The form of a public limited company is permitted for all lawful purposes of a company. Upon establishment of the company, the entire nominal capital is issued in the form of shares to the shareholders. The shareholders can be individuals or legal entities. The public limited company's liability as a legal entity towards creditors extends to the corporate assets.
The A.Ş. is obligatory forbanks, insurance companies, leasing and capital investment firms
Nominal capital of the A.Ş.
50,000 TRY, corresponds to approx. 22,900 EUR (09/2009)
Special rules for
banks
insurance companies
leasingcompanies
significantly higher capital thresholds
Minimum of 5 shareholders
Company name
The public limited company must always use the addition A.Ş. in its company name. If foreigners hold shares in the A.Ş., foreign names can also obtain approval.
Foundation
For the foundation, a minimum of five shareholders is required.
Upon its entry into the trade register, the A.Ş. becomes legally effective and obtains the status of a legal entity.
Should the number of shareholders fall below five, the A.Ş. will not be dissolved automatically; however, every shareholder, creditor, or the ministry for industry and trade can apply to a court for dissolution.
At present, an A.Ş. can be formed by means of a uniform foundation or simultaneous foundation, or by means of a foundation by stages.
In practice, foundation by stages can be neglected. The new commercial code makes allowance for this development and only provides for the uniform foundation. In case of a uniform foundation, the founders of the A.Ş. initially take over all corporate shares.
Administrative board, general meeting and supervisory board
In addition to the normal written form requirements in the A.Ş.'s articles of association, with the minimum requirements regarding the number of founders, the purpose of the company, the headquarters, the term of the company, the form and amount of the nominal capital, the number of shares and the face value of the shares etc., the A.Ş. consists of the administrative board, the general meeting and the supervisory board.
Restriction of corporate purposes for the Ltd. Şti.
Further information on
the Turkish private limited company
Purpose of the company
The corporate purpose of an Ltd. Şti. may not exclusively relate to bank, insurance and financing transactions, as these would mandatorily require the legal form of the A.Ş.The number of shareholders is limited to between two and fifty. If the number of shareholders falls below two, this constitutes a reason for a dissolution which the creditors can apply for at court.
Foundation
In order to establish aLtd. Şti., a written company agreement must be drafted, containing information on the shareholders and the company.
This agreement must be notarised prior to its filing with the trade registry.
Upon entry of the Ltd. Şti. in the trade register, the company will obtain the status as an independent legal entity.
Corporate bodies of an Ltd. Şti.
The general meeting and the directors are the corporate bodies of the Ltd. Şti. If a company has more than twenty shareholders, the law additionally provides for a supervisory board. Important resolutions, such as changes of the company agreement, the appointment, removal and the discharge of directors, will only be legally effective if they are taken during a general meeting.
The law allows the replacement of shareholders; the withdrawal of a shareholder who has not paid in his/her contribution is only possible with the approval of all shareholders.
Transformation of the corporate form
The transformation of the Ltd. Şti. into a different legal form is permitted, provided that the prerequisites for the foundation of the intended legal form are being fulfilled.
Liability of the shareholders of an A.Ş.
Pursuant to Art. 269 of the Turkish commercial code, the nominal capital of the A.Ş. is divided into shares. Whoever purchases or subscribes a share of the A.Ş., becomes a member. Membership results in a variety of rights and obligations for the shareholder. One of the shareholders' obligations is to pay in the agreed capital contribution. A release from this obligation is not possible, nor is the option to request repayment of the capital contribution.
With regard to capital, the provisions are the same as for the Ltd. Şti.
Liability of the Ltd. Şti. shareholders
Liability for the company's acts and omissions is restricted to the company and its assets. The shareholders will not have any personal liability towards third parties; the company's liability may in principle lead to the depletion of the capital contribution. However: If the state (tax office, social security authorities) is unable to collect a claim from the company, it has the right to take action against the shareholders. Their liability will in such cases be restricted to the share of the claim which corresponds to this shareholder's share in the company's capital.
Liability of the A.Ş.'s board
Under its obligation to manage operations, the board is liable to the shareholders for the proper conduct of business. In cases of abuse of authority, individual members of the board may be liable towards the shareholders or the company's creditors. In principle, there is the possibility of exculpation. If the supervisory board does not properly attend to its official duties, it may also face liability claims.
The Turkish commercial code provides for three corporate bodies as a minimum requirement: the administrative board, the general meeting and the controllers.
Liability of the Ltd. Şti.'s directors
The managing shareholders of an Ltd. Şti. are liable for claims against the company up to the sum of their capital contribution. However, as of 01 Jan. 1999, they are also personally liable without restrictions for the company's tax liabilities and for unpaid social security contributions for employees.They are not liable for capital contributions which other shareholders have failed to pay in. Liability in tort affects the directors of the Ltd. Şti. just as the board of the A.Ş. if they acted intentionally or in a grossly negligent manner.
In practice, foreign direct investments in Turkey frequently give preference to the Ltd. Şti. rather than the A.Ş., without any profound examination. The foundation process which seems to be more complicated, the higher minimum number of shareholders - five for the A.Ş. in comparison to two for the Ltd. Şti. - and the more formalised procedures of the decision-making process in the various corporate bodies are often decisive here, as, at first sight, the A.Ş. does not seem to have any tax-related or other advantages in comparison with the Ltd. Şti.
Issues which often are neglected during the selection process are innocuous, but certainly important differences of the two corporate forms with regard to the "piercing of the corporate veil", i.e. the danger that the corporate liability shield protecting the shareholders may be disregarded.
Majorities (majority of shares) are important in connection with votes during annual general meetings or shareholder meetings. In addition to the so-called simple majority (more than 50% of the votes) the
qualified majorityis particularly relevant for limited companies.
According to the legal and statutory regulations under German law, certain shareholder resolutions will only become legally binding if they are taken by a qualified majority, i.e. by a majority which is larger than the simple majority of votes and/or capital or by a majority of three quarters of the votes cast.
A majority of at least three quarters (German law) or two thirds (Turkish law) of the nominal capital represented upon passing of the resolution is required during the A.Ş.'s annual general meetings for:
In Germany, the law regulating GmbH's also provides for a qualified majority:
In case of an intended amendment of the company agreement, section 53 (2) GmbHG requires a majority of three quarters of the votes cast, whilst, pursuant to Art. 513 (1) of the Turkish commercial code a majority of two thirds of the votes is sufficient under Turkish law.
Under German law, "control stock" means a majority of at least 25 per cent plus one share of the nominal capital represented at the annual general meeting of an AG. Amendments of the articles of association are not possible against this qualified minority. This makes it possible to prevent capital increases or mergers. Under Turkish stock market law, this threshold is 33 per cent plus one share, as an amendment of the articles of association requires a two-thirds majority.
Attorney under German law, Bar certified specialist for Criminal Law Cüneyt Gençer
E-Mail: gencer@gencer-coll.de • Tel. +49-(0)-911-37 66 76-63
Tax Consultant, Dipl.-Kfm (Univ.) Bernhard Hofer
E-Mail: hofer@gencer-coll.de • Tel. +49-(0)-911-37 66 76-63