Read More About Turkish Corporate Entities

Corporate Investment Alternatives in Turkey

Capital Companies

Capital companies are the most common form of business entities in Turkey utilized by both local and foreign investors. Investors may choose to participate into an already existing capital company or establish a new one. Under Turkish law, both joint stock corporations (similar to Corporations in Europe) ("Anonim Sirket - AS") and limited liability companies (similar to LLC's in Europe) ("Limited Sirket - LS") are capital companies, as opposed to so-called "personal companies" used for individual service providing.

The liability of shareholders is limited to the share capital subscribed to in the capital companies. In both AS and LS types, fields of activity, operations, and other corporate matters are governed by their articles of association (similar to certificate of incorporation and bylaws in Europe) within the framework set out in the Turkish Commercial Code (the "TCC").

From a practical point of view, Joint Stock Companies - AS are legal entities most appropriate for large operations, including in particular, corporate joint ventures, and the legal framework on corporate governance of AS are better developed and more flexible (the management body is Board of Directors, company holds General Assemblies etc.). AS's could also issue share certificates (physically printed) available for many financing or related purposes.

On the other hand, Limited Liable Companies - LS are generally used for projects and investments in smaller scale (the only corporate body is shareholders board and day to day business are run by directors).

The main difference between the two company types lies in liability perspective. Although they are both capital companies with responsibility limited with their capital payments of their shareholders, the LS shareholders are also liable with their personal assets for State related debts such as taxes and social security premium payments for employees. In addition AS company accounts require sworn financial accountant audit annually.

The AS companies require five (5) shareholders and the LS companies require two (2) shareholders at minimum to incorporate (the ratio of shareholding is not an issue ex: 99.99% for one shareholder and 0.01% for the other is permissible).

The minimum capital requirement for AS is TRY 50,000 and TRY 5,000 for LS (approximately EUR 1 = TRY 2), therefore its approximately €25,000.- for AS and €2,500.- for LS companies. The ¼ (one fourth) of this capital shall be paid to the company accounts at commencement (or within 3 months, freely to be used for expenses of the company) and the remaining could be paid in to the company in three (3) years. In both company types the incorporator shareholders could be companies or individuals and they can all be established or resident in foreign countries.  

Branches and Liaison Offices

Alternative to directly establishing or participating in a capital company, investors may choose to invest in Turkey through a branch office or a liaison office of a foreign commercial entity. Branch offices are not considered as separate legal entities and are closely associated with their parent companies in respect of internal management. However, a branch office will have autonomy in terms of accounting matters and carrying out commercial transactions and will be subject to corporate tax. Accordingly their incorporation is similar to corporations.  

Liaison offices, on the other hand, are the right tools for 'non-commercial activities' (liaison offices cannot issue invoices and gather income) such as research and marketing services. Please note that for non-companies there is a permission required to be obtained from the relevant authorities (Foreign Investment Undersecretary of Treasury and Ministry of Commerce and Industry).

Procedure

Although it may vary due to the type of entity (especially for branch and liaison offices) the procedure for incorporation may be summarized below:

- Drafting and notarization of Certificate of Incorporation (Article of Association),

- Getting an office lease contract,

- Registration to Chamber of Commerce Trade Registry,

- Notarizing company books,

- Registration to Tax Office, 

- Management (signature power) appointment,

- Opening a bank account. 

Documents

The documents required for the establishment of capital companies and/or branch or liaison offices is not complicated and mainly consists of the documentation of the incorporating shareholder firms or individuals such as their activity certificates and certificates of good standing or passport and residency information and a power of attorney (PoA) with respect to our services. Please note that foreign documents also require either an Apostile verification (based on Hague Convention for the recognition of legal documents dated October 5, 1961) or Turkish consulate verification. Following our engagement a detailed list of documents and relevant stages for incorporation will be provided.

Time

The procedure for incorporation takes less than 1 (one) week following the submission of documentation for both types of capital companies. For branches and liaison offices it takes an additional 2 (two) weeks to obtain the special permissions.