Entering the Turkish Market
Starting a Business
Choosing a company structure is an important aspect for an investor when entering the Turkish market. The Turkish market is a promising and dynamic market. Knowledge and a strong network are key characteristics for a successful investment in Turkey. Therefore, in many cases it is advisable to enter into a joint venture with a Turkish partner who knows the market and the business culture very well and has already built a broad network in the country.
In case of cooperation with a partner, establishing all agreements through a proper Joint Venture Agreement and Articles of Association is an essential aspect.
Regardless of your decision to work with or without a local partner, it is always important to choose the right type of company.
The types of companies that can be established in Turkey can be divided into three main categories:
- Companies that can be established according to the Turkish Commercial Code
(Incorporated form) a- Capital companies (Sermaye Şirketleri)
a.1: Limited Şirket (comparable to the Dutch B.V.)
a.2: Anonim Şirket (comparable to the Dutch N.V.)
b- Personal companies (Şahıs Şirketleri)
b.1: Kollektif Şirket (General Partnership)
b.2: Komandit Şirket (Limited Partnership – partly a personal company)
- Cooperation / Partnership (Adi Şirket / Unincorporated Form) Joint Venture, Business Association, Consortium
- Companies that can be established according to special legislation: Banks, private finance institutions, insurance companies, financial leasing companies, factoring companies, holdings, foreign currency exchange offices, companies active in public warehousing, companies in free trade zones, publicly held companies subject to capital market law, cooperatives.
In capital companies, shareholders have limited liability with their guaranteed capital, while in personal companies the partners are personally liable for the debts of the partnership. For this reason, starting entrepreneurs in Turkey usually prefer capital companies.
Since in personal companies such as Kollektif Şirket (General Partnership) or Komandit Şirket (Limited Partnership – partly a personal company) individuals are personally liable and because it is generally disadvantageous from a tax perspective, these company forms are rarely chosen.
Companies with foreign capital established according to the Turkish Commercial Code have the same status as Turkish companies and are therefore subject to the same procedures as Turkish companies.
Another company structure that foreign entrepreneurs may choose when starting a business or participating in an existing company, in addition to the above-mentioned incorporated company forms, is the partnership form (Adi Şirket). This form also involves personal liability.
Joint ventures and consortiums are considered partnerships. This also includes partnerships established through cooperation agreements that do not possess the main characteristics of the incorporated company forms mentioned above in the Turkish Commercial Code.
Below is brief information about some commonly used business structures in Turkey.
The two most common company types in Turkey are Limited Şirket (Private Limited Company) and Anonim Şirket (Public Limited Company).
Anonim Şirket (Public Limited Company)
Joint-stock companies can generally be compared to the Dutch N.V. (public limited company). These companies are legal entities and belong to the category of capital companies. The company has a fixed capital divided into shares.
The liability of shareholders is limited to the capital they guarantee. Shareholders can be either legal entities or natural persons.
The company is managed by a “board of directors,” and important decisions are made by the shareholders’ meeting.
The company consists of the following bodies: the general meeting (shareholders’ meeting), the board of directors, and the supervisory board.
Shares of a joint-stock company consist of registered shares (nama yazılı hisse senedi) and bearer shares (hamiline yazılı hisse senedi). Unless otherwise stated in the articles of association, the shares must be issued as registered shares.
There is an important difference between a joint-stock company and a private limited company in terms of share transfers. For both bearer shares and registered shares, as well as uncertified shares, it is not mandatory to involve a notary or another official authority when transferring shares. However, the transfer is only valid when registered shares are entered into the share register after approval by the board of directors.
An Anonim Şirket is generally a more suitable company form for large enterprises.
Limited Şirket (Private Limited Company)
A Limited Şirket is generally comparable to the Dutch B.V. (private limited company). There must be a minimum of 1 and a maximum of 50 shareholders. Shareholders may be either legal entities or natural persons.
This company also has a fixed capital and is established under a trade name. The liability of the shareholders is limited to the capital they guarantee. Shareholders are personally liable for the company’s debts up to a maximum of their unpaid capital contribution. Shareholders may also be personally liable for the company’s tax debts.
Private limited companies cannot issue shares. The transfer of shares in a private limited company is legally valid only if the transfer takes place through a notarial procedure and provided that the transaction is submitted to the shareholders’ meeting for approval and subsequently recorded in the share register. If the transfer occurs through inheritance, new shareholders do not need to obtain approval.
The management of the company is carried out by directors. There is no board of directors, and important decisions are taken during the general shareholders’ meeting.
Unless otherwise agreed in the articles of association or required by mandatory provisions of the Turkish Commercial Code, decisions are generally taken by a majority of shares.
If partners know and trust each other well, the Limited Şirket is generally a more suitable company form for small businesses.
Komandit Şirket (Limited Partnership)
A Komandit Şirket is partly a personal company and is established under a trade name. There are two types of partners in this company:
- The general partner (Komandite) has unlimited liability. This partner may also contribute labor and reputation as capital.
- The limited partner (Komanditer) has limited liability up to the capital contributed. Legal entities can only become limited partners. The limited partner has no right or obligation to manage the company.
No minimum capital is required. The rights and obligations of the partners are determined in the articles of association.
The Komandit Şirket is rarely used in Turkey due to the unlimited liability of the general partner.
Kollektif Şirket (General Partnership)
A Kollektif Şirket is a personal company established under a trade name. The liability of the partners is unlimited. No minimum capital is required and all partners must be natural persons.
The rights and obligations of the partners are determined in the articles of association. Partners may divide profits and losses equally if no other distribution is specified in the articles.
Unless otherwise agreed in the articles of association, decisions are generally taken by a majority of the partners.
The Kollektif Şirket is also rarely used in Turkey due to the unlimited liability of the partners.