14 Feb

Establishment of a company is one of the first steps of penetration into a foreign market. The frequently asked questions by foreign investors is how to establish a company and which company type would be most recommended for the investors. There is no question that this will vary from sector to sector and from one investment volume to another but it is still crucial to know the basics of company establishment procedures to better navigate in a foreign investment climate.

Company establishment facilitated within the Turkish Commercial Code

From the investors’ side, the company establishment processes may be regarded as a long process with a strict bureaucracy. Especially foreign investors may be in the opinion that they would be subject to a different process than domestic investors. The repealed laws have differed between domestic and foreign investors, especially the minimum company capital for foreign investors varied from the minimum capital which the domestic investors had to pay. As from entering of the recent Foreign Direct Investmets Law in force in 2003, such differences in incorporation between foreign and domestic investors have been removed. Accordingly, both investors will be subject to the similar conditions in company establishment in Turkey. Moreover, the New Turkish Commercial Code that has entered into force in 2012 has facilitated procedures during and after the company establishment in accordance with the harmonisation with the EU-Directives. Enablement of the establishment of a single-shareholder company and abolition of ultra vires principle may be regarded as most essential reforms that have been regulated by the New Turkish Commercial Code.

Facilities for shareholders or directors abroad

As mentioned above, the Turkish Commercial Code provides facilities also after the establishment of a company. For taking and implementation of company resolutions, the meeting of shareholders and board of directors is a requirement. The New Turkish Commercial Code has enabled the shareholders and board of directors’ meeting electronically under the conditions stated in the Commercial Code. Due to this facility, a board of directors’ member or a shareholder will be able to participate these meetings even if they are abroad. Consequently, the company resolutions will be passed more accelerated.

Company types in the Turkish Commercial Code

Types of companies that have been regulated by the Commercial Code are partnerships and capital companies. The company type to establish may vary depending on the sector in which the company intends to operate and on the investment’s amount. However, both limited liability companies and joint stock companies have advantages and disadvantages.

In several sectors such as banking and insurance, the establishment of a certain company type is a requirement for operating in these sectors. Accordingly, it is very important to determine the right sector and the requirements of this sector. The establishment amounts may also vary depending on the company type.

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