Turkish Commercial Code (“TCC”) numbered 6102 specifically determines the types of companies that may be established in Turkey. TCC allows the formation of five different company structures. These are collective company (equivalent of general partnership), commandite company (equivalent of limited partnership), joint stock company, limited liability company and cooperatives. In practice, founders generally prefer to establish either joint stock companies or limited liability companies. Joint stock company is the second most preferred company form in Turkey based on statistics published by the Union of Chambers and Commodity Exchanges of Turkey.

This article aims to provide general information regarding joint stock companies and their incorporation procedure, in the light of the provisions in the relevant Turkish legislation.

I. General Information

Joint Stock Company (“JSC”) is defined as a company which has a definite capital divided into shares and which is liable for its debts only with its assets. Shareholders of a JSC are liable to the company only for the amount of the capital shares they have subscribed to. In other words, a JSC shall be liable to its creditors only with its assets, and its shareholders are not liable for the company’s debts.

A JSC may be formed for any economic purpose and with any scope of activity that is not legally prohibited.

JSCs whose operations are determined by the communiqués published by the Ministry of Industry and Trade may be established with the permission of this Ministry. For the establishment of JSCs other than these ones, no permission is required.

Shareholders

Shareholders are the natural and legal persons who subscribe to the shares and sign the articles of association of a JSC according to the TCC.

The former Turkish Commercial Code numbered 6762 was not permitting the establishment of a JSC without at least 5 shareholders; however TCC, as the new Turkish Commercial Code, has changed this condition and allowed the formation of a JSC even with one shareholder as a minimum. Natural or legal persons may be shareholders of a JSC. There is no upper limit for the number of shareholders for establishing a JSC.

Foreign natural or legal persons are subject to the same conditions with domestic founders. TCC does not stipulate any different procedure or condition for foreign natural or legal persons.

Capital

The minimum capital amount required to be subscribed under articles of association for the incorporation of a JSC is 250,000 Turkish Liras (for a non-public JSC which adopts the registered capital system, the minimum capital amount cannot be less than 500,000 Turkish Liras). TCC stipulates that at least 25 percent of nominal value of the shares subscribed in cash must be paid before registration. The remaining shall be paid within 24 months following the registration. Cash payments shall be made to the bank account opened in the name of the JSC to be established before registration.

TCC allows both monetary contribution and non-monetary contribution (i.e. contribution in kind) for capital subscriptions. Non-monetary contributions are movable and immoveable assets which can be subscribed as capital in kind. According to TCC, assets without any restriction such as measures, pledges and encumbrances on them, and which can be converted into cash and which are transferable -including intellectual property rights and virtual environments- can be contributed as capital. In the case of contribution in kind, a valuation report prepared by experts assigned by the commercial court at the place of the company’s principal office must be obtained.

Articles of Association (“AoA”)

Articles of Association are the written agreement which regulates all matters of incorporation including name of the company, purpose and capital of the company, duties and responsibilities of shareholder(s), board members etc. AoA is signed by the founder(s) before a notary public or trade registry office. AoA may be signed by representatives authorized by a power of attorney on behalf of the founders.

Board of Directors

One of the mandatory bodies of a JSC is the board of directors. Responsibility of management and representation of a JSC rests with the board of directors.

In accordance with the relevant articles of the former Turkish Commercial Code, board members had to be chosen from among shareholders of a JSC. TCC has changed this condition, and being a shareholder is no longer mandatory in order to be appointed as a board member. In addition, legal persons may also be appointed as a board member.

Board of directors is composed of at least one person and there is no upper limit for the number of members. Founders determine the minimum and maximum number of the members in the AoA.

Article 362 of the TCC stipulates that members of board of directors shall be elected for a maximum office term of 3 years. The office term of board members may be determined as any other period provided that it does not exceed the mentioned 3 years stipulated under article 362 of TCC.

Board members may be appointed by the founders under the AoA at the incorporation phase. After incorporation of a JSC is completed, the general assembly may change the board members at any time.

General Assembly

General Assembly is the executive body of a JSC. Members of the general assembly consist of the shareholders of the JSC. All shareholders are represented in the general assembly and are authorized to accept or reject decisions regarding the company. TCC determines the authorities and duties of the general assembly which cannot be transferred or delegated.

Pursuant to article 409 of the TCC, general assembly meetings may be convened as ordinary or extraordinary meetings. An ordinary general assembly meeting must be held within three months as of the end of each activity period. Extraordinary meetings may be convened as and when required.

II. Incorporation Procedure

Once the founders determine the above-mentioned issues and gathers the required documents, application for incorporation shall be submitted to the trade registry office where the company’s principal office is located.

Below documents must also be submitted along with the application for incorporation:

• Application letter signed by the authorized person of the JSC
• Articles of Association (this document shall be issued through a system explained in detail below and signatures of the founders shall be affixed and certified either before a notary public or the relevant trade registry office)
• Signature Declarations of persons authorized to represent and bind the company
• Document showing that the Competition Authority’s share has been paid
• Document showing that at least twenty-five percent of the capital subscribed in cash has been deposited into a bank 
• Valuation report, in the case the capital subscription is through in-kind contribution, and a letter to be taken from the relevant registry showing that there is no restriction on the capital in kind
• In the case of capital subscription in kind, a document showing that the relevant immovable property, intellectual property rights or other values have been annotated to the relevant registries
• Written approval of non-shareholder board members showing that they accept to be appointed as board members
• In the case of a legal person appointed as a board member, a notarized resolution of the competent authority of this legal person which shows the name and surname of a natural person appointed to represent such legal person
• Chamber Registration Declaration
• Incorporation Declaration Form if, among the shareholders, there is a foreign person or a Turkish citizen residing abroad
• In the case that shareholders or board members of the company are foreigners, translated and notarized copy of their passports and their Turkish tax identification numbers

Central Registration System

Central Registration System (“Mersis”) is a system created to enable the recording and registration of commercial transactions (including incorporation, AoA amendments, registration and other changes) electronically.

Mersis is the first phase of the company incorporation procedure in Turkey. In other words, company incorporation procedure is commenced initially through Mersis. Any applicant or the relevant user fills in the necessary information determined and the system automatically issues a draft of the AoA of the Company. After the completion of the required data on this system, a unique number is given to the applicants. With this number, founders may sign the AoA either before a notary public or the trade registry office where the company’s principal office is located.

Mersis also automatically assigns a potential tax number for JSCs.

Announcement of Incorporation

Upon the completion of the application made through the Mersis, the applicants must submit the above-mentioned required documents to the relevant trade registry office where the JSC is registered. The trade registry office examines the documents submitted, and if the documents are sufficient, valid, and duly signed, it approves the incorporation. Thereafter, the incorporation is published and announced in the Turkish Trade Registry Gazette. This step takes approximately one week.