Setting up a company in Turkey

SETTING UP OF BUSINESS BY FOREIGN INVESTORS IN TURKEY

The Law known as “Foreign Direct Investment Law number 4875” (FDIL) was put into effect on 17.06.2003 to overcome the shortcomings of the previous law regarding foreign investments in Turkey. A landmark novelty of the law is that it abolished most of the formalities for foreign investors willing to establish companies in the country.

Permission-Approval System Replaced by Notification Being the Only Requirement

Before FDIL, the creation of companies and taking over shares, acquisitions or mergers were subject to prior permission regarding such activities of foreign investors. Likewise, foreign investors had to initially block some amount of currency and some more restrictions were stipulated in terms of the type of company to be established.

With the entry into force of FDIL, there has been a shift to the notification system. Accordingly, it is now sufficient for foreign investors to only report to the General Directorate of Incentive Application and Foreign Capital and notify the authorities of their company via an online system known as "Electronic Incentive Application and Foreign Capital Information System-E-TUYS". That means less bureaucracy and a smoother process for the investors

Equal and Liberal Approach

Apart from the above mentioned obligation to notify, foreign investors are now subject to totally equal legal treatment with locals. As, there is no more a permission or approval process, it makes things more easy and swift for foreign investors to get their business up and running in Turkey within a short period of time.

Indeed, the FDIL does not only reflect the liberal approach of Turkey towards international investments, but it also aims to gather and shed more light on the already existing rights of foreign investors that derive from different pieces of legislation.

Also, it is important to keep in mind that establishment of companies is exempt from duties in Turkey.

Who is a foreign investor?

Under Article 2 of the FDIL, legal entities established in accordance with the laws of foreign countries and international organizations are considered foreign investors in Turkey. On the other hand, a company registered with the Trade Registry with its headquarters located in Turkey is accepted as a Turkish company even if its partners are foreign country nationals.

The only requirement to be considered a foreign investor for a company, foundation, association or another type of legal entity is that they must be established based on the laws of any other country except Turkey. It does not matter whether it operates in Turkey or has branches in the country.

Types of Companies to be Established by Foreign Investors

Earlier in time, the abolished legislation allowed foreign investors to register only via a capital company (such as a joint stock and limited company) or it allowed them to become partners of such companies. FDIL lifted all these restrictions and thus, it is now lawful for foreign investors to chose amongst the company types that are stipulated under the Turkish Commercial Code No.6102 (TCC) and under the Turkish Code of Obligations No.6098. So, it is possible to chose either a type of a commercial company or a joint venture without being subject to any discriminatory restrictions or extra obligations.

Under TCC, the five types of commercial companies in Turkey are as follows (The first 3 company types are called “capital companies” in which the partners are liable to the company with the capital they committed. Around 80% of all types of companies are limited companies, followed by joint stock companies and cooperatives respectively) :

• Joint stock Company: Articles 329-564 of TCC regulate this very common type of company. This is the company type that is known as Societé Anonyme (SA) in Belgium.
• Limited Company: It is now easier to establish limited liability companies in Turkey as article 573 of the TCC allows them to be established with one or more shareholders (being either natural persons or legal entities) while the number of shareholders cannot exceed 50. The initial minimum capital is very much lowered to the amount of TRY 10.000. This is the company type that is known as Societé à Responsabilité Limiteé (SARL, SàRL) in Belgium.
• Limited Partnership: Here, some partners’ liabilities are limited whereas some partners’ are unlimited.
• Collective Company: This can be established with a minimum of two partners. Only natural persons can be partners in a collective company. There is no fixed capital requirement.
• Cooperative: This is a partnerships established by natural and legal persons for the purpose of enhancing certain economic interests of partners.

STEPS OF ESTABLISHING A COMPANY

In Turkey, the company establishment procedure takes only a couple of hours, provided that the required documents are submitted to the related trade registry offices. The steps are roughly as follows:

1. Preparation of the company contract and approval of the signatures of the founders:

The establishment of a company can be initiated by creating a free membership via the electronic platform called “MERSİS” ( https://mersis.gtb.gov.tr/). Foreigners to be partners or authorized persons of the company will be asked their passport numbers and will need to obtain a tax number from the tax office. They will then be able to register it to MERSIS by applying to the trade registry office.

MERSIS directs the user to fill in the legally required elements of the contract and the company contract is prepared by entering the necessary information. The contract is prepared in Turkish. The company’s potential tax number is also automatically assigned by MERSIS.

1. Preparation of signature declarations of company officials

The signatures of the persons authorized to represent the company under the title of the company shall be approved by the competent authority and signature declarations shall be prepared. This process is carried out in any trade registry offices in Turkey.

1. Application to the Trade Registry Directorate for registration

Upon the application of the founders together with the relevant documents to the registry directorate, the trade registry directorate completes the registration process.

 

For further details on the above, doing business in Turkey or on our services on Turkey please consult Legal Counsel for Turkey, Şükran Ünal on s.unal@a-law.eu or fill in our online contact form.