Av. Alparslan LEVENT -Karşıyaka Avukat - İzmir Avukat
Av. Alparslan LEVENT -Karşıyaka Avukat - İzmir Avukat
Av. Alparslan LEVENT -Karşıyaka Avukat - İzmir Avukat

COMMERCIAL LAW

Overview of Turkish Commercial Law

Turkish Commercial Law is primarily governed by the Turkish Commercial Code (Türk Ticaret Kanunu, TTK) No. 6102, which came into force on July 1, 2012. The TTK provides a comprehensive legal framework for commercial transactions, companies, negotiable instruments, maritime commerce, and insurance.

Fundamental Principles

  1. Freedom of Trade: Individuals and companies are free to engage in commercial activities within the limits of the law. This principle promotes economic activity and entrepreneurship.

  2. Good Faith: Parties involved in commercial transactions must act in good faith. This principle ensures fairness and trust in commercial relationships.

  3. Publicity: Certain commercial activities and company information must be made public to ensure transparency. This principle helps protect the interests of third parties and the public.

Structure of the Turkish Commercial Code

The Turkish Commercial Code is divided into several main parts:

  1. Commercial Enterprise: This part deals with the establishment, operation, and transfer of commercial enterprises.

  2. Commercial Companies: This part includes regulations on different types of companies such as joint-stock companies, limited liability companies, and partnerships.

  3. Negotiable Instruments: This part covers the issuance, endorsement, and transfer of negotiable instruments like promissory notes, bills of exchange, and checks.

  4. Maritime Commerce: This part addresses issues related to maritime trade, including shipping contracts, maritime insurance, and liability of shipowners.

  5. Insurance Law: This part regulates the formation, performance, and termination of insurance contracts as well as the rights and obligations of insurers and insured parties.

Types of Commercial Companies

  • Joint-Stock Companies: Companies whose capital is divided into shares and whose liability is limited to the value of their shares.

  • Limited Liability Companies: Companies whose liability is limited to the amount of capital they have committed to contribute.

  • Partnerships: Business entities where two or more individuals share ownership and management responsibilities.

Commercial Transactions

  • Contracts: Commercial transactions are often based on contracts, which are agreements between parties that create mutual obligations enforceable by law.

  • Agency: An arrangement where one party (the agent) is authorized to act on behalf of another (the principal) in commercial dealings.

  • Trade Registry: A public registry where details of commercial enterprises, companies, and legal entities are recorded to ensure transparency and legal certainty.

Conclusion

The Turkish Commercial Law establishes a structured legal framework that governs commercial activities, ensuring fairness, transparency, and efficiency. Understanding its principles and regulations is essential for anyone involved in business transactions in Turkey.

Introduction to Turkish Corporate Law

Turkish Corporate Law is primarily governed by the Turkish Commercial Code (TCC), which was significantly reformed with the enactment of the new code in 2012. The TCC aims to align Turkish corporate governance with international standards and EU legislation, fostering transparency, accountability, and efficiency within Turkish companies.

The main entities under Turkish Corporate Law are Joint Stock Companies (JSC, Anonim Şirket - A.Ş.) and Limited Liability Companies (LLC, Limited Şirket - Ltd. Şti.). Both forms provide limited liability to their shareholders but differ in terms of formation requirements, governance structure, and capital obligations.

The TCC outlines the procedures for the establishment, management, and dissolution of companies, stipulates the duties and responsibilities of directors and auditors, and provides comprehensive regulations on shareholders' rights and obligations. Additionally, Turkish Corporate Law includes provisions on capital markets, mergers and acquisitions, corporate restructuring, and insolvency.

To ensure compliance, companies must adhere to reporting and disclosure requirements, which are overseen by regulatory bodies such as the Capital Markets Board (CMB) and the Ministry of Trade. These regulations aim to enhance corporate governance practices and protect the interests of shareholders and stakeholders.

Types of Companies in Turkey

Turkish corporate law recognizes several types of companies, but the most common forms are Joint Stock Companies (Anonim Şirket - A.Ş.) and Limited Liability Companies (Limited Şirket - Ltd. Şti.). Each type has its unique features, advantages, and regulatory requirements.

Joint Stock Companies (A.Ş.):
Joint Stock Companies are typically preferred for larger businesses and those intending to access capital markets. The minimum capital requirement for a JSC is 50,000 TRY. JSCs can issue shares and bonds, which allows them to raise capital more easily. The management of a JSC is vested in the Board of Directors, which must consist of at least one member. Shareholders' liability is limited to their capital contribution, and their rights are proportionate to the number of shares they hold.

Limited Liability Companies (Ltd. Şti.):
Limited Liability Companies are more suitable for small to medium-sized businesses. The minimum capital requirement for an LLC is 10,000 TRY. Unlike JSCs, LLCs cannot issue shares or bonds, and their capital is divided into quotas rather than shares. An LLC can have a maximum of 50 shareholders, and the management can be carried out by one or more managers who may be shareholders or third parties. Shareholders' liability is also limited to their capital contribution, and their rights are based on their ownership percentage.

In addition to JSCs and LLCs, Turkish law also recognizes other company forms such as Commandite Companies, Collective Companies, and Cooperative Companies. However, these forms are less commonly used in practice.

The choice between a JSC and an LLC largely depends on the company's size, capital requirements, and the level of regulatory compliance it can handle. Both forms offer limited liability protection, but they differ significantly in terms of flexibility, complexity, and funding options.

Formation of Companies

The formation of a company in Turkey involves several legal steps and requirements, which vary slightly depending on the type of company being established.

Establishment Procedures:

  1. Company Name Reservation: The first step is to reserve a unique company name with the Central Registry System (MERSIS).
  2. Preparation of Articles of Association: The articles of association must be drafted, outlining the company's purpose, capital, shareholders, and management structure.
  3. Notarization: The articles of association and other necessary documents must be notarized.
  4. Registration with the Trade Registry Office: The notarized documents are submitted to the Trade Registry Office, where the company is officially registered. This step includes obtaining a registration number and publishing the company's establishment in the Turkish Trade Registry Gazette.
  5. Tax Office Registration: The company must be registered with the local tax office to obtain a tax identification number.
  6. Social Security Institution Registration: Companies hiring employees must also register with the Social Security Institution (SGK).

Required Documentation:

  • Articles of Association: Specifies the company's name, address, purpose, capital, and shareholder information.
  • Founders’ Declaration: A document signed by the company's founders.
  • Notarized Signatures: Signatures of the company's representatives.
  • Receipt of Paid-in Capital: Proof that the required initial capital has been deposited in a bank account.
  • Other Regulatory Approvals: Depending on the industry, additional licenses or permits may be required.

Timeframe and Costs:
The entire formation process typically takes 1-2 weeks if all documents are correctly prepared and submitted. The costs involved include notary fees, registration fees, and any necessary legal or consultancy fees.

Corporate Governance

Corporate governance in Turkey is regulated by the TCC and aims to establish a transparent, accountable, and efficient management structure within companies.

Management Structure:

  • Joint Stock Companies (A.Ş.): Managed by a Board of Directors, which must have at least one member. Directors are appointed by the shareholders and are responsible for the overall management and strategic direction of the company.
  • Limited Liability Companies (Ltd. Şti.): Managed by one or more managers, who can be shareholders or third parties. Managers are responsible for the day-to-day operations and strategic management of the company.

Duties and Responsibilities of Directors and Managers:

  • Fiduciary Duty: Directors and managers must act in the best interest of the company and its shareholders.
  • Duty of Care: They must perform their duties with the care and diligence expected from a prudent businessperson.
  • Duty of Loyalty: They must avoid conflicts of interest and must not use their position for personal gain.
  • Duty to Avoid Conflicts of Interest: Directors and managers should not engage in activities that conflict with the interests of the company.

Board Committees:
In larger companies, specific committees such as audit, risk management, and corporate governance committees may be established to oversee various aspects of the company's operations and ensure compliance with regulatory requirements.

Shareholders' Rights and Obligations

Shareholders in Turkish companies have specific rights and obligations, which are detailed in the TCC.

Rights:

  • Voting Rights: Shareholders have the right to vote on significant company matters, such as amendments to the articles of association, mergers, and the appointment of directors.
  • Dividend Rights: Shareholders are entitled to a share of the company's profits in the form of dividends.
  • Information Rights: Shareholders have the right to access certain information about the company's operations and financial status.
  • Preemptive Rights: In case of a capital increase, shareholders have the right to purchase new shares before they are offered to third parties.

Obligations:

  • Capital Contribution: Shareholders must pay the amount they have committed to as their capital contribution.
  • Compliance with Company Regulations: Shareholders must comply with the company’s articles of association and decisions made by the general assembly.
  • Liability: Shareholders’ liability is generally limited to their capital contribution, protecting them from personal liability for the company's debts.

Capital and Financing

The TCC provides comprehensive regulations on capital and financing, ensuring that companies maintain sufficient capital to support their operations.

Share Capital:

  • Joint Stock Companies (A.Ş.): Must have a minimum share capital of 50,000 TRY. Shares can be issued in exchange for cash or non-cash assets, and the capital can be increased or decreased with the approval of the general assembly.
  • Limited Liability Companies (Ltd. Şti.): Must have a minimum share capital of 10,000 TRY. The capital is divided into quotas, and similar to JSCs, it can be increased or decreased with the approval of the general assembly.

Financing Options:

  • Equity Financing: Raising capital through the issuance of shares.
  • Debt Financing: Raising capital through loans or the issuance of bonds. JSCs have the ability to issue bonds, providing a flexible financing option.

Capital Maintenance: Companies must maintain their capital at a level sufficient to cover their liabilities. Distributions to shareholders are restricted if the company’s net assets fall below a certain threshold.

Mergers, Acquisitions, and Restructuring

Turkish Corporate Law provides detailed regulations for mergers, acquisitions, and corporate restructuring, ensuring that these processes are conducted transparently and fairly.

Mergers: Two or more companies can merge to form a new entity or for one to absorb the other. The process requires the approval of the general assembly of each company involved and must comply with regulatory requirements.

Acquisitions: A company can acquire another company by purchasing its shares or assets. Acquisitions may require approval from the Competition Authority if they meet certain thresholds.

Corporate Restructuring: Companies can restructure their operations through various methods such as spin-offs, demergers, or changes in corporate structure. These processes also require the approval of the general assembly and compliance with regulatory requirements.

Dissolution and Liquidation

The dissolution and liquidation of companies in Turkey are governed by the TCC, providing a structured process for winding up a company's affairs.

Dissolution: A company may be dissolved voluntarily by a decision of the general assembly or involuntarily by a court order. Reasons for dissolution include the expiration of the company's term, fulfillment of its purpose, or financial difficulties.

Liquidation: Upon dissolution, the company enters into liquidation, where its assets are sold, liabilities are settled, and any remaining assets are distributed to shareholders. A liquidator, appointed by the general assembly or the court, manages this process.

Compliance and Reporting Requirements

Turkish companies are subject to strict compliance and reporting requirements to ensure transparency and accountability.

Annual General Meeting: Companies must hold an annual general meeting where shareholders review the company’s performance, approve financial statements, and make key decisions.

Financial Reporting: Companies must

prepare and submit financial statements, which are audited and published in accordance with Turkish Financial Reporting Standards (TFRS).

Regulatory Filings: Companies must regularly file certain documents with regulatory authorities, including changes in management, capital increases, and significant corporate actions.

Corporate Governance Compliance: Companies, particularly those listed on the stock exchange, must adhere to corporate governance principles set by the Capital Markets Board (CMB).

Conclusion

Turkish Corporate Law provides a comprehensive legal framework for the formation, management, and dissolution of companies. With its emphasis on transparency, accountability, and alignment with international standards, it ensures that Turkish companies operate efficiently and responsibly. Understanding the key aspects of this legal framework is essential for any business operating in or with Turkey, ensuring compliance and fostering sustainable growth.