The new Turkish Commercial Code has provided new rules regarding the corporate structure of limited liability and joint stock companies. Pursuant to the repealed Commercial Code, the establishment of a company was not possible with one shareholder.
The single-shareholder company is based on the Twelfth Council Company Law Directive 89/667/EEC of 21 December 1989 on single-member private limited-liability companies. Within this Directive, the single-shareholder company has been implemented in laws of member states.
How is the single-shareholder company defined?
Single-shareholder company is a recent term in Turkish Commercial Code, whereas this term has been regulated in other jurisdictions for a long time. It may be defined as a company which is incorporated with one shareholder or shareholders number of which has been decreased to one shareholder later. This term has been used in the Turkish Commercial Code since 2012. Accordingly, a joint stock company or a limited liability company may be established with at least one shareholder. Moreover, the Turkish Commercial Code sets forth certain obligations and conditions for these companies.
Moreover, the New Turkish Commercial Code has been making it possible for limited liability companies and joint stock companies that their board of directors consists of one board member.
Why to prefer a single-shareholder company?
The single-shareholder companies are preferred especially by foreign capital companies, public authorities, universities and foundations. There are many factors for preference of single-shareholder companies. Before the entering of the New Turkish Commercial Code into force, permanence of a company in the event of decrease of the shareholders’ number to one shareholder was not possible. The possibility of establishment of a company with one shareholder contributes to the permanence of companies. Moreover, due to the possibility of incorporation with one shareholder, foreign capital companies will not have difficulties by finding another shareholder during incorporation of a company in Turkey. The most important facility of one-shareholder limited company is that all company procedures will be accelerated and since the company will have one board member and one representative, the company resolutions will be passed and applied faster.
According to the Commercial Code, it is possible for a joint stock company to pass a resolution to go public. As is known, this procedure is subject to certain conditions and certain quorum for decision which may take long time. A one-shareholder company is able to accelerate these procedures by way of passing such resolutions by one board member. Also the procedure of transfer of shares will be more accelerated and easier in single-shareholder companies.
Family company is also common in Turkey, which are managed or owned by a family. Also such companies may benefit from these facilities. According to the Law’s Preamble, such facilities may make the establishment of foundations’ enterprises with one-shareholder possible which have not been defined and regulated in Turkish Law.
Briefly, a single-shareholder company may
- be holding company in group of companies,
- contribute to the institutionalization of joint stock companies,
- accelerate the procedures in share transfers and public offers,
- accelerate the resolution mechanism in board of directors and shareholders’ meetings.
As mentioned above, a limited liability company or a joint stock company may be established with one shareholder, it may be transformed into a single-shareholder company and it may also have one board member. Due to these facilities and regulations, the conformity of the Turkish Commercial Code with directives of the European Union has been provided to a large extent.