The real persons and legal entities may perform its commercial activities in Turkey by establishing (i) a joint-stock company (“JSC”), (ii) a limited liability company (“LLC”) or (iii) opening a branch in Turkey.

· Joint-stock company

JSC is one of the most common company types in Turkey for mostly large operations and foreign investors. A JSC can be established with at least one real person or legal entity shareholder and, there are no maximum limits for the number of shareholders. The initial capital amount of a JSC must be at least TRY 50,000, 25% of this amount must be deposited to a bank in Turkey and be blocked by the bank until the establishment of the company. The remaining capital must be paid within 24 months from the registration of the company. JSC’s shareholders are only liable for the amount of share capital subscribed. In other words, when a shareholder pays the capital amount subscribed to the JSC, the shareholder will not be responsible for the company’s debts in case of insolvency.

· Limited liability company

LLCs are also a common company type in Turkey, mostly used for small scale businesses. LLCs can be incorporated by at least one real person or legal entity shareholder and a maximum of fifty. The initial capital amount of an LLC must be at least TRY 10,000. The shareholders are not obliged to deposit any capital or block the amount before the establishment of the LLC. The capital amount must be paid within 24 months from the registration of the company. The shareholders of an LLC are liable with their assets for unpaid public debts (duties, taxes, penalties, etc.) to the extent of the individual share percentage in the capital, provided that the company becomes insolvent.

· Branch

The real persons and legal entities wishing to perform its commercial activities in Turkey also has the option to establish a branch in Turkey. Unlike liaison offices, branches can carry out commercial activities. However, the activities of the branch shall be limited only to the activities of the parent company and all activities shall be carried out on behalf of the parent company. Branches do not have a separate shareholding structure and its own articles of association. Even though there are no formal minimum capital requirements for the branches, they must also have a separate capital. For opening a branch in Turkey, at least one branch manager must be appointed. In addition to the company, the branch manager is liable with his/her assets to pay the unpaid public debts and liabilities (duties, taxes, penalties, etc.).

While incorporating a new company in Turkey, below points should be considered.

A. TITLE

In principle, the title of a company can be determined without being subject to restrictions. However, the below points should be considered when determining the title:

· The title of the company must indicate the main activity area of the company, in Turkish. Words indicating the main activity area cannot be used as an abbreviation in the title.

· The title cannot include the words “Türk” and “Türkiye”, which are in Turkish, without the approval of the relevant official bodies. However, “Turkish” and “Turkey” can be used in the title in English.

· Names of other countries cannot be used without the approval of the authorized bodies of the country in question.

· The title cannot be the same as another existing company’s title. Also, the titles of companies erased from the Trade Registry records cannot be used before five (5) years from the announcement of erasure.

B. PURPOSE AND SUBJECT

Companies established in Turkey must determine the main activity area and purpose with articles of association (the “AoA”).

A company can engage with the operations that fall within the scope of the main activity area and side operations to realize the purposes of the company. Also, side activity areas may be determined with the AoA.

C. CAPITAL AND SHARES

Joint-stock company

As mentioned, the initial capital amount of a JSC must be at least 50,000 TRY in principle. According to Turkish Commercial Code №6102 (the “TCC”), ¼ of this amount must be deposited to a bank in Turkey and be blocked by the bank until the establishment of the company. The remaining capital must be paid within 24 months from the registry of the company with the Trade Registry.

This amount must be deposited directly from a bank account belonging to the shareholders of the JSC. After that, a bank letter stating that the mandatory amount is deposited should be obtained from the bank, to be submitted to the Trade Registry.

There are two types of shares that a joint-stock company can issue which are, bearer or registered shares. The registered shares are recommendable as the owner of the shares should be affixed to the share ledger and certificate, which creates certainty regarding the owner, while the owner of the bearer shares is the person who holds possession of the certificate. Also, to issue bearer share certificates, the total amount of the capital must be paid. Lastly, while issuing share certificates is not required for registered shares, issuing bearer share certificates and registering those to the Central Registry Agency (MKK) are mandatory.

Apart from the type of the share certificates, shares can be issued as privileged shares, founder’s shares, non-voting shares and, shares with or without premium. At this stage issuing ordinary shares is recommended for the company.

Limited liability company

As for LLCs, the initial capital must be at least TRY 10,000. However, unlike JSCs, it is not required to deposit ¼ of this amount prior to the establishment. The whole capital amount needs to be deposited the company’s bank account within 24 months from the registration.

D. MANAGEMENT AND REPRESENTATION

The board of directors (“BoD”) is the body that manages and represents the company. The BoD can be formed by one or more members. Real persons and legal entities may be appointed as BoD members, whether they are shareholder or not. However, in case of the appointment of a legal entity BoD member, a real person representative must be appointed by the legal entity to represent itself in the BoD of the company.

The BoD convenes with the majority of the total number of members and issues its resolution with the majority of the members present at the meeting as per TCC. This is the minimum meeting and resolution quorum stipulated by TCC and, circumstances of these quorums may be aggravated by the AoA.

BoD can transfer their management and representation duties to one or more BoD members and/or third persons (executive directors) partially or as a whole, provided that this transfer is allowed with the AoA. For this transfer, an internal directive must be issued by the BoD. In case such duties are resolved to be transferred to the third person, at least one BoD member should keep the representation authority along with the appointed executive director.

Representation authority can be used separately or jointly by the authorised representatives.

E. PROCEDURE

After the determination of the shareholder(s), title, share capital, BoD and address of the company the incorporation documents below will be prepared and an application through the Central Registry System (MERSIS), which is the online system for tracking the legal entities, will be filed.

After the deposit of 25% of the capital to the bank for JSCs, the incorporation documents and bank letter confirming the afore mentioned deposit will be submitted to the Trade Registry. During this application, the contribution of the Competition Authority (0,04% of the total share capital) and the expenses of the Trade Registry must be paid.

After the application, the Trade Registry will examine the documents and register the incorporation of the company, and announce it in the Trade Registry Gazette.

F. DECLARATIONS

As per Foreign Direct Investment Law, the established company will be considered as a foreign direct investment. In that regard, the company will be obliged to notify below information to the Ministry of Industry and Technology (the “Ministry”), through online system of the Ministry (E-TUYS):

· Investors, shareholders and affiliated companies (within one month after the authorization of a user of E-TUYS),

· Financial statements, tax information, representatives, licenses, trademarks, etc. (every year, before the end of May)

· Shareholding structure in case of a share capital increase or decrease (within one month from the transaction)

· Shareholding structure in case of a share transfer,

Shareholding structure in case of a payment during capital increase or share transfer (within one month from the transaction).