Limited Liability And Joint Stock Companies In Turkey
While deciding the company type for the investments of foreigners in Turkey the below main similarities and differences between limited liability companies (“LTD”) and joint stock companies (“JS”) which are the two common types of companies that the investors mainly consider to use for their operations can be considered:
i. Both JS and LTD companies can be established with a single (or more) shareholder.
ii. The minimum capital of JS is TL 50.000, for LTD it is TL 10.000. Please note that for JS and LTD, the 1/4th of the capital should be paid before the registration while the remaining 3/4th should be paid within 2 years as of the registration of the company.
iii. JS and LTD companies have their separate Articles of Associations regulating the management and shareholding structure of the companies.
iv. The management authority of LTD is left to manager/managers while its’ directors (Board members) for JS companies. Managers and directors can be foreigners and/or Turkish nationals. At least one of the shareholders of the LTD should be appointed as the manager of the company. No such requirement is regulated for the directors of JS companies. Legal entities can be appointed as the manager of LTD and the director of the JS in which case a real person representative of such legal entity should be registered with the Trade Registry as well. In such case the legal entity itself shall be deemed liable for the manager/director duties/responsibilities and the real person representative may not be considered as the liable party on behalf of the legal entity manager/director. In case the manager of an LTD/director of the JS shall not reside in Turkey and shall enter into Turkey with valid visas, no residence permit may required to be obtained for the managers of LTDs/director of the JS. Likewise, in case the manager of an LTD/director of the JS shall not be actively carrying transactions on behalf of the LTD in Turkey and/or shall not be under the payroll of the LTD/JS, then a work permit may not necessarily be obtained for the manager of an LTD/director of the JS.
v. Regarding the liability on public debts which cannot be covered by the legal entities established in Turkey, kindly note that as per article 35 of the Law On The Procedure For The Collection Of Public Receivables numbered 6183 (the “Law”), the shareholders of limited liability companies are directly responsible with their own assets for public debts which cannot/may not be collected from the company in proportion to their capital share and shall be subject to enforcement process as per the provisions of the Law. The sole condition for initiation of the enforcement proceedings against the shareholders is that the public debts “could not be fully or partially collected or were determined to be uncollectible from the Company” according to the first paragraph of Article 35 of Law. Regarding the company debts, under art. 602 of the Turkish Commercial Code it is clearly stated that the Company is solely liable for its’ debts and liabilities with its’ assets. The shareholders are solely liable to make their capital contributions. The Law does not contain a provision which sets forth the liability for joint stock company shareholders due to the public debts of the company. However, if the shareholder will act as a BOD member, then liability of such shareholder regarding public debts of the Company may be triggered (please refer below our explanation regarding the liability of representatives of JS companies on public debts).
As per art.35 of the Law, public debts which could not be fully or partially collected or were determined to be uncollectible from the Company may be collected from the representatives of such legal entities with their personal assets. Such representatives may recourse the amount paid to the respective authority from the Company. As per art.35 of the Law, LTD company managers are held liable from the public debts, which could not be fully or partially collected or were determined to be uncollectible from the Company with their personal assets. Such representatives may recourse the amount paid to the respective authority from the Company.
A part from the Law, please also note that article 10 of Tax Procedural Law No. 213 governs the collection of tax payments from the legal representatives of both JS and LTD companies in the event tax payments cannot be collected from the company. As per the said article, if a legal entity is a tax payer, duties relating to being a tax payer will be fulfilled by its legalrepresentative. In case the legal representative does not fulfill his obligation and the tax and the receivables cannot be totally or partially collected from the assets of the tax payer, they will be collected from the assets of the legal representativewho did not fulfill his obligation.