HOW TO DO BUSINESS IN TURKEY
Cumhuriyet Cad. N.147 K.1 34373 Harbiye – Istanbul –Turkey T +90(212)219 1630 info@bb-legal.com | www.bb-legal.com
F +90(212)219 1632
1. WHICH KIND OF COMPANIES CAN BE ESTABLISHED IN TURKEY? Despite there are several types of corporations may be set up in Turkey pursuant to the TCC, due to the advantages on taxation and shareholders’ other financial responsibilities, there are only two common types of corporations incorporated in Turkey as following; • •
Joint Stock Company (“JSC”) Limited Liability Company (“LLC”)
Notwithstanding the above; establishing a liaison office is occasionally recommended, if a foreign investor does not know the Turkish market and wants to acquire a range of customers prior a full settlement within the country. The possibility of establishing a liaison office is only given to foreign companies or institutions and is not admitted for foreign real persons. All costs of the liaison office including employees’ wages have to be settled with foreign currency. In addition, the employees’ wages are exempted from the income tax and the maximum initial term for the activities of a liaison office is determined as three years, which may be prolongued. According to Article 3/h of Foreign Direct Investments Law no. 4875 (“FDIL”), establishment of a liaison office requires the permission of the Undersecretariat of Treasury’s General Directorate of incentive and Implementation Foreign Capital (“GDFC”). The main disadvantage is that the liaison office is not allowed to conduct any commercial activity. However, activities such as gathering information, conducting market research, visiting clients and describing the features of the parent company, arranging the transfer of documents between the clients and the parent company and establishing contacts to expand the business opportunities of its parent company are permissible, as long as the liaison office does not directly generate a revenue. 2. WHICH ARE THE REQUIRMENTS FOR THE ESTABLISHMENT? The JSC or LLC can be established with %100 foreign capital without any legal restriction.
Cumhuriyet Cad. N.147 K.1 34373 Harbiye – Istanbul –Turkey T +90(212)219 1630 info@bb-legal.com | www.bb-legal.com
F +90(212)219 1632
1
In both JSCs and LLCs, fields of activity, operations, and other corporate matters are governed by their articles of association within the framework set out in the TCC. From a practical point of view, JSC is a legal entity most appropriate for large operations, including in particular corporate joint ventures, and the legal framework on corporate governance in a JSC is better developed and more flexible. Company incorporation procedure in JSCs and LLCs and the necessary documentation in this context are similar to each other with minor differences, as well as the likely time period for formation. Company incorporation procedure is the same in companies with domestic capital and companies with foreign capital. The comperative chart below defines the requirements for the establishement of JSCs and LLCs. SUBJECT Minimum Share Capital
Shares
Number of Shareholders
Scope of Activity
JSC TL 50.000. ¼ of the total amount shall be paid before registration and the rest shall be paid fully within 24 months following the registration. For the quoted companies minimum share capital of the company must be TL 100.000 The nominal value of each share shall be Turkish Cent (Kurus) 1, however the general practice is to set the nominal value of TL 1. Minimum 1 shareholder shall incorporate a JSC. However, should the number of shareholders exceed 250, the company will be subject to Capital Market Board’s regulations. The scope of activity of a company is determined in
LLC TL 10.000. ¼ of the total amount shall be paid before registration and the rest shall be paid fully within 24 months following the registration.
The nominal value of each share shall be TL 25 ormultiples of TL 25.
Minimum 1 shareholder shall incorporate a LLC where the maximum number shall be 50.
The scope of activity of a company is determined in
Cumhuriyet Cad. N.147 K.1 34373 Harbiye – Istanbul –Turkey T +90(212)219 1630 info@bb-legal.com | www.bb-legal.com
F +90(212)219 1632
2
Incorporation
Management
the articles of association of the Company and can be defined by the shareholders. An application must be made to the relevant trade registry where the Company is planned to be incorporated within 15 days following the articles of association is notarized. To set up a company it is necessary to pay 4/10000 of the company capital into a bank account of the Turkish Competition Authority. General Assembly of shareholders is the highest decision making body.
the Articles of Association of the Company and can be defined by the shareholders. An application must be made to the relevant trade registry where the Company is planned to be incorporated within 15 days following the articles of association is notarized. To set up a company it is necessary to pay 1/10000 of the company capital into a bank account of the Turkish Competition Authority. General Assembly of shareholders is the highest decision making body.
Day-to-day business is carried by the board of directors consisting of at least 1 director. This director can be foreign and he/she is not obliged to reside in Turkey. Furthermore, it is not required for the board of directors to be consisted of the shareholders; accordingly it is possible to appoint third parties as board members.
LLCs do not have a board of directors. Individual directors called "managers" carry day-to-day business; such managers may be shareholders, representatives of shareholders or third parties, however it is required to appoint at least one shareholder as a manager to the company with the maximum representation authority.
Please kindly note that it is also possible for a legal entity to be a board member of the company.
Unless otherwise is stated in the articles of association, each shareholder has the right and duty to be involved in the management of the LLC.
Cumhuriyet Cad. N.147 K.1 34373 Harbiye – Istanbul –Turkey T +90(212)219 1630 info@bb-legal.com | www.bb-legal.com
F +90(212)219 1632
3
Transfer of Shares
Unless otherwise stipulated in the articles of association shares may be freely transferred. In other words, shareholder approval is not sought. Additionally, registration of such transfer is not required and the proceeding ends upon the registration of such transfer into the Company Share Ledger and exchange of possession of the share certificates.
The transfer of shares depends on the approval of Shareholders’ Assembly. Such transfer depends on written procedure and shall be notarized. It shall also be registered to the relevant trade registry and published in the Turkish Trade Registry Gazette.
Vote
Each share gives the holder at least one vote.
TL 25 represents one vote.
Company Books
Share Ledger, Inventory, Journal Ledger, Board Resolution Book, General Assembly Resolution Book are required books by law. Such books shall be kept in Turkish Lira.
Share Ledger, Inventory, Journal Ledger, Shareholder Assembly Resolution Book are required books by law. Such books shall be kept in Turkish Lira.
1. 2. 3.
4.
DOCUMENTS RELATED TO THE ESTABLISHMENT JSC LLC Petition: To be submitted to the 1. Petition: To be submitted to the trade registry office. trade registry office. Articles of Association: Five nota- 2. Articles of Association: Five notarized copies are required. rized copies are required. Power of Attorney: signed by each 3. Power of Attorney: signed by each shareholder to obtain tax number shareholder to obtain tax number and in case of a foreign shareholder and in case of a foreign shareholder to participate in the company, it is to participate in the company, it is also required to carry out the other also required to carry out the other procedures on behalf of those procedures on behalf of those shareholders. Please also note that shareholders. Please also note that it should be notarized and apostilled. it should be notarized and apostilled. Board Resolution for Participa- 4. Board Resolution for Participation in NewCo: Foreign Company tion in NewCo: Foreign company shall take a board resolution, which shall take a board resolution, which shall include the fact that it will beshall include the fact that it will become a shareholder of the NewCo. come a shareholder of the NewCo.
Cumhuriyet Cad. N.147 K.1 34373 Harbiye – Istanbul –Turkey T +90(212)219 1630 info@bb-legal.com | www.bb-legal.com
F +90(212)219 1632
4
The title of the NewCo and the amount of foreign company’s participation to NewCo’s capital shall be stated in the resolution. Such board resolution shall also indicate the name of the person who will be its representative in the NewCo. Please also note that the board resolution should be notarized and apostilled. 5. Signature Declaration(s) of the NewCo Board member(s) and signatory authorities: Each Board member and signatory authority of the Newco will submit a signature declaration. Two notarized copies are required. Please also note that each signature declaration should be notarized and apostilled. The names at the signature declarations should be the same as those in the passports. 6. Certificate of Activity: (good standing certificate) of foreign company as shareholder of the NewCo. The certificate of activity should be notarized and apostilled. 7. Notarized identity records with photo of Turkish individual shareholders. 8. Passport copies of foreign representatives (signatory authorities) notarized and apostilled. 9. Declaration: Signed by the shareholders. 10. Declaration: Signed by the board members who are appointed among third parties stating that they accept their duty. 11. Bank receipt relating to the payment of at least ¼ of the initial share capital, 12. Bank receipt relating to the payment of 4/10000 of the share capital to the Competition Board of Turkey.
The title of the NewCo and the amount of foreign company’s participation to NewCo’s capital shall be stated in the resolution. Such board resolution shall also indicate the name of the person who will be its representative in the NewCo. Please also note that the board resolution should be notarized and apostilled. 5. Signature Declaration(s) of the NewCo Board member(s) and signatory authorities: Each Board member and signatory authority of the Newco will submit a signature declaration. Two notarized copies are required. Please also note that each signature declaration should be notarized and apostilled. The names at the signature declarations should be the same as those in the passports. 6. Certificate of Activity: (good standing certificate) of foreign company as shareholder of the NewCo. The certificate of activity should be notarized and apostilled. 7. Notarized identity records with photo of Turkish individual shareholders. 8. Passport copies of foreign representatives (signatory authorities) notarized and apostilled. 9. Declaration: Signed by the shareholders. 10. Declaration: Signed by the managers who are appointed among third parties stating that they accept their duty. 11. Bank receipt relating to the payment of at least ¼ of the initial share capital, 12. Bank receipt relating to the payment of 4/10000 of the share capital to the Competition Board of Turkey.
Cumhuriyet Cad. N.147 K.1 34373 Harbiye – Istanbul –Turkey T +90(212)219 1630 info@bb-legal.com | www.bb-legal.com
F +90(212)219 1632
5
13. Address: The NewCo needs to have an address in Turkey before the registration with the Trade Registry. A lease contract is required to be in place to demonstrate it.
13. Address: The NewCo needs to have an address in Turkey before the registration with the Trade Registry. A lease contract is required to be in place to demonstrate it.
3. HOW LONG WOULD IT TAKE TO SET UP A NEW CORPORATION AND WHICH ARE THE APPROXIMATE COSTS INVOLVED? The length of establishment procedure depends on the preparation of the documentation mentioned above and once all the documents are ready, duly translated and notarized, the registration procedure is usually completed between 1-5 business days and registration to the tax office occurs between 3-7 business days. The costs of incorporation may show variety depending on several criteria. Accordingly, as a first stage, obligations on share capital for whether JSCs or LLCs shall be fulfilled. Legal and accountancy services may change occasionally. In addition, including but not limited to, registration, publishing, notarization, apostil, taxes, rental expenses, employment and other corporate expenses shall be taken into consideration. Therefore, despite it is almost impossible to predict the rates for establishing an entity; the fees for the establishement of a JSC and LLC will be around EURO 4.500 excluding the capital payment, notary and translation expenses and fees to be paid to the trade registry re the registration and publicaitons. 4. IS THERE A LEGAL FRAMEWORK WHICH FAVORS (FOREIGN) INVESTMENTS? The investment incentives mechanism has been comprised of four different schemes. The schemes cover wide range of sectors including but not limited to automotive, tourism, energy and electronics. Within that context, without making any discrimination, local and foreign investors have equal access to General Investment Incentives Scheme, Regional Investment Incentives Scheme, Large-Scale Investment Incentives Scheme and Strategic Investment Incentives Scheme. Having said that different terms and conditions should be fulfilled by companies in each incentive scheme in order to be benefited. Further, Small and Medium Enterprises Development Organization (KOSGEB) provides extra incentive ratios for entrepreneurs for the expens-
Cumhuriyet Cad. N.147 K.1 34373 Harbiye – Istanbul –Turkey T +90(212)219 1630 info@bb-legal.com | www.bb-legal.com
F +90(212)219 1632
6
es arises in different stage of the investment. Within that scope, up to %80 of the expenses may be covered by the government. Under the “Techno-Initiative Capital Support Program” carried out by Ministry of Science, Industry and Technology, the amount of TRY 100.000 which is non-refundable has been granted to the qualified projects of young entrepreneurs. Besides, the Scientific and Technological Research Council of Turkey (TUBİTAK) has also introduced an incentive program for the young entrepreneurs which promises up to TRY 100.000 for each qualified project. 5. ARE THERE BILATERAL AGREEMENTS IN PLACE BETWEEN ITALY AND TURKEY? The significant bilateral agreements regulating the commercial relations between Turkey and Italy are listed below: 1. Economical, Industrial and Technological Collaboration Agreement dated 16.12.1976 2. Tourism Cooperation Agreement dated 13.06.1986 3. Agreement on avoidance of double taxation as regards taxes on revenue and tax evasion signed in 27/07/1990 4. Agreement on Mutual Incentivisation And Protection Of Investments dated 22.03.1995
Cumhuriyet Cad. N.147 K.1 34373 Harbiye – Istanbul –Turkey T +90(212)219 1630 info@bb-legal.com | www.bb-legal.com
F +90(212)219 1632
7