When setting up a business in Turkey, choosing the right company type is critical to its success and operational efficiency. Under the Turkish Commercial Code ("TCC") No. 6102, the two most commonly preferred types of companies are the Limited Company ("Limited Şirket") and the Joint Stock Company ("Anonim Şirket"). These company types differ significantly in terms of structure, capital requirements, management, liability, and operational flexibility. This article outlines the primary differences and similarities between these two forms of companies, helping potential investors and entrepreneurs make an informed choice.
Joint Stock Company (Anonim Şirket)
A Joint Stock Company ("JSC") is defined under Article 329 of the TCC as a company with a capital divided into shares. Shareholders are only liable for the company’s debts up to the value of their subscribed shares. JSCs are suitable for larger operations, offering advantages such as the ability to issue shares and raise substantial capital.
Key Features:
Minimum capital: 500,000 TRY for public JSCs (as of 1 January 2024).
The Statutory organs: General Assembly and Board of Directors.
Transfers do not require notarial attestation.
Liability limited to the value of shares.
Suitable for public offerings and large-scale operations.
Limited Company (Limited Şirket)
According to Article 573 of the TCC, a limited company is a company established by one or more real or legal persons with a predetermined capital divided into shares.Unlike JSCs, Ltd. companies are not suitable for public offerings.
Key Features:
Minimum capital: 50,000 TRY (as of 1 January 2024).
Mandatory organs: General Assembly and Managers’ Board.
Share transfers require notarisation and registration in the Trade Registry.
Liability extends to unpaid public debts if the shareholder is also a manager.
Best suited for small to medium-sized enterprises. Comparing Limited and Joint Stock Companies in Turkey
Key differences between JSC and Ltd. companies
Capital Requirements
JSC: The minimum capital of 500,000 TRY for public companies and 100,000 TRY for non-public companies under the registered capital system.
Ltd.: The minimum capital is 50,000 TRY.
Number of Shareholders
JSC: Unlimited number of shareholders; publicly listed JSCs can have thousands of shareholders.
Ltd.: Limited to a maximum of 50 shareholders.
Liability for Public Debts
JSC: Shareholders are not personally liable for public debts (e.g., taxes, social security contributions). However, Board members may be held liable if the company’s debts cannot be collected.
Ltd.: Shareholders are liable for public debts in proportion to their shares if they are also company managers. Managers are fully liable if the debts cannot be recovered from the company.
Share Transfers
JSC: Shares can be transferred without notarial certification. Transfers are effective upon delivery and, in the case of registered shares, notification to the Central Securities Depository.
Ltd.: Share transfers must be documented via a notarial deed, approved by the General Assembly, and registered with the Trade Registry.
Public Offering
JSC: Can issue their shares for public trading on the stock exchange, allowing access to capital markets.
Ltd.: Not allowed to issue public offering. The conversion to JSC should be done for public trading.
Management and Representation
JSC: Managed by a Board of Directors, which can include individuals or legal entities. Shareholders are not required to participate in management.
Ltd.: Managed by one or more Managers. At least one manager must be a shareholder.
Attorney Requirement
JSC: Companies with a capital exceeding 500,000 TRY must appoint a contracted attorney.
Ltd.: No mandatory requirement to appoint an attorney.
Tax Implications
JSC: Shareholders enjoy tax exemptions for shares held longer than two years, provided the shares are issued as securities. Corporate tax is 25% (2024).
Ltd.: No tax exemption for share transfers. Gains from share sales are subject to income tax for individuals and corporate tax for companies.
Mandatory Presence of Ministry Representatives
JSC: Certain General Assembly meetings, such as those involving capital increases, mergers, or liquidations, require the presence of a Ministry representative.
Ltd.: Ministry representatives are not required for General Assembly meetings.
Bond Issuance
JSC: Allowed to issue bonds and other debt securities under the Capital Markets Law.
Ltd.: Not permitted to issue bonds or similar instruments.
Similarities
Both JSCs and Ltd. companies are capital companies, limiting shareholder liability to their capital contribution.
Each type needs one General Assembly and the respective management organ: Board of Directors for JSCs, Managers' Board for Ltd. companies.
Both can be established by a single shareholder and allow for real or legal persons to act as shareholders.
Capital contributions may be in cash or in-kind, such as intellectual property rights, provided they are transferable and unencumbered.
The corporate tax rate is the same for both at 25% as of 2024.
Choosing Between a JSC and a Ltd. Company
The choice between JSC and Ltd. company depends on the specific needs and goals of the business. If the entrepreneurs need scalability, access to capital markets, and limited personal liability for management, they might prefer JSC. On the other hand, an SME with simpler structure and lower operational costs might opt for forming a Ltd. company.
Understanding the distinctions between Joint Stock Companies and Limited Companies under Turkish law is crucial for making an informed decision. While JSCs offer advantages in terms of capital raising, share transferability, and public offerings, Ltd. companies provide a straightforward and cost-effective structure for smaller enterprises. Consulting with experienced legal and financial advisors ensures that the chosen company type aligns with long-term business objectives and compliance requirements.
For further guidance on setting up a company in Turkey, contact CCS Law’s experienced legal team. We offer comprehensive services tailored to your business needs, ensuring seamless incorporation and compliance with Turkish commercial laws.
Disclaimer: This article is intended for informational purposes only and does not constitute legal advice.
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