Introduction
Limited Liability Company (LLC)(1) is the most frequent form of company in Turkey, as it is across the world.
Under a trade name, an LLC can be formed by one or more real or legal persons with a specified amount of capital. According to Turkish law, a limited liability company (LLC) can have a maximum of 50 shareholders.
In an LLC, foreign ownership of 100 percent is permitted. By using a power of attorney, a foreigner who has never visited Turkey can become a shareholder of a Turkish LLC.
Capital
An LLC’s minimum share capital is 10.000 TRY.
(2) The book value per share can be as low as 25 TRY or as high as multiples of that.
After the registration, the capital can be paid within two years.
Cash contributions for the share capital must be put into a separate bank account that will be opened in the name of the newly formed company. The relevant trade registry office will get a bank letter confirming that the subscribed share capital has been put into an account. The corporation can withdraw the money placed after presenting the necessary establishing documents proving that it has legal personality. (3)
It is acceptable to make a contribution in kind.
Shareholders
An LLC’s shareholders might be both legal and non-legal entities. Non-residents can become shareholders of a Turkish LLC without having to live in Turkey.
A minimum of two shareholders were necessary to organize and sustain an LLC under the previous commercial code. A one-shareholder LLC is now possible under the new business code (in effect since July 2012).
If the LLC is formed with only one shareholder or the number of shareholders is reduced to one later, the shareholder’s name, address, and citizenship information must be recorded with the trade registry office and published in the trade registry gazette.
The general assembly is the organ of the LLC where the shareholders are represented, same as it is for a Turkish JSC. The general assembly meetings are where shareholder motions are passed. The general assembly can meet in either regular or extraordinary sessions. Ordinary meetings must take place at least once a year, within three months of the fiscal year’s end. Extraordinary meetings can be called by the directors or holders of at least 10% of the stock. (4) The general assembly has the authority to alter the articles of incorporation, appoint and fire directors, review financial statements, allocate profits, dissolve the corporation, and so on.
A simple majority of the share capital represented in the meeting constitutes a decision quorum on topics touching the company’s ordinary business. For big decisions such as mergers, demergers, capital increases or decreases, voluntary dissolution, and so on, the commercial code mandates larger decision quorums.
Director
An LLC’s managing body, like a JSC’s board of directors, is made up of directors. The director is in charge of the company’s management and representation in front of third parties.
A foreigner with a work permit in Turkey can be appointed to the position of director. A person who is not a shareholder of the LLC can also be appointed to the board of directors.
A decision of the general assembly can fire the director at any moment.
Liability
Unless otherwise indicated in the articles of association, an LLC’s liability for its debts and obligations is limited to its assets. The LLC’s debts are not the responsibility of the shareholders.
This general rule, however, has an essential exception:
An LLC’s shareholders are personally liable for the company’s public debts. They are jointly and severally liable for the taxes in proportion to their capital shares. On the other hand, their duty for the LLC’s employees’ social security premium payments is for the entire debt, not in proportion to their interests in the capital. However, such responsibility will arise only if the company’s assets are unable to cover the debts.
The responsibility regime for public obligations is one of the most fundamental differences between an LLC and a JSC. As a result, it should be taken into account while deciding on the type of business to start.
Association Articles
The articles of organization, which serve as the company’s constitution, must be prepared in order to form an LLC. Before the trade registry office, all of the LLC’s shareholders (or their representatives by proxy) must sign several copies of the articles of association (unless the shareholders or their representatives are illiterate or handicapped or cannot speak Turkish in which case the AoA must be signed before a notary public).
The following must be included in the wording of the articles of association:
a) The founders’ names and surnames, addresses, and citizenship information, b) The company’s commercial name, c) The company’s main area of activity and subject matter, d) The company’s address, e) The company’s capital, number of shares, nominal value of each share, and how the capital will be subscribed, f) The director(s)’ names, surnames, and nationalities, g) How the capital will be subscribed
In practice, draft articles of association documents are provided by trade registry agencies.
An LLC’s articles of association can be modified by a resolution passed by its general assembly.
The Procedure for Establishment
MERSS, Turkey’s Central Registration Recording System, handles trade registration transactions for all types of businesses.
The shareholders’ commercial name for the LLC must be provided via MERSS, and its approval will be accepted in principle electronically. The business name must not be deceptive or offensive.
Once the articles of organization have been attested by the trade registry office or a notary public, the company must apply to the relevant tax authority for a prospective tax identity number. This possible tax identification number is required to create a bank account in order to deposit the Company’s share capital.
It is necessary to obtain a letter from the bank where the company’s subscribed share capital is deposited. The name of the company and its shareholders, as well as the amount each of them has deposited, should be included in this letter.
As a fee to the Turkish Competition Authority, 0.04 percent of the share capital must be placed in a public bank account.
Documents Required
The following documents(5) must be presented to the relevant trade registry office when the basic preparations have been completed:
a) A letter of application from the director, signed. The request for registration must be included in the application letter, as well as information about the company’s name, share capital, address, and establishment date, as well as the name of the tax office where the company will be registered and a list of annexes.
a) Form of incorporation declaration The authorized persons must fill out three copies of this form and sign them. Four copies of the document must be filled out and signed if there is a foreign stakeholder.
Unless the founders sign the articles of association in front of trade register authorities, c) Notarized copies of the articles of association(6)
d) The “Chamber Registration Declaration”(7), which the company’s founders must fill out and sign.
e) Notarized copies of foreign shareholders’ and directors’ passports and certificates of residence, as well as a special tax ID number provided to foreigners.
f) The directors’ notarized signature specimens(8), unless they sign written declarations in front of the trade registry officers,
g) Notarized acceptance letters attesting to the non-shareholder directors’ acceptance of their responsibilities as company directors.
h) A bank receipt for the payment of the Competition Authority fee, which is 0.04 percent of the company’s share capital.
I A bank letter containing the name of the firm and its shareholders, as well as the total amount deposited and the amount deposited by each shareholder; (9)
j) Contracts entered into by the company with its shareholders or other third parties
Completion
The registration of the LLC is notified in the Turkish Commercial Registry Gazette once the registration process is completed.
The LLC registration process usually takes a few weeks to complete.
Once the company registration process is complete, the LLC must be registered with the appropriate tax and social security departments.
(1) The Turkish name for a Limited Liability Company is “Limited sirket.” In Turkish, the abbreviated version is “LTD T.”
(2) You can find the current EUR/TRY and USD/TRY exchange rates here and here, respectively.
(3) If the company does not get legal personality within three months, depositors have the right to withdraw their funds.
(4) The articles of association may specify a lesser percentage.
(5) If there is a contribution in kind or in other circumstances, additional paperwork must be prepared. To avoid causing any confusion, we have left such data out of our paper. If you require further information not addressed in our article, please contact one of our team members.
(6) For the notarization of the articles of association, certain notarial expenses are waived.
(7) This is the application for the company to be registered with the relevant chamber of commerce.
(8) The company’s name must also be included on such signature specimens.
(9) It should be emphasized that without a special letter from the bank, trade registry offices will not accept bank receipts alone.
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