Corporation Law

  1. General

In Turkish Law, company types are determined by law. If there is a company that does not comply with one of the types of companies regulated in the Commercial Code, this company is deemed to be an ordinary partnership pursuant to paragraph 520 of article 2 of the Code of Obligations.

There are 5 types of trading companies regulated in the Commercial Code. According to the Article 136, they are:

  • Collective Companies
  • Commandite Companies
  • Joint Stock Companies
  • Limited Companies
  • Cooperative Companies

In accordance with Article 137 of the Commercial Code, these companies have legal entities. Legal entity carries out its activities through its organs and has its own assets separate from its constituent partners. Also, legal entities hold an active and passive litigation license.

INDIVIDUAL PARTNERSHIPS AND CAPITAL PARTNERSHIPS

Trading companies are divided into two groups as individuals and capital partnerships.

Unless otherwise agreed in person partnerships, each partner has the authority to manage and represent the company. In addition, partners are also responsible for the debts of the company in such partnerships. Due to the receivables that cannot be obtained from the assets of the company, the personal assets of the partners can be obtained. Partners are secondly but unlimitedly responsible for company debts. Collective partnerships are the most typical example of person partnerships.

As for capital partners, the creditors of the company can only apply to the assets of the company as a rule. In such partnerships, the partners are only liable to the company and to pay the capital share they have committed. Partners have no responsibility for company creditors.

The Commercial Code seeks a minimum capital for such partnerships. In addition, administration and representation in these companies are, as a rule, performed by the established bodies, not by the partners. Joint stock companies are the most typical example of capital partnerships. Limited partnerships are also considered as a capital partnership. Limited partnerships, on the other hand, have characteristics specific to individual partnerships or even ordinary partnerships, but these partnerships are also included in the capital partnership  group.

2.TRADING COMPANIES

A. COLLECTIVE COMPANY (COMMERCIAL CODE 153-242)

Commercial Code Article 153 defines the collective company as a company that is established between real persons with the purpose of operating a commercial enterprise under a trade title and that the partners have no liability to the creditors of the company.

The collective company can only be established to operate a commercial enterprise. A minimum capital facility is not foreseen.

The collective company is established only between real people and at least with 2 people together. Legal entities cannot be partners in a collective company. However, this does not prevent collective company partners from becoming partners with other companies at the same time. Although the law does not set an upper limit on the number of partners of the collective company, many partnerships are not actually possible.

In the collective company, the liability of all partners towards the creditors of the company is unlimited. It is the collective company itself, as a legal person, who is primarily responsible for company debts. The partners are responsible in the second degree, after the legal person. The creditor of the company cannot directly apply to the partner.

Three steps need to be taken in order to establish a collective company:

  • Preparation of the company contract
  • Notary approval for the company contract. (If a partner refrains from certifying his/her signature, deemed to have violated the contract. Hence, he may be asked for compensation.)
  • Registration to trade registry

This obligation must be fulfilled within 15 days of the notarization of the signatures. The registration request must be made by all partners. After the company is registered in this way, it becomes a legal entity.

B. COMMANDITE COMPANY (COMMERCIAL CODE 243-268,475-484)

There are two different types of limited partnerships: ordinary commandite company with individual partnerships and stock commandite company with capital partnerships (capital divided by shares).

Ordinary Commandite Company: This is an individual partnership and in many ways, it is similar to a collective company. There are two types of partners in the limited company: Commandite (unlimited responsible) partners are no different from collective partners. These are the people who hold the management of the company and have an unlimited risk. However, the commanditer (limited liability) partner invested a certain amount of capital into the company to operate, and he/she does not want to risk it anymore. Its responsibility is limited by the amount of capital it has committed. The commanditer does not have an active role in the management of the company. The main concern of the commanditer is the success of the company.

The commandite company can only be established for commercial businesses. The law did not provide minimum capital for the commandite company. There is no limit for the number of partners either. It can be established with any number of partners, provided that there is at least one commandite and commanditer. Legal entities cannot enter the limited company as a limited partner. On the other hand, it is possible for legal entities to become commanditer partners.

After the contract is signed, the partners are obliged to certify their signatures in the contract to the notary. After confirmation, all founding partners should be registered in the trade registry of the company’s headquarters within 15 days, without discrimination between commandite and commanditer. The commandite company gains legal personality with company registration.

Shareholder (Capital Shares Split) Commandite Company: The shareholder limited company constitutes a type of joint stock company and the provisions of the joint stock company are applied except for exceptional provisions.

The capital of the shareholder commandites is divided into certain and shares as in joint stock companies. Since the provisions of the joint stock company will be applied, except for the exceptional provisions, the capital of the shareholder cannot be less than fifty billion Turkish Liras.

Commandite partners are as a collective partner, that is, secondly and unlimitedly responsible to company creditors. Commanditer partners are responsible like shareholders in the joint stock company, that is, their responsibilities are limited to the capital shares they have committed. If they have paid these, they can no longer apply to them.

Shareholder commandite companies can be established not only for commercial business, as for ordinary commandites, but also for any economic purposes and subjects that are not legally prohibited, as in joint stock companies.

The main contract is prepared at the establishment stage of the shareholder limited company; are signed and signatures are notarized. The Ministry of Industry and Trade does not have a permit phase in the establishment of a shareholder limited company.

C. JOINT STOCK COMPANY (COMMERCIAL CODE 269-474)

Commercial Code Article 269 describes the joint stock company as “a company that has a title, the basic capital of which is divided into certain shares and shareholders and is only responsible for its debts”.

Joint stock companies, which have legal personality and their own assets, operate through their bodies. The general assembly is the decision-making body, the executive board is the administrative and representative body, and the auditors are the auditory board of the company. The general assembly is equipped with various powers.

In addition, some extra powers may be given to the general assembly with the company contract.

Joint stock companies can be established not only for the purpose of operating a commercial enterprise but also for any economic purposes and subjects that are not legally prohibited.

The establishment of the joint stock company begins with the notarization of the written and signed contract and ends with the registration of the joint stock company to the trade registry. Legal entity is acquired with this registration. As with limited companies, the permission of the Ministry of Industry and Trade has been revoked in joint stock companies. Only in terms of banks, private financial institutions, insurance companies, financial leasing companies, factoring companies, conglomerates, companies operating foreign
currency buffets, companies dealing with public stores, companies subject to the Capital Markets Law, founding of free zone founder and operator companies, and amendments to the articles of contract permission is sought.

In order to establish a joint stock company, there must be at least five founding partners who owns shares. These partners can be real or legal persons. Joint stock companies are established with a capital of at least fifty billion Turkish Liras.

The establishment stages are as follows:

  1. Preparation, signing and notarization of signatures of the articles of contract: The articles of contract are made in writing and signed by at least five founders. Then the signatures are approved by a notary.
  2. Permission from the Ministry of Industry and Trade: As mentioned earlier, the permission of the Ministry of Industry and Trade was revoked in the establishment of joint stock companies and in the amendment of the articles of contract. However, this permit requirement has been maintained for certain joint stock companies. One of them is joint stock companies subject to the Capital Markets Law. A gradually established joint stock company will be included in the scope of the Capital Market Law as it will be a publicly held joint stock company. Therefore, this permission is sought in the gradual establishment. In the gradual establishment, the founders will prepare a document showing that ten percent of the basic capital has been paid or provided before applying to the Ministry. In the gradual establishment, the contract must be approved by the Capital Markets Board before obtaining permission from the Ministry of Industry and Trade.
  3. Registration: Company becomes a legal entity by registration. Company can be claimed against third parties, registered in Turkey Trade ‘Registry is made possible by the Gazette.

Those who have the title of board member are registered and announced in the trade registry.

As for the authority of representation, the principle of double signing has been adopted if no other regulation has been made with the contract in terms of exercising this authority. It is possible to divide the power of representation among the members only by place. If the authority of representation is devoted to the center or a branch, this limitation may be put forward against third parties after registration and announcement. The power of representation cannot be limited, although there are exceptions.

AUDITORS IN JOINT STOCK COMPANIES (AUDITING BOARD)

In joint stock companies, the auditing board is one of the compulsory bodies. Its deficiency is a reason for termination for the company. The number of auditors may be one or more, but not more than five. Multiple auditors form a board. Auditors are not required to be shareholders. However, if there is only one auditor, its expected that the auditor should be Turkish citizen. If more than one auditor exists, more than half of the board should be Turkish citizens. The members of the executive board may not be auditors at the same time, nor can they be elected as auditors unless they have been discharged even if their duties are over. Auditors are elected by the general assembly. It is not possible to transfer this authority to another body.

Auditors are elected for the first time in the company for one year. It is possible to be elected by the general assembly for a maximum of three years.

D. LIMITED LIABILITY COMPANY (COMMERCIAL CODE 503-556)

The limited company is a company established by two or more real or legal persons under a trade title, operating in economic matters, is only responsible for the debts of the company and its assets and its basic capital is determined which is equal to the total capital share of the partners. Personal labor or personal reputation cannot be brought to the limited company as capital.

The number of partners in a limited company cannot be less than two and more than fifty. Legal persons, like real persons, can also become a limited company partner.

Instantaneous formation is the only way to establish a limited liability company. In this case, there are three stages:

1. Preparation of the company contract
2. Notarization of signatures
3. Registration in the trade registry

The company contract must be prepared in writing.

The basic capital of the limited company expresses the fixed figure consisting of the basic capital shares of the partners. This figure cannot be less than five billion Turkish Liras. The capital shares of limited company partners may differ from each other, but the shares must be at least 25 million Turkish Liras or their multiples.

Partnership share is different from the basic capital share. Basic capital share refers to the nominal value of the capital amount of a partner in the limited capital of the limited company. The principal capital of the limited company is divided into the number of partners. The partnership share, however, is the partner’s rights and obligations in a limited company. The amount of capital determines the partnership’s share of the partner. Unlike the partnership agreement, if there is no provision, the voting right of each partner is determined according to the basic capital share. Accordingly, every 25 million Turkish Liras gives one voting right.

Partnership share can be transferred but cannot be attached to the valuable paper. Transfer of the partnership share may be subject to more severe conditions than the Commercial Code stipulates with the first partnership agreement and may even be banned entirely.

The legally mandatory bodies of the limited partnership are the partners’ general assembly and managers. If the number of partners exceeds twenty, auditors become compulsory. As in the joint stock partnership, in the limited partnership, the general assembly convenes in two ways: ordinary and extraordinary.

The management and representation of partnership belong to managers. If the title of manager is not left to one or more of the partners by the articles of company or the decision of the partners, then all of the partners have this title. Those who are not partners can also be selected as manager.

In written declarations to be made on behalf of the company, it is sought to have the signatures of the managers together with the title of the company. In the letters, documents and documents issued by the partnership, the amount of the basic capital must be shown along with the title.

The provisions regarding joint stock company auditors are applied to the auditors in limited partnership if the company has more than twenty partners. In limited companies with twenty or less partners, the shareholders who do not have the title of manager are given the right to audit the ordinary partnership partners. They have the right to receive information about the course of partnership affairs, and to review the books and documents of the partnership, even if they do not have administrative powers.

The rights of the partners are property rights, participation rights and protective rights.

Limited partnership ends in various situations. These are the realization of the reasons written in the partnership agreement, the decision of the majority (which constitutes 3/4 of the shareholders who own 3/4 of the main capital, unless there is a contrary provision in the agreement) and the court’s decision and other law listed in the case of justified reasons.

RIGHTS AND OBLIGATIONS OF LIMITED COMPANY PARTNERS

Rights:

1. Property Rights

a) Right to Dividend
b) Right to Liquidation Share
c) Right to Get New Shares
d) The right to veto if actions and responsibility are extended.
e) Right over the transferability of the Shareholder Share.

2. Rights to Participate

a) Right to Attend the General Assembly
b) Right to vote
c) Right to Administration

3. Protective Rights

a) Right to Open a Cancellation Case
b) Right to Audit
c) Right to Leave the Partnership
d) Right to Request Removal of Another Partner
e) Right to Request Termination of Partnership for Justified Reasons
f) Right to Minority

Obligations:

a) Payment of Capital Debt
b) Obligation of Management of the Company
c) Prohibition to Compete with Partnership
d) Additional Payments Obligation: If this obligation is brought by contract change, it should be taken 2/3 majority.

E. COOPERATIVES (COOPERATIVES LAW)

The cooperative is defined in the 1st article of the Cooperatives Law. According to this definition, cooperatives are real and public legal entities and various partnerships established by private administrations, municipalities, villages, societies and associations in order to provide and protect the specific economic interests of their partners and especially their professional and livelihood needs. Cooperative is an organization, not an association or partnership.

The aim of the cooperative is to provide and protect the specific economic needs of the partners and especially their professional and livelihood needs. The tools used to achieve this aim are mutual aid, solidarity and surety.

Not every person was allowed to become a cooperative member. However, real persons and some legal entities can become members of the cooperative. In addition to all public legal entities, while public economic enterprises and associations can be partners, trade partnerships cannot be partners to cooperatives.

Each person entering the cooperative has at least one partnership share. By determining the highest limit in the Articles of Cooperative, a partner can be allowed to buy more than one share within this limit. The value of a partnership share is 100.000 TL. Partners entering the cooperative can commit a maximum of 5,000 shares.

The important factor in cooperatives is people. This factor is also important in terms of searching for a certain profession, seniority or other qualifications in entering the cooperative, connecting the right to exit to certain conditions, additional payments, voting right and responsibility.

The number of partners in the cooperatives is variable. The capital of the cooperative increases spontaneously with each incoming partner and decreases with the outgoing partner. As a result of this situation, in cooperatives, capital is also of varying character. Therefore, a cooperative cannot be established by limiting the amount of capital. The “open door principle”, which is a natural result of variable partnership and variable capital, is dominant in the cooperative. Pursuant to this principle, the number of partners cannot be limited to a certain number, the partnership does not depend on anyone’s will, the partnership depends on the realization of the objective conditions and these conditions cannot be made very difficult. The same is true for exiting the partnership. However, the exit of the partner from the cooperative should not harm the cooperative.

Cooperatives have legal personalities. These are private legal entities. Since the aim of the cooperatives is to develop the economies of their own partners, the cooperatives do not deal with third parties but only with their own partners. Except in exceptional circumstances, cooperatives are prohibited from trading with non-partners.

Establishment of Cooperatives:

1. Preparation of the main contract
2. Permission from the Ministry of Industry and Trade
3. Registration and Announcement

The cooperative gains its legal personality by registering to the trade registry of the place where its headquarters is located. Those who act on behalf of the cooperative before registration are personally and severally responsible for these transactions.