partners.
The active partners (unlimited responsible) manage the company and are liable for debts.
The dormant partners (limited responsible) are liable only up to their committed capital and cannot manage the company.
There are two kinds of limited partnership: ordinary limited partnership and limited partnership divided into shares.
The active partners can only be real persons, and the dormant partners can be both real and legal persons.
A limited partnership can be established by at least two people, one of which is an active partner and the other a dormant partner.

Cooperative (Kooperatif)

Cooperatives are established to provide and protect the specific economic interests of its partners through labor, mutual assistance, solidarity, and bail.
Each partner undertakes at least one share, and the value of one partnership share is 100 Turkish Liras.
Cooperatives can be established with at least seven partners.
The board of directors consists of at least three Turkish citizens.

Company Establishment Process

The company establishment process in Turkey is designed to be efficient:

Electronic Registration: Procedures are performed electronically via the Central Registry System (MERSİS).
Company Contract: The company contract is prepared on MERSİS, with Turkish citizens added using their ID numbers and foreigners with their passport numbers. Foreigners must obtain a tax number before this process.
Signature Approval: The founders sign the contract, and it is verified by a competent authority.
Trade Registry Application: The company is registered with the relevant trade registry directorate.
Competition Authority Share: 0.04% of the company’s capital must be paid to the Competition Authority.

Key Documents Required

The documents required vary depending on the company type:

Joint Stock Company: Articles of Association, proof of Competition Authority share payment, signature declarations, and proof of capital deposit.
Limited Company: Company agreement, signature declarations, proof of Competition Authority share payment.
Cooperative: Company contract, authorization letter, signature declarations.
Collective Company and Limited Partnership: Company agreement, signature declarations.

Audit and Financial Oversight

Independent Audit: Certain capital companies are subject to independent audits by international standards based on criteria like total assets, annual net sales revenue, and the number of employees.
Public Audit: The Ministry of Trade can audit all trading companies.

Share Transfers

Joint Stock Companies: Share transfers are generally free and do not require registration.
Limited Companies: Share transfers require approval from the general assembly.
Limited Partnership divided into shares: The share transfer procedure is the same as for joint stock companies.

Liquidation

When a company terminates, it goes through a liquidation process.
The purpose of liquidation is to sell assets, collect debts, and distribute assets to shareholders.
Liquidation officers handle the process.

Branches of Foreign Companies

Foreign companies can register branches in Turkey, subject to the same regulations as domestic businesses.
A full authorized commercial representative, who is a resident in Turkey, is assigned for the branch.

Transfer of Headquarters

It's possible to move a company's headquarters from Turkey abroad or from a foreign country to Turkey.
Moving headquarters to Turkey requires adapting to Turkish Law.

Conclusion

Navigating the business landscape in Turkey requires a clear understanding of the available company structures. By understanding the nuances of each type, you can select a structure that aligns with your business objectives and growth plans. This guide, based on the Turkish Commercial Code, should provide a solid starting point for your journey.