Corporations / Joint Stock Companies (Anonim Şirketler)

Overview

Joint stock corporations are capital-based companies defined by the Turkish Commercial Code (TCC). They have a trade name and specific capital divided into shares. Shareholders are liable for company debts only to the extent of their pledged capital (TCC, Art. 329).

In other words, shareholders’ liability is limited to the amount of the capital represented by their shares.

Purpose and Establishment

Joint stock companies can be established for any lawful business purpose unless prohibited by law (TCC, Art. 331). Some specific business activities, such as banking or insurance, may only be conducted through joint stock corporations.

To establish a joint stock company, there must be at least one founding shareholder (TCC, Art. 338/1). The Board of Directors (“Yönetim Kurulu”) manages and represents the company. It must consist of at least one person (TCC, Art. 359). At least one member must have the power to represent and bind the company. Roles can be allocated through a written internal directive. Directors are elected for up to three years.

Capital and Shares

The capital of a joint stock company is divided into shares. These shares may be represented by registered or bearer share certificates. The company can also issue bonds to raise capital.

Joint stock corporations are suitable for enterprises that require significant capital. Consequently, a group of corporations connected through shareholding may form a “holding company.” A holding company owns shares in one or more other corporations.

Legal Personality and Liability

A joint stock company is a separate legal entity. It focuses on the company’s capital rather than the shareholders’ personal resources. The articles of incorporation (“Esas Sözleşme”) must specify a minimum capital of 250,000 TL. Shareholder liability ends once the capital is fully paid.

Most joint stock companies in Turkey are closely held by a small number of founding shareholders, often family members or small business groups. Recently, more Turkish corporations have been going public to raise capital.

A joint stock company can also be a founder of other corporations, allowing existing business entities to combine resources and expertise for a new venture. Additionally, joint stock companies can form subsidiaries, which are separate entities controlled by a parent company (“ana şirket”).

Business Activities and State Supervision

Turkish law mandates that certain activities, like banking or leasing, must be conducted through joint stock companies. These activities have higher capital requirements and additional legal provisions.

Due to their potential to have many shareholders with limited liability, joint stock companies are subject to closer state supervision and more detailed legal provisions compared to other business associations where partners have unlimited liability.

Sources of Law

Joint stock companies are primarily regulated by the Turkish Commercial Code and the Capital Market Law. Other laws, like the Banking Law and privatization laws, also include relevant provisions.

While many provisions of the Commercial Code allow freedom of contract, there are also mandatory provisions that cannot be overridden by the articles of incorporation. Incorporators may choose to regulate certain corporate matters in a separate agreement, provided it does not conflict with the mandatory provisions of the Code.

State Supervision

Corporations engaged in activities like banking, insurance, leasing, or securities trading are subject to specific regulations. The Capital Markets Board oversees publicly held corporations and ensures compliance with legal requirements.

Types of Incorporation

The formation of a joint stock company depends on whether the capital is fully or partially subscribed. In simultaneous incorporation (“ani kurulmuş”), founders subscribe to all capital, making the process simpler compared to gradual incorporation (“tedrici kurulmuş”), which involves public subscription.

Simultaneous incorporation involves two stages: preparing the articles of incorporation and obtaining Ministry of Trade approval, followed by registration in the commercial registry (TCC, Art. 355). Legal personality is acquired upon registration.

Operational Structure of Turkish Corporations

A joint stock company must have three main organs:

     

      1. Board of Directors (“Yönetim Kurulu”): The Board is responsible for managing the company and representing it in dealings with third parties. It must consist of at least one member, elected by the shareholders for a maximum of three years (TCC, Art. 359). Directors may be individuals or legal entities.

      1. Auditors (“Denetçiler”): The company may appoint an independent auditor to supervise the financial statements and general compliance with the law (TCC, Art. 397). The auditors report to the General Assembly of Shareholders.

      1. General Assembly of Shareholders (“Genel Kurul”): The highest authority in the company, consisting of all shareholders. The General Assembly approves financial statements, appoints directors and auditors, and decides on major changes, such as amendments to the articles of incorporation (TCC, Art. 409).

    Shareholder Rights

    Shares grant shareholders financial and administrative rights, including:

        • The right to attend General Assembly meetings, vote, and participate in decisions.

        • The right to receive dividends based on share ownership.

        • Preemptive rights, allowing shareholders to participate in capital increases.

      Certain rights, such as the right to vote and receive dividends, are vested rights that cannot be taken away under the articles of incorporation.

      Minority shareholders, representing at least 10% of the capital, have additional rights, such as demanding a General Assembly meeting or requesting the appointment of a special auditor (TCC, Art. 411).

      Capital Structure

      To protect third parties dealing with the company, the Commercial Code sets a minimum capital requirement for joint stock companies, which must be fully subscribed and paid in. The stated capital is divided into shares, which can be of different types, including common shares and privileged shares, which grant priority in voting or dividend rights (TCC, Art. 478).

      The transfer of share certificates represents the transfer of shareholder rights and obligations. Share certificates can be registered or bearer, with the latter being more easily transferable.

      Conclusion

      Joint stock corporations are a common choice for businesses in Turkey, especially those needing substantial capital and limited liability for shareholders. The Turkish Commercial Code provides a comprehensive legal framework that balances flexibility for companies with protections for shareholders, creditors, and third parties.

      Establishment Process

      1. Preparation of the Company Contract (Articles Of Association) and Approval of the Founders’ Signatures

      Users can start the company establishment process by creating a free membership via the MERSIS internet address (https://mersis.gtb.gov.tr). The preparation of the company contract occurs on MERSIS. Details such as ID numbers and authorizations of founders are recorded within the system. For this process, users can finalize it with a notarization at the trade registry office or electronically sign and submit the contract via MERSIS.

      2. Preparation of Signature Declarations of Company Officials

      The signatures of the persons authorized to represent the company under the title of the company must be approved by the competent authority, and signature declarations will be prepared. This process is carried out at any trade registry office in Turkey.

      3. Payment of Competition Authority Share and Cash Capital

      0.04% of the company’s capital must be deposited in the bank account of the Competition Authority as a Share of the Competition Authority. There is also a need to open a bank account where the cash portion of the capital is deposited. At least 25% of the declared nominal capital must be deposited in this bank account opened on behalf of the company before the registration of the company.

      4. Application to the Trade Registry Directorate for Registration

      Upon the application of the founders together with the relevant documents to the trade registry office, the registration process is completed. This process leads to the official registration of the company and enables the company to gain legal personality.