Establishing a Joint-Stock Company in Turkey

Av. Mert Türk
Jun 22, 2024
3 min read

A. Introduction

This article will introduce joint-stock companies, highlighting their advantages, formation processes, reasons for their popularity, and disadvantages, providing essential information on this corporate form.

B. What is a Joint-Stock Company?

A joint-stock company is a type of commercial company whose capital is divided into shares and is liable only with its assets for any debts. It can be established by at least one person according to the Turkish Commercial Code (TCC 338 for single shareholder joint-stock companies). Joint-stock companies are suitable for businesses requiring significant capital and having multiple partners. Advantages include the ease of increasing capital, limited liability of shareholders, transferability of shares, and tax benefits. Disadvantages involve complex and costly establishment, management, and auditing, limited shareholder participation in decision-making, and rigorous tax inspections. Provisions concerning joint-stock companies are regulated under TCC Articles 324 et seq.

C. How to Establish a Joint-Stock Company?

Establishing a joint-stock company requires careful planning and legal consultation. Starting without legal advice may seem easy initially but can lead to confusion and disputes as the company grows and faces new challenges.

The formation of a joint-stock company begins with drafting the articles of association, as mentioned earlier. These articles, regulated under TCC Article 339, should include the company's name, headquarters, business scope, share regulations, management, auditing bodies, general assembly procedures, and profit distribution policies.

Subsequently, according to TCC Article 344, at least 25% of the company’s capital must be paid up. For joint-stock companies with a minimum capital requirement of 250,000 TL, at least 25% of this amount must be deposited into a bank account and confirmed with a blockage receipt from the bank.

Next, under TCC Article 354, the complete articles of association must be registered with the Trade Registry and announced in the Turkish Trade Registry Gazette within thirty days following the formation, unless specific permission is required from the Ministry of Customs and Trade for companies being established under special provisions.

Documents required for registration include the articles of association, blockage receipt, signature declarations, and tax registration certificate. Upon registration under TCC Article 355, the company acquires legal personality.

Finally, the company must be registered with relevant authorities such as the tax office, Social Security Institution, chamber of commerce, and professional chambers. Documents required for these registrations include the registration announcement, articles of association, tax plate, and signature circulars.

The establishment of joint-stock companies concludes with these steps. A joint-stock company consists of the capital, board of directors, audit committee, and general assembly, with the capital overseeing the company's operations and finances, and the general assembly being the ultimate decision-making body.

D. Advantages and Disadvantages of Establishing a Joint-Stock Company

Advantages:

Ease of Capital Increase: Shares can be issued to new investors or sold by current shareholders, facilitating capital increases through general assembly resolutions.
Limited Liability: Shareholders are only liable up to the amount of their capital contribution, protecting personal assets.
Transferability of Shares: Shares can be bearer or registered, with bearer shares easily transferable, providing flexibility in ownership.
Tax Benefits: Corporate tax rate is 20%, lower than some other business forms, with deductions available for management fees and independent audit expenses.

Disadvantages:

Complex and Costly Establishment: Requires a series of legal documents and significant initial capital.
Complex Management and Auditing: Involves a board of directors, audit committee, and mandatory annual audits, increasing bureaucracy and reducing efficiency.
Limited Shareholder Participation: Shareholder influence is proportional to share ownership, potentially marginalizing smaller investors.
Rigorous Tax Inspections: Strict tax oversight can lead to penalties for non-compliance.

E. Conclusion

A joint-stock company is a significant and common corporate form in Turkish Commercial Law, suitable for large-scale enterprises. Its establishment involves various advantages and disadvantages, necessitating careful legal consultation to choose the best path for your business.

We hope this guide has been helpful in understanding the process of establishing a joint-stock company. If you need legal advice on establishing or managing a joint-stock company, contact TNC Law & Consultancy, which specializes in corporate law.