Capital Companies And Organizations – Shareholders

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.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.