Melisa Işık

Intern Attorney

02.05.2024

Capıtal Companıes And Organızatıons

CAPITAL COMPANIES AND ORGANIZATIONS 

In the Turkish Commercial Code, company types are regulated under two main headings: ordinary companies and commercial companies. Trade companies, on the other hand, are divided into capital companies and sole proprietorships. In capital companies, partners are only responsible for the capital they have committed to the company. These are; a joint stock company, a limited liability company, a cooperative and capital company type as a commandite company whose capital is divided into shares. Cooperatives are also regulated in the Cooperatives Law No. 1163. In private companies, the principle of secondary and unlimited liability of the partners from the company debts applies. Ordinary commandite companies and collective companies are private companies. The establishment, basic features and operations of the companies defined above are regulated in the Turkish Commercial Code No. 6102.

Among the types of companies made possible to be established in Turkey, the most common are joint stock companies and limited liability companies. The fact that it has facilities in terms of its establishment and operation in economic life is among the main reasons.

All commercial companies, except for the ordinary commandite company, have legal personality. Legal personality is acquired by registering in the trade registry. Article 56 of the Turkish Civil Code No. 4721 They can benefit from all rights within the framework of the article. Like real persons, they have the capacity to act and their capacity to act is represented by their organs. As a result of having a legal personality, companies have a unique asset that is separate from the partners. Another important feature of commercial companies in terms of procedural law is their settlements. Unless it is understood that there is a contrary provision in the contract, the place of residence is considered as the place shown in the articles of association. Determining the place of residence is very important in terms of the lawsuit to be filed.

JOINT STOCK COMPANIES

1. General Information on Joint Stock Companies

Joint-stock company type is frequently encountered in key areas such as banking, insurance, capital market and economic activities of the state and in important sectors that require large capital. With the increase in the number of joint stock partnerships and the effect of rapid developments in trade life, science and technology, the capitalist economic system has become global and dominated almost the whole world. It is an important and effective type of company in economic life. In legal terms, it is preferred with its structure suitable for being a multi-partner and its regulations on capital. 

Article 329 of the Turkish Commercial Code No. 6102 states that, "It is the type of company whose capital is determined and divided into shares, for which only the legal entity of the company is responsible with its own assets due to its debts, and the shareholders are only responsible for the capital shares they have committed and only for the company." 

The benefits provided by joint stock companies are;

-It brings together small savings that do not work on their own. In this way, it enables the formation of large capitals and has an important place in the development of economic life.

-It is preferred because it is possible to establish with minimum capital, the shareholders are limited in responsibility and the transfer of shares is easy compared to private companies. It should be noted that if the number of shareholders exceeds five hundred, the company is subject to the provisions of the public joint stock company, except for those who collect money from the public with crowdfunding.

There are also some losses such as the benefits of the joint stock company. The most important of these is that since joint stock companies are managed according to the majority principle, sometimes a small organized minority administration can be seized and act contrary to the interests of the majority and manage in line with its own interests. At the same time, it is seen that such companies have a higher tendency to monopolize

2. The Elements of Joint Stock Companies

-Trade Name: In accordance with Article 136 of the Turkish Commercial Code, joint stock companies are merchants in accordance with Article 18 since they are a trade company; they are obliged to take a trade name. This title is chosen in accordance with articles 45 and 48.

-Capital: Two types of capital emerge in the concept of capital in joint stock companies: the registered capital system and the main capital system. The registered capital system allows capital increase between the lower and upper limits shown in the articles of association, without complying with the amendment procedure of the articles of association with the decision of the board of directors. In the main capital system, it is a system that is registered in the trade registry by being shown in the company's articles of association during establishment and requires a change in the articles of association. The 329th capital concept of the Turkish Commercial Code covers both types of capital systems explained.

The capital must be fully committed, predetermined and fixed, and divided into shares. As can be seen in Articles 332 and 344 of the Turkish Commercial Code, the portion of the cash capital foreseen to be paid must be paid.

- Being Responsible for Assets: The joint stock company is responsible for its assets against its creditors. Its assets emerge as a concept that describes the existing rights, receivables, debts and reserves of the company as a legal entity. This concept varies in connection with the activities of the partnership. As mentioned above, the partners are limited to the amount of capital they undertake to bring to the company. In this case, a company creditor who cannot collect his/her receivables from the company will be able to apply to the legal entity of the company, not to the partner who has not yet fulfilled his/her capital debt.

- Limited Liability of the Partners: The partners are liable limited to the amount of capital they undertake to bring to the company. This responsibility ends only with the performance of the capital share to the partnership.

-Minimum Capital: The minimum capital amount in joint stock companies was TL 50,000 in the previous period. With the Presidential Decision No. 7887 published in the Official Gazette dated 25.11.2023, the minimum capital amount for joint stock and limited liability companies was increased. With the adjustment, the amount was increased to 250,000 TL. For non-public joint stock companies that have accepted the registered capital system, the minimum initial capital amount is determined as 500,000 TL.


3. Establishing a Joint Stock Company

3.1 Preparation and Content of the Articles of Association

If a partnership is established, the existence of the articles of association is considered mandatory. The articles of association is a company constitution, so to speak. In another aspect, it is a contract between the partners. According to Article 340 of the Turkish Commercial Code, it is regulated that the articles of association can be separated from the provisions of the Law regarding joint stock companies only if this is expressly permitted. If there is no provision in the Law on the subject regulated by the articles of association, it is seen that there is a consensus in the doctrine that it will be possible to decide on complementary provisions in the articles of association, provided that it is not contrary to the mandatory provisions.

Mandatory elements in the articles of association are listed in Article 339, paragraph 2 of the Turkish Commercial Code. These are:

-The place where the company's trade name and headquarters will be located

- The subject of the business whose essential points have been specified and completed

-The nominal value of the company's capital and each share and the form and conditions of their payment: Pursuant to Article 344 of the Turkish Commercial Code, According to the article, at least 25% of the nominal value of the shares committed in cash shall be paid before the registration and the rest shall be paid within twenty-four months following the registration. In the performance of non-cash capital commitments, it has been determined that Article 128 of the Turkish Commercial Code should be taken into account. Non-cash capital is the value of all kinds of assets other than money, whose economic value is appreciable. This can be a receivable or an intellectual property right.

-Share certificates shall be registered or bearer

- Number of members of the board of directors, who are authorized to sign on behalf of the partnership and who are the first members of the board of directors: In Article 359 of the Turkish Commercial Code, the number and qualifications of the members of the board of directors are as follows: "The joint stock company has a board of directors consisting of one or more persons appointed by the articles of association or elected by the general assembly. (2) If a legal person is elected as a member of the board of directors, only one natural person determined by the legal person on behalf of the legal person shall be registered and announced together with the legal person; in addition, it shall be immediately announced on the company's website that the registration and announcement has been made. Only the person registered on behalf of the legal entity may attend and vote at meetings. (3) The members of the board of directors and the real person to be registered on behalf of the legal person must be fully qualified. (4) Reasons for termination of membership are also obstacles to election. (5) In companies where the state, special provincial administration, municipality, village and other public legal entities have shares, the listed legal entities or their real person representatives may be elected to the board of directors. In companies with more than two members of the board of directors, more than one real person can be elected to the board of directors on behalf of the public legal entity, provided that not all of the members are representatives of the same public legal entity.”.

- How to call the General Assembly to the meeting, is as written in Article 414 of the Turkish Commercial Code, "The general assembly is called to the meeting as shown in the articles of association, with the announcement published on the company's website and in the Turkish Trade Registry Gazette. This call is made at least 3 weeks before the meeting date, excluding the announcement and meeting days. With the provision written in the share ledger, the shareholders who have previously given a share certificate or a document proving their shareholding to the company and notified their addresses, the day of the meeting and the newspapers where the agenda and announcement are published or will be published are notified by registered letter with return receipt.". Although the method of calling the general assembly is written with the provision regulated, the manner in which it should be called is shown among the mandatory elements in the articles of association.

- How to make announcements belonging to the company

- Types and amounts of capital shares committed by shareholders

Fiscal Period of the Company:

An articles of association that does not include the above-mentioned mandatory elements shall be deemed invalid due to violation of the mandatory provisions. In the partnerships subject to permission regulated in Article 333 of the Turkish Commercial Code, the Ministry shall refrain from granting permission and also the registrar shall refrain from registration.

Although it is not mandatory to be included in the articles of association, there are also conditions that must be included in the articles of association in order to be valid. In paragraph 339/2 (e) of the Law, "Rights and rights other than money; their values; the amount of the shares to be paid for them, the cost of them and the costs of the goods and rights purchased by the founders for the company's account for the establishment of the company, and the amount of the fee, allowance or reward to be given to those whose services are provided in the establishment of the company" and in paragraph (f) "Benefits to be provided to the founders, members of the board of directors and other persons from the company's profit.". It is necessary to include the relevant provision in the articles of association if the conditions for the matters have been fulfilled.

Finally, there may be some elements that are not mandatory in the articles of association.

- According to Article 347/1 of the Turkish Commercial Code, premium share certificates may be issued if there is a provision or general assembly decision in the articles of association, such examples can be given;

- According to Article 336/1 of the Turkish Commercial Code, the chairman and/or deputy chairman of the board of directors can be elected by the decision of the board of directors or the general assembly, provided that there is a provision in the articles of association,

- Arranging that the liquidators can be appointed by the articles of association or the decision of the general assembly in accordance with Turkish Commercial Code 536/1, 

It is seen that elements that are not obligatory to be written, such as these examples, can also be valid in another legal transaction.

 

3.2 Founder Signatures and Approval

The founders carry out the works necessary for the establishment of the joint-stock partnership. In order to establish a joint stock partnership, these founders must consist of at least five people and a joint stock agreement must be drawn up and signed. This number of minimum founders also indicates the minimum number of shareholders that should be present during the continuation of the partnership.

According to Article 339 of the Turkish Commercial Code No. 6102, the articles of association shall be signed by the founders in the presence of the notary public or trade registry director or deputy and the signatures shall be approved.

 

3.3 Payment of Share Fees 

As stated above, Article 344 of the Turkish Commercial Code According to the article, at least 25% of the nominal value of the shares committed in cash shall be paid before the registration and the rest shall be paid within twenty-four months following the registration. In the same article of the Turkish Commercial Code, it is stated that the provisions of the Capital Markets Law on this subject will be reserved. In Article 12/1 of the Capital Markets Law, "The prices of the issued shares must be paid in full and in cash. The Board may request that all of the shares that cannot be sold within the sales period be purchased and that their prices be paid against the partnership. The Board is authorized to determine the situations where it is not obligatory to pay the share prices in cash, such as mergers, divisions, share changes and capital increases to be made in similar company configurations.".

 

3.4 Ministry Permit 

Although it is not valid for the establishment of every joint stock company, in accordance with the communiqué to be put into effect by the Ministry of Commerce, permission is required for the establishment of some companies listed in terms of their field of activity. Banks, financial leasing companies, factoring companies, consumer financing and card services companies, asset management companies, insurance companies, holdings, companies operating foreign exchange kiosks, agricultural products licensed warehousing companies, independent audit companies, companies affiliated with the Capital Markets Law can be counted among the companies affiliated with the permit.


3.5 Registration and Announcement

In Article 354 of the Turkish Commercial Code No. 6102, it is regulated that the company shall be registered in the trade registry of the place where its headquarters is located within thirty days following the establishment of the company and shall be announced in the Turkish Trade Registry Gazette. Article 355 of the Law states that "The company gains legal personality by registering in the trade registry. (2) Those who perform transactions and enter into commitments on behalf of the company before registration are personally and severally liable for these transactions and commitments. However, if it is clearly stated that the transactions and commitments are made on behalf of the company to be established in the future and these commitments are accepted by the company within three months after the registration of the company in the trade registry, only the company shall be responsible. (3) If not accepted by the company, the expenses of the establishment shall be covered by the founders. They have no right of recourse to the shareholders.”.

Failure to comply with the thirty-day period specified in the law for the registration of the joint stock company has not been regulated in the law. 

 

LIMITED COMPANIES

Limited companies are a widely preferred type of company with their establishment and operation being more economical and easier than other types of companies. When the regulations of the Turkish Commercial Code regarding limited partnerships are examined, it is seen that they are similar to joint stock companies. In many matters, explicit references have been made to joint stock companies and it has been accepted that the said provisions also apply to limited liability companies. 


1. The Elements of Limited Companies

Although there is no direct definition in the Turkish Commercial Code No. 6102, the characteristics and characteristics of the limited liability company are listed in Article 573. The Article states that "(1) A limited liability company is established under a trade name by one or more real or legal persons; its principal capital is certain and this capital consists of the sum of its principal capital shares. (2) The partners are not responsible for the debts of the company and are only obliged to pay the principal capital shares they have committed and to fulfill the additional payment and subsidiary obligations stipulated in the articles of association. (3) The limited liability company may be established for all kinds of economic purposes and subjects that are not prohibited by law.”. Accordingly, a limited liability company is a type of capital company established by one or more real and/or legal persons to operate in all kinds of economic purposes and subjects that are not prohibited by law, limited to the assets of the partnership due to the debts of the company, and the shareholders are limited to the principal capital shares they undertake as a rule, and are only liable to the partnership, whose principal capital is determined and consists of the sum of the principal capital shares.

- Number of Partners: Limited partnership can be established with one or more real and legal persons. A company can be established with a single partner. Articles 574/2 and 3, 616/3 and 629 of the Law are regulated specifically for single partner limited companies. The abandonment of the understanding that at least two partners were required during the period of the old Turkish Commercial Code is an important development for the revival of economic life. In the Turkish Commercial Code No. 6102, it is accepted that the number of partners will not exceed fifty.

-Operation Subject: It has been deemed sufficient for the limited company to operate economically. It should be noted that limited companies cannot carry out insurance and banking activities. The law regulates that these activities can only be carried out with a joint stock company.

According to the first paragraph of Article 629 of the Turkish Commercial Code, "The relevant provisions of this Law regarding joint stock companies are applied by analogy to the scope of the representation powers of the directors, the limitation of the authority, the determination of those authorized to sign, the form of signature and their registration and announcement." The understanding valid in joint stock companies is also valid in limited liability companies. Accordingly, the transactions made by those authorized to represent with third parties other than the subject of the business do not bind the company. 

-Minimum Capital: The minimum capital amount in limited companies was determined as 10,000 TL. With the Presidential Decree No. 7887 published in the Official Gazette dated 25.11.2023, the minimum capital amount for joint stock and limited companies has been increased. With the adjustment, the amount was increased from 10,000 TL to 50,000 TL. In limited companies, it is allowed to bring non-cash capital other than the capital in kind, as in joint stock companies. If the real capital share undertaken by the partner is a movable, it must be deposited to a reliable person before the registration of the company; if it is an asset subject to immovable or private registry, an annotation must be given to the land registry or the relevant private registry. The capital consists of the sum of the principal capital shares and it is obligatory to show the nominal values of the principal capital shares in the articles of association. Article 583 of the Turkish Commercial Code titled "Principal capital shares states that "(1) The nominal values of the principal capital shares in the articles of association can be determined as at least twenty-five Turkish Liras. In order to improve the situation of the company, this value may be reduced below this value. (2) The nominal values of the principal capital shares may differ. However, the values of the principal capital shares must be twenty-five Turkish Liras or multiples thereof. The game to be played by a principal capital share is not the calculation of the nominal value in accordance with Article 618 and the division of the principal capital share. The same provision applies to cases where a right or obligation is determined according to the nominal value. (3) A partner may have more than one share capital. (4) Principal capital shares may be deducted from the nominal value or with a price exceeding this value. (5) The price of the main capital share is paid as stipulated in the articles of association, in cash or as a month or through the exchange of a receivable or by converting the freely available equity into the main capital, as in the case of capital increase.". According to the provision, the values of the principal capital shares must be twenty-five Turkish Liras and multiples thereof. Again, as in joint stock companies, the main capital share cannot be divided in limited liability companies.

While share certificates can be transferred freely in joint stock companies, the transfer of partnership shares in limited liability companies is subject to a number of conditions. For the transfer; transfer agreement, signatures must be notarized and approved by the general assembly.

-Legal entity: Limited liability companies, like other companies regulated in the Turkish Commercial Code, have legal personality. They acquire their legal entities by registering in the trade registry.


2. Establishing a Limited Company:

2.1. Corporate Agreement

Article 575 of the Law relates to the form of the contract. According to the provision, the contract must be made in writing and signed by the founders in the presence of the personnel authorized in the trade registry office.

The elements of the articles of association of limited liability companies are divided into compulsory records (Article 576) and binding records (Article 577), provided that they are stipulated in the articles of association. Apart from this, according to Article 579 of the Law, a provision in the contract is only valid if the law expressly allows it.

Records that must be written;

-The place where the company's trade name and headquarters are located.

- The subject of the company's business in a way that its essential points are specified and defined. 

-The nominal amount of the principal capital, the number of principal capital shares, their nominal values, privileges, if any, groups of principal capital shares. 

- Names, surnames, titles, citizenship of directors.

-The form of the announcements to be made by the company.

 

2.2. Payment of Share Fees

Pursuant to Article 370 Shareholders who have committed cash capital shares in joint stock companies are obliged to deposit at least 25% of the nominal value of their committed shares to a bank account to be opened in the name of the company before the registration of the company. The remaining part must be paid within twenty-four months from the registration of the company at the latest.

Pursuant to Article 585 of the Law on limited liability companies, "The company is established by the founders declaring their will to establish a limited liability company in the articles of association signed in the presence of the authorized personnel in the trade registry office, which are regulated in accordance with the law, unconditionally undertake to pay the entire capital. The provisions of this Law regarding joint stock companies are applied comparatively in the payment of the principal capital share prices, place of payment, performance debt, consequences of non-performance, transfer of shares whose prices have not been fully paid. However, the requirement that at least twenty-five percent of the nominal value of the shares pledged in cash be paid before registration shall not apply to limited liability companies. The provisions of the first paragraph of Article 588 are reserved." According to the provision, it has been determined that the condition regarding the prepayment of at least twenty-five percent of the nominal value of the committed capital shares in limited liability companies before the registration of the company cannot be applied. However, the other provisions of the joint stock company regarding the capital share remain valid for limited liability companies. The partners of the limited liability company are also obliged to pay their commitments to place a cash capital share within twenty-four months at the latest from the registration of the company. There is no regulation in this type of company that prevents all or some of the cash capital share commitments from being paid before the registration of the company. However, it is not explained where the payment will be made before registration. Based on the provisions regarding joint stock companies, it is possible to deposit this amount to a bank account to be opened in the name of the company. 

 

2.3. Registration and Announcement

The establishment procedure of the limited liability company is completed with the registration of the articles of association. Following the registration, an announcement will be made in the Turkish Trade Registry Gazette regarding this situation. Within thirty days following the signing of the signatures of the founders in the presence of the personnel authorized in the trade registry office in accordance with the provision of Article 587 of the TCC, the company's headquarters is registered in the trade registry and announced in the Turkish Trade Registry Gazette238 and the limited liability company acquires legal personality. As in joint stock companies, no sanction is foreseen in the Law regarding non-compliance with the specified thirty-day period.

Provisions 345/2 of the Turkish Commercial Code regarding joint stock companies shall apply to limited liability companies by analogy. According to the provision, from the date of signing the articles of association in the presence of the personnel authorized in the trade registry office, if they cannot acquire a legal personality within three months, the fees are returned to their owners by the bank upon the submission of a registry office letter confirming this issue.

Registration is carried out by applying to the trade registry in the place where the head office of the company is located. The application for registration must be in writing and the director (s) of the company must sign the relevant application petition. In the type of company in question, it has been regulated that all of the directors in the organization are authorized to apply.

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