WHICH TYPE OF COMPANY TO INCORPORATE IN TURKEY?
10 Major Differences Between Limited Liability Companies and Joint-Stock Companies
In Turkish corporate law, the two most-commonly seen commercial legal entities are limited liability companies and joint-stock companies. For foreign investors, it can be complicated when it comes to decide whether to incorporate a limited liability company or a joint-stock company in Turkey.
While there are many differences between limited liability companies and joint-stock companies, 10 of the major differences are as follows:
1) Limited liability companies are incorporated with 10,000 TL minimum capital whereas joint-stock companies are incorporated with 50,000 TL minimum capital.
2) In limited liability companies, all of the capital is payable within 24 months from the incorporation, whereas in joint-stock companies at least 25% of the capital must be paid prior to the incorporation.
3) The separation between the shareholders’ liability and the entity’s liability is stricter in joint-stock companies. In joint-stock companies, the shareholders are only liable for the value of the shares that they have undertaken to pay; they do not have any personal liability for the debts of the company. In limited liability companies however, the shareholders are personally and jointly liable for the company’s defaulted debts against the state (such as taxes, social security premiums or fines). Furthermore, in limited liability companies, the shareholders have side obligations such as prohibition of competition, obligation of loyalty and confidentiality.
4) Transfer of shares in limited liability companies is costlier than in joint-stock companies, due to the reasons that in limited liability companies, transfer of shares must be approved by the general assembly and that the contract of share transfer must be notarized and registered in the trade registry. In joint-stock companies, transfer of shares is carried out by a simple written contract.
5) In limited liability companies, at least one of the directors must also be a shareholder, whereas in joint-stock companies, shareholders and board members may be different persons/entities.
6) In joint-stock companies the profits made from sale of shares are not subject to income tax within 2 years starting from the date of incorporation.
7) In some joint-stock companies with certain fields of operations, a representative of the Ministry of Commerce must attend the general assemblies.
8) In joint-stock companies, shares can be transformed to negotiable instruments and may be printed out as written documents. They can be transformed into bearer shares, registered shares or order shares. This way, shares may be transferred by physically delivering them to the buyer. In limited liability companies, however, shares belong to whomever are registered as owners.
9) Joint-stock companies cost more fees and taxes to incorporate and operate, than limited liability companies. Furthermore, joint-stock companies with more than 250,000 TL capital must always keep an attorney on retainer.
10) Only joint-stock companies can be transformed to publicly held companies.
In 2003, Turkey introduced the Direct Foreign Investments Law, thereby adopting a completely liberal approach to foreign investors and immigration. Foreigners may now be investors and shareholders in companies incorporated in Turkey just as easily as Turkish citizens. In fact, Article 3/a of the Law emphasizes the equality between Turkish and foreign investors as follows:
“Foreign investors are free to make direct foreign investments into Turkey. Foreign investors are subject to the equal treatment with the local investors.”
Antalya Lawyer Baris Erkan Celebi and his Antalya Law Firm offer to incorporate limited liability companies and joint-stock companies in Antalya, Istanbul and all cities of Turkey, including consultancy services such as the procurement, compilation, translation and notarization of the required documents for the incorporation, locating suitable offices and signing lease agreements for the headquarters of the company, hiring and working together with certified public accountants, drafting and signing articles of association tailor fit to the specific type and requirements of the company and consulting the shareholders and the directors of the company on the norms and practicalities of Turkish corporate law.