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Company Incorporation in Turkey

It is true say that company incorporation process in Turkey is relaxed following implementation of new Turkish Commercial Code. However, in term of time, with it is length process Turkey is still well behind from most of the European countries.

The new Commercial Code redefines some important aspects of company structure in Turkey. The New Turkish Commercial Code permits the incorporation of a joint stock company (JSC) and the limited liability company (Ltd.) with a single shareholder or partner. The New Commercial Code is also, for the first time in Turkey, defines group companies, i.e. the relations between the parent company and subsidiaries which are subject to the same principles and policies and are gathered under the same group management Under Turkish law, a company is an incorporated entity with a legal status separate and distinct from its owners / shareholders that allows it to sue and be sued in its own name.

The new commercial code provides five different company structures. These are:

  • Joint Stock Companies (Anonim Şirketler)
  • Limited Liability Companies (Limited Şirketler)
  • Collective Companies (Kollektif Şirketler)
  • Partnerships Limited by Shares (Komandit Şirketler)
  • Cooperative Associations (Kooperatifler)

The main legal differences between those companies concern the allocation of liability and the legal form of the entity. However, largely due to the favourable position concerning the liabilities borne by shareholders, joint stock companies and limited liability companies are the corporate structures in Turkey most commonly chosen by foreign investors, along with the other business setup forms of branch offices and liaison offices.

Joint stock companies (JSC) and limited liability companies (LLC), are those in which shareholders are not liable for the debts of the company in terms of their personal assets. There are some basic differences between these two types of companies. A JSC can issue debentures, while a LLC is prohibited from doing so. A JSC can go public while a LLC cannot offer its shares to the public. A statutory auditor is required for a LLC, only if and when it has more than 20 shareholders, while it is required for a JSC regardless of number of shareholders.

Branch (Şube)

A branch is a legal entity registered with the Trade Registry Office and represented by a representative or a branch manager. Even though a branch has separate capital, which is allocated by the head office, it may not have a separate articles of association and consequently must act within the same field of activity as that of its head office. Even though the branch is dependent on its head office in internal relations, it may act independently and trade in its own account in external relations. It is considered to have separate tax personality than that of its head office. A branch representative/branch manager should have a residency permit in Turkey. Branch offices in Turkey are required to use the parent company name by indicating that it is a branch.

Liaison Office (Temsilcilik)

A liaison office, often also called ‘representative office’, is primarily established to provide preparatory and auxiliary services. (i.e. gathering information on the Turkish economy, customers, suppliers and competitors); performing surveys on markets and the activities of distributors, agents or licensees; following developments and changes in the local regulations and (if necessary) lobbying; surveying the possibility of establishing a branch or incorporation in Turkey, providing information relating to the activities of the head office and representing its products to suppliers or customers as long as this does not constitute active solicitation, etc. for its head office. It is prohibited from carrying out any kind of ‘commercial activities’ in Turkey.

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