Turkey’s strategic position as a bridge between Europe and Asia, combined with its robust economic growth and favorable investment climate, has made it an increasingly attractive destination for international businesses and investors. Understanding Turkish corporate law is crucial for any entity seeking to establish, operate, or invest in Turkish companies. This comprehensive guide examines the fundamental principles, structures, and regulatory framework governing corporate entities in Turkey.
Table of contents
- The Foundation of Turkish Corporate Law
- Types of Corporate Entities in Turkish Law
- Corporate Governance: Pillars of Sound Business Practice
- Corporate Governance Requirements
- Capital Markets and Public Companies
- Foreign Investment and Corporate Establishment
- Merger and Acquisition Framework
- Compliance and Regulatory Oversight
- Tax Implications of Corporate Structures
- Intellectual Property and Corporate Assets
- Labor Law and Corporate Employment
- Foreign Direct Investment (FDI) in Turkey
- Contact us for Turkish Corporate Law & Regulations
The Foundation of Turkish Corporate Law
Turkish corporate law is primarily governed by the Turkish Commercial Code (TCC), which underwent significant modernization in 2012. This comprehensive legislation aligns Turkish corporate governance standards with international best practices and European Union directives, creating a more transparent and investor-friendly legal environment.
The TCC establishes the legal framework for various types of commercial entities, defines corporate governance principles, and outlines the rights and obligations of shareholders, directors, and other stakeholders. The law emphasizes transparency, accountability, and protection of minority shareholders while providing flexibility for businesses to adapt to modern commercial practices.
Turkey’s membership in the Council of Europe and its customs union with the European Union have significantly influenced the development of its corporate law framework. The Turkish Ministry of Trade oversees the implementation and enforcement of commercial regulations, ensuring compliance with both domestic and international standards.
Types of Corporate Entities in Turkish Law
Joint Stock Companies (Anonim Şirket – A.Ş.)
Joint Stock Companies are the most common form for large businesses and publicly traded entities. They are characterized by their capital being divided into shares, and the liability of shareholders is limited to their subscribed capital.
Key Features of a Joint Stock Company:
- Share Capital: The minimum share capital required for establishing a Joint Stock Company has recently been increased to TRY 250,000 (effective January 1, 2024, for new establishments). Companies with capital below this threshold existing before this date have until December 31, 2026, to comply.
- Shareholders: A Joint Stock Company can be established by a single shareholder, who can be a real person or a legal entity, and can be foreign.
- Board of Directors: Management is entrusted to a Board of Directors, which can consist of one or more members. At least one member must be a Turkish resident for tax purposes, though this is not a strict legal requirement for the director’s nationality or residency otherwise. Recent amendments have abolished the annual election obligation for the Chairperson and Vice-Chairperson of the Board, allowing them to serve for the full term of the Board.
- Auditing: Certain Joint Stock Companies, depending on their size and sector, are subject to independent audit requirements.
- Public Offerings: Joint Stock Companies are the only company type permitted to offer their shares to the public.
Limited Liability Companies (Limited Şirket – Ltd. Şti.)
Limited Liability Companies are a popular choice for small and medium-sized enterprises due to their simpler structure and formation requirements compared to Joint Stock Companies. Similar to an A.Ş., the liability of shareholders is limited to their capital contributions.
Key Features of a Limited Liability Company:
- Share Capital: The minimum share capital for a Limited Liability Company has also been increased to TRY 50,000 (effective January 1, 2024, for new establishments). Existing companies have until December 31, 2026, to adjust.
- Shareholders: A Limited Liability Company can be established by one or more shareholders (real persons or legal entities, including foreign). The maximum number of shareholders is 50.
- Management: Management is carried out by one or more “managers” (Müdür) who can be shareholders or third parties. There is no residency requirement for managers.
- Simplicity: Generally less complex in terms of governance and regulatory compliance than Joint Stock Companies.
Beyond these two, the TCC also recognizes other company types such as Collective Companies, Commandite Companies, and Cooperatives, though they are less frequently used for general commercial purposes, particularly by foreign investors.
Corporate Governance: Pillars of Sound Business Practice
Turkish corporate law places significant emphasis on corporate governance, particularly for Joint Stock Companies, to ensure transparency, accountability, and fairness to all stakeholders. The Capital Markets Board of Turkey (CMB) plays a crucial role in setting and overseeing corporate governance principles, especially for publicly traded companies.
Core Principles of Corporate Governance in Turkey:
- Fairness: Ensuring equitable treatment of all shareholders, especially minority shareholders.
- Transparency: Requiring timely and accurate disclosure of all material information regarding the company’s financial situation, performance, ownership, and governance.
- Accountability: Establishing clear roles and responsibilities for the board of directors and management, and holding them accountable for their actions.
- Responsibility: Recognizing the company’s responsibilities towards all stakeholders, including employees, customers, suppliers, and the wider community.
Corporate Governance Requirements
Board Structure and Responsibilities
Turkish corporate governance emphasizes the board of directors as the primary decision-making body responsible for strategic direction, risk management, and stakeholder protection. Board members owe fiduciary duties to the company and its shareholders, including duties of care and loyalty.
The TCC requires boards to establish internal control systems, risk management frameworks, and audit committees for certain companies. Independent board members are mandatory for publicly traded companies, with specific qualifications and independence criteria defined by the Capital Markets Board of Turkey.
Directors must possess appropriate qualifications and cannot have conflicting interests that might compromise their independence or decision-making abilities. The law provides detailed provisions regarding director appointments, terms of office, and removal procedures.
Shareholder Rights and Protection
Turkish corporate law places significant emphasis on protecting shareholder rights, particularly minority shareholders. The legislation establishes comprehensive frameworks for shareholder participation in corporate decision-making through general assemblies and voting mechanisms.
Minority shareholders enjoy specific protections, including the right to request extraordinary general assemblies, nominate board members, and challenge board decisions that may harm company interests. Preemptive rights ensure existing shareholders can maintain their proportional ownership when new shares are issued.
Information rights allow shareholders to access corporate records, financial statements, and other relevant documentation necessary for informed decision-making. The law also provides mechanisms for derivative lawsuits, enabling shareholders to take legal action on behalf of the company against directors or third parties.
Capital Markets and Public Companies
Companies seeking to access Turkish capital markets must comply with additional regulations administered by the Capital Markets Board. These requirements include enhanced disclosure obligations, corporate governance principles, and investor protection measures.
The Borsa Istanbul serves as Turkey’s primary securities exchange, providing platforms for equity, debt, and derivative trading. Companies listed on Borsa Istanbul must maintain ongoing compliance with market regulations, including periodic financial reporting, material disclosure requirements, and corporate governance standards.
Foreign companies can access Turkish capital markets through various mechanisms, including direct listing, depositary receipts, or establishing Turkish subsidiaries. The regulatory framework supports international investment while maintaining appropriate investor protection standards.
Foreign Investment and Corporate Establishment
Turkey maintains a liberal foreign investment regime, allowing international investors to establish corporate entities with minimal restrictions. The Foreign Direct Investment Law provides national treatment to foreign investors, ensuring equal treatment with domestic enterprises in most sectors.
Foreign investors can establish wholly-owned subsidiaries, joint ventures, or acquire existing Turkish companies subject to sector-specific regulations. Certain strategic sectors, including defense, telecommunications, and media, may have foreign ownership limitations or require government approvals.
The investment process involves registration with the Investment Office of the Presidency of the Republic of Turkey, which serves as the primary interface for international investors. This centralized approach streamlines administrative procedures and provides comprehensive support for foreign investment projects.
Merger and Acquisition Framework
Turkish corporate law provides comprehensive frameworks for corporate restructuring, including mergers, acquisitions, spin-offs, and other reorganization transactions. The TCC establishes detailed procedures ensuring transparency, creditor protection, and shareholder rights during restructuring processes.
Cross-border mergers are permitted under Turkish law, enabling international corporate structures and facilitating regional expansion strategies. The legislation aligns with European Union directives on cross-border mergers, providing familiar frameworks for international investors.
Competition law considerations play crucial roles in merger and acquisition transactions, with the Turkish Competition Authority reviewing transactions that meet specific threshold requirements. Our firm’s merger and acquisition practice assists clients in navigating these complex regulatory requirements while achieving strategic objectives.
Compliance and Regulatory Oversight
Corporate compliance in Turkey involves multiple regulatory bodies, each with specific oversight responsibilities. The Ministry of Trade oversees general commercial regulations, while specialized agencies regulate specific sectors such as banking, insurance, and telecommunications.
The Turkish Commercial Registry system maintains comprehensive records of corporate entities, ensuring transparency and public access to corporate information. Companies must file annual reports, financial statements, and significant corporate changes with the registry.
Anti-money laundering regulations require companies to implement customer due diligence procedures, maintain transaction records, and report suspicious activities to relevant authorities. The Financial Crimes Investigation Board oversees compliance with these requirements.
Tax Implications of Corporate Structures
Corporate taxation in Turkey follows territorial and source-based principles, with resident companies subject to tax on worldwide income and non-resident companies taxed only on Turkish-source income. The corporate tax rate is currently 25%, with various incentives available for specific industries and regions.
Transfer pricing regulations align with OECD guidelines, requiring multinational companies to maintain arm’s length pricing for intercompany transactions. Documentation requirements and compliance obligations vary based on transaction volumes and entity relationships.
Value-added tax, withholding taxes, and other indirect taxes create additional compliance obligations for Turkish corporations. Our corporate tax advisory services help clients optimize their tax structures while maintaining full compliance with Turkish regulations.
Intellectual Property and Corporate Assets
Intellectual property protection plays increasingly important roles in corporate value creation and competitive positioning. Turkish intellectual property law provides comprehensive protection for patents, trademarks, copyrights, and trade secrets through registration and enforcement mechanisms.
Corporate entities must implement appropriate intellectual property strategies, including registration procedures, licensing agreements, and enforcement protocols. The Turkish Patent and Trademark Office administers registration processes and maintains public databases of intellectual property rights.
Technology transfer agreements, research and development activities, and innovation-based business models require careful legal structuring to protect intellectual property assets while maximizing commercial potential.
Labor Law and Corporate Employment
Turkish labor law establishes comprehensive frameworks governing employment relationships, collective bargaining, and workplace safety. Corporate entities must comply with detailed regulations regarding employment contracts, working conditions, and employee rights.
Termination procedures, severance payments, and social security obligations create significant compliance requirements for employers. Recent legislative changes have introduced more flexible employment arrangements while maintaining essential worker protections.
International companies establishing operations in Turkey must navigate complex labor law requirements, including work permit procedures for foreign employees and compliance with collective bargaining agreements where applicable.
Foreign Direct Investment (FDI) in Turkey
Turkey has actively sought to attract foreign direct investment, implementing a legal framework that treats foreign investors equally with domestic ones. The Foreign Direct Investment Law No. 4875, enacted in 2003, is the cornerstone of this policy, guaranteeing equal treatment, reducing bureaucratic hurdles, and safeguarding foreign investments.
Key Aspects for Foreign Investors:
- Equal Treatment: Foreign investors have the same rights and obligations as domestic investors.
- No Pre-Approval: Generally, foreign investment does not require pre-approval from any government authority, streamlining the establishment process.
- Repatriation of Profits: Foreign investors can freely transfer profits, dividends, and earnings abroad without restrictions.
- Real Estate Acquisition: Foreigners can acquire real estate in Turkey, subject to certain limitations and compliance with relevant legislation.
- Dispute Resolution: The legal framework provides options for dispute resolution, including litigation in Turkish courts and international arbitration.
Our firm, Akkas & Associates Law Firm, has extensive experience in assisting foreign clients with company formation in Turkey, advising on the most suitable legal structures and navigating the regulatory landscape. For a deeper understanding of specific considerations for foreign investors, we recommend exploring our detailed article on Doing Business in Turkey.
Why Choose Akkas & Associates Law Firm?
Since our foundation in 1992, Akkas & Associates Law Firm has been at the forefront of providing comprehensive legal services in Istanbul, specializing in Turkish Corporate Law. Our team of experienced lawyers possesses in-depth knowledge of the TCC and related legislation, coupled with practical expertise in navigating complex corporate transactions and disputes.
We offer tailored legal solutions to a diverse clientele, ranging from startups to multinational corporations, assisting with:
- Company Formation: Guiding clients through the entire process of establishing Joint Stock Companies, Limited Liability Companies, branch offices, and liaison offices.
- Corporate Governance & Compliance: Advising on best practices, regulatory adherence, and internal corporate structuring.
- Mergers & Acquisitions: Providing strategic counsel and due diligence services for M&A transactions.
- Shareholder Relations & Disputes: Representing clients in shareholder agreements, disputes, and corporate litigation.
- Foreign Direct Investment: Facilitating market entry and ensuring compliance for international investors.
- Commercial Contracts: Drafting, reviewing, and negotiating a wide range of commercial agreements.
Our commitment to professionalism, integrity, and client-centricity ensures that we deliver effective and efficient legal services, enabling our clients to thrive in the Turkish business environment. We understand that each client’s needs are unique, and we pride ourselves on crafting bespoke legal strategies that align with their specific objectives.
Contact us for Turkish Corporate Law & Regulations
Turkish Corporate Law, anchored by the comprehensive Turkish Commercial Code, offers a robust and evolving framework for businesses. Its continuous modernization, emphasis on corporate governance, and investor-friendly policies create an attractive environment for both domestic and international ventures. However, the intricacies of the law necessitate expert legal guidance.
Akkas & Associates Law Firm, with its decades of experience and deep understanding of Turkish corporate intricacies, stands as your reliable partner in navigating this dynamic landscape. Whether you are considering establishing a new entity, engaging in complex corporate transactions, or require assistance with ongoing compliance and dispute resolution, our team is equipped to provide the top-tier legal services you need to achieve your business goals in Turkey.
For further inquiries or to schedule a consultation, please do not hesitate to contact Akkas & Associates Law Firm.
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