BUSINESS ESTABLISHMENT MODELS AND PROCEDURE FOR ...

BUSINESS ESTABLISHMENT MODELS AND PROCEDURE FOR FOREIGN INVESTORS

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The main aim of this article is to introduce business establishment models and procedure inTurkeyto foreign direct investors who has intention of doing business inTurkey.

It is a fact that the establishment requirements and conditions are crucial for any investors in order to shape their business activities in a suitable and convenient manner with their business plan inTurkey. In practice, there are three types of business establishment methods which are commonly used by foreign investors during their business activities inTurkey.

The New Turkish Commercial Code (?hereinafter NTCL?) will enter into force on 1^st of July, 2012. Thus in this article the procedure of setting up companies according to the NTCL numbered 6102 will be examined.

I.????????? Setting up a Limited Liability Company: (LLC)

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Founding share holders: Minimum 1 ?Maximum 50
Capital requirement: In Total Minimum 10.000 TL
Founders nationality: Free
Purpose of Activities: Free
Governing Law: Turkish Commercial Code numbered 6102
Legal Status: Independent Turkish Company
Shareholder Liability: Limited with the payment of the capital guaranteed by them
Issuing Stocks: Allowed
Management: Managing partners
Governance: Partners Assembly meeting
Transfer of Shares: Allowed
Taxation Liabilities: Corporation tax 20% (2011)
Billing: In Turkish currency only to Turkish entities. Indexation TL amount on the invoice to foreign currency allowed.

A) Definitions

LLCs are regulated starting the Article 573 of the NTCL and defined as companies which have declared principal capital divided into shares and founded by real or legal people under a title. Partners of a LLC are only responsible with amount of the capital which they have guaranteed to put in and with the subsidiary performance and supplementary payment which are anticipated in the main contract, not with the debts of the company (Art.573).

The main contract should be in written and signs of the founders should be approved by notary. The issues to be written on the main contract are regulated under the Art.576 as:

• The commercial name of the company and the place where is the company?s center is located.
• Field of operation of the company defining the principal points
• The nominal amount of the principal capital, the number of shares of the principal capital and their nominal amount, prerogatives if there are and the groups of the principal capital
• The name, surname, nationality and degrees of managers
• The form of announcements that will be made by the company

These are the issues which are obligated to be written in the main contract. There are some other issues regulated under the Article 577 which become obligatory by being written in the main contract.

The minimum amount of the principal capital should be 10.000 TRY however it can be increased by the decision of Council of Ministers up to 10 times of 10.00 TRY.

The moment of establishment is defined under the Article 585 of NTCL as indicated below:

The company is established after the declaration of intent to establish the company by founders, the commitment of the capital unconditionally and the payment of the cash part of the capital.

b) Registry and Announcement

According to the Art.586 after arranging the main contract in accordance with the Art 575, an application is made by the founders to the commercial register. The application should be signed by all founders and the following documents should be added:

• An approved copy of the main contract
• Declaration of the founders arranged in conformity with Art 349 and the report of the transaction controller prepared in accordance with Art.351 if requested by the Ministry.
• A document which indicates the names and the residences of the people authorized to represent the company and election of the controller.

The petition should indicate the following issues:

• Names, surnames, degrees and nationalities of all partners,
• The amount of the capital assumed by each partner and the amount paid by them,
• Partner or stranger, the names, surnames and degrees of the managers,
• Under which circumstances the company will be represented.

To the Art.587 the main contract of the company will be registered at the commercial registry and announced on the commercial registry gazette within 30 days following the approval of the notary the founder?s signs. The company obtains its legal entity by being registered to the commercial registry, by the statement of the Art.588.

II. Setting Up a Branch Office

Branch offices are stipulated under the NTCL Article 40 and following. Foreign Companies can open branches inTurkey. According to the paragraph 4 of the Art.40 foreign companies which will set up branches inTurkeywill be registered as local enterprises but the foreign provisions about the commercial name will be protected. For these branches a commercial representative whose residence is inTurkeywill be appointed. Under the Art.48 paragraph 3 it is regulated that the commercial name of the branch must contain the residences of the center, branch and a provision indicating itself as branch.

A. Branch Opening Procedure

The commercial name of the branches and branches itself are registered on the registry of their residences. According to the Commercial Registry Bylaw Art.54 the issues below are requested to register a branch:

• All the facts written on the center?s registry
• With which number and date is the center registered on its registry
• Commercial name and the address of the branch
• Principals regarding the branch
• The attorneys of the branch and if their authorization is limited with the branch, this issue and how will they sign
• The capital reserved for the branch

There are not many differences between TCL and NTCL provisions about branch offices.

III. Setting up a Joint Stock Company (JSC)

In the NTCL Joint Stock Companies are regulated under the Articles between 329-563.

Founding share holders: One or more sharer
Capital requirement: Minimum 50.000 TRY, if it is a close JSC where the registered capital system indicating the authorization limit given to the Board, is accepted 100.00 TRY initial capital

Founders nationality: Free
Purpose of Activities: Free
Governing Law: Turkish Commercial Code numbered 6102
Legal Status: Independent Turkish Company
Shareholder Liability: Limited with the share capital except for tax liabilities
Issuing Stocks: Free
Management: Managing partners
Governance: Partners Assembly meeting
Transfer of Shares: Allowed
Taxation Liabilities: Corporation tax 20% (2011)
Billing: In Turkish currency only to Turkish entities. Indexation TL amount on the invoice to foreign currency allowed.

a)Definitions

JSCs are defined under the Art.329 of NTCL. According to the definition JSCs are the companies of which its capital divided into shares and only responsible of its debts with its assets.? The partners are only responsible with the capital share that they have put in. The establishment of the company regulated under the Art.335. To establish the JSC a legally arranged main contract containing the guarantee of founders that they will pay the capital unconditionally and their signs approved by the notary. The NTCL is requesting few documents for the establishment transactions in the Art. 336 which are:

• The main contract
• The declaration of the founders
• The appraisement reports
• All contracts that are made with the establishing company, founders and other people including transfer of the goods and enterprises.

According to the Art.339 the main contract should be in written, approved by the notary and contain the issues below:

• Commercial name and the place where the center of the company is located,
• The main points of the field of operation,
• The nominal value of the capital and each share, form and conditions of payment,
• The issue that the shares will be registered or bearer, the privileges granted to the certain shares, and limits of transfer,
• The rights and the goods put in, except the money, their value, the amount of the shares that will be given in exchange for these, in case of transfer of an enterprise or a good, their cost, the cost of goods and rights that are bought by the founders to establish the company and the amount of salary, subvention and reward that will be given to people who are served during the establishment.
• The benefits which will be provided to the founders, members of the board and other people from the company?s profit,
• The number of the Board?s members and the people who are authorized to put signs in between them,
• The invitation procedure of General Assembly and rights to vote,
• If the company is limited with a period, the amount of this period,
• The procedure of the announcement which will be made by the company,
• The type and the amount of the shares guaranteed by the sharers,
• Accounting period of the company,

The initial members of the Board are appointed with the main contract.

b) Registry and Announcement

Registry and announcement of the JSCs is regulated under the Art. 354 of the Law numbered 6102. According to the Article, the main contract will be registered to the Trade Registry and announced in the Trade Registry Gazette within 30 days:

• ?If the company will be established with the permission of Ministry of Customs and Trade, after this permission is got
• In the other companies, in accordance with the Article 335/1 after the establishment of the company.

On the main contract that will be registered the issues below should be written:

• The date of the main contract,
• Commercial name of the company and the place where the center of the company is located,
• If there is the duration of the company,
• The capital of the company, its form and conditions of payment and the nominal value of the shares and the privileges if there are,
• The type of the share certificate and the issue if they are registered certificates or bearer papers,
• How does the company will be represented,
• The names, surnames, nationalities and residences of the people authorized to represent the company and members of the board,
• The form announcements which will be made by the company; if there is a statement about it in the main contract, how the notice about the decisions of the Board will be made.

According to the Article 355 the company obtains its legal entity by registration on the Trade Registry.

c) Other Issues Regarding Joint Stock Companies

The amount of partnership shares can be minimum ?1 kuru?? and it can be increased by Council of Ministers until 10 times (Art.476). The partnership shares can be registered or bearer according to the Art. 484. The transfer of the bearer partnership shares are regulated under the Art.489 as ?The transfer of the bearer partnership shares realize by transfer of possession about the company and third people.? The transfer of the registered partnership shares are regulated under the Art.490 as ?Unless it regulated contrarily under the Law and the main contract, the registered shares can be transferred without a restriction.

The management and the representation of the JSCs are regulated under the Art.365 of the Law. JSC are managed and represented by a board.

Auditing of the JSC is regulated 397 and the following Articles of the Law. The Article 367 regulates that the examination of the financial charts of the company will be made by an? auditor in accordance with the Turkish Audition Standards which are conformable with the international audition standards.

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Source: http://ongurergan.av.tr/wp/?p=282

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