Legal Guide to Forming a Corporation in Turkey

1. TYPES OF BUSINESS ORGANIZATIONS

In Turkey, one of the two options may be adopted in order to carry out business activities;
as individuals engaged in commercial activity or through a legal entity pursuant to the
Articles of Association and relevant Turkish Commercial Code. The individuals who carry
their business activities, solely, under the title "merchant" or through the ordinary
company, as stated in article 520 of Turkish Commercial Code, do not have a legal entity.
However there are seven types of legal entities provided under Turkish Commercial Code
and Turkish Code of Obligations, by which business activities can be carried out. The
legal entities provided under the Turkish Commercial Code can be named as;

Joint Stock Companies (Anonim Sirket),

Limited Companies (Limited Sirket),

General Partnership (Kollektif Sirket),

Limited Partnership (Komandit Sirket),

Partnership Limited by Shares (Sermayesi Paylara Blnm Komandit irket),
and
Cooperative Companies (Kooperatif),

Due to the speciality of the legal entities provided under Turkish Commercial Code we
would like to take this opportunity to inform yourselves about the certain attributes of the
above mentioned legal entities and leave the Ordinary Company out for the time being.
Notwithstanding the nationality, any real person or legal entity, who has legal capacity
under the provisions of the Turkish Code of Obligations, may become a shareholder of a
corporation. Any limitation other than the legal capacity does not exist under the Turkish
Code of Obligations in respect of being a shareholder. Under Turkish laws, foreign
investors may incorporate or participate to any and all kinds of companies, which are
available to local investors in accordance with the equal treatment principle defined in the
Foreign Direct Investment Law. Pursuant to Article 3 of the Foreign Direct Investment
Law, unless otherwise provided by the international agreements and relevant specific
laws, foreign investors can invest directly in Turkey without any limitation and shall be
subject to the same treatment and provisions with domestic investors.
Please find below a brief description of each of the entities and procedures to be followed
during the establishment process.

1.1 Description of the Legal Entities Stated in the Turkish Commercial Code
1.1.1 Joint Stock Company
The joint stock company is a company established with a minimum number of five
shareholders, which may consist of real persons of legal entities. The minimum capital
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requirement is NTL 50.000,- and the capital is divided into shares and each shareholder's
liability is limited to the value of his shares.
A joint stock company may be established either as a public company or as a private
company. In case the joint stock company is established in the form of a public company;
it means either its shares are registered for trading on a stock exchange or its shares are
offered to the public pursuant to the Capital Market Law No: 2499. Another possibility for
a joint stock company to be classified as public company is the presumption of law; which
indicates that a joint stock company with more than 250 shareholders is assumed to be a
public company.

1.1.2 Limited Company

The limited company is a company established with at least two and at most fifty real
persons or legal entities. The Partners' liability is in proportion to the amount of the capital,
which they have committed. However, partners have personal liability against the
company debts to government offices (e.g. taxes, social security premiums, etc.). The
minimum capital requirement for limited company is NTL 5.000.-.

1.1.3 General Partnership

General Partnership is the partnership of two or more real persons established for the
purposes of operating a commercial enterprise under a trade name, containing legal
status and all partners being under several and unlimited liability against the creditors of
the partnership.

1.1.4 Limited Partnership

The limited partnership differs legally from the general partnership because at least one
partner (who is called the "general partner") is unlimitedly liable for all the debts and
obligations of the partnership against the third parties, whereas the other partners (who
are called the "limited partners") are not liable for the debts and obligations of the
partnership against third parties.

1.1.5 Partnership Limited by Shares

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The partnership limited by shares contains the characteristics of both the joint stock
company and the limited partnership. Its capital is divided into shares and, depending on
the Law it is agreed under its bylaws, one or more partners are jointly, severally and
unlimitedly liable to the creditors of the partnership similar to the "general partner" as
described above.

1.1.6 Cooperative Company

The cooperative company is an association of an indefinite number of real and legal
persons, the main purpose of which is the furtherance or safeguarding of a defined
economic interest of its members by their mutual efforts. The capital of the cooperative
company is not fixed in advance and its liability to its own assets, unless otherwise agreed
by its articles of association.

1.2 Description of the Individual Merchants and Ordinary Company

1.2.1 Individual Merchant
An individual merchant is a real person who manages a commercial enterprise, even if
partially, on behalf of himself. However in order to protect the third persons; if a real person
has announced the public that he has established and commenced operating a
commercial enterprise or registered his enterprise through a commercial registry; he then
is assumed to be individual merchant whether or not he as commenced business in actual
fact.

1.2.2 Ordinary Company

The ordinary company, which is established pursuant to the article 520 of the Turkish
Code of Obligations, is a company with two or more partners who enter into obligations
of combining their labor and / or capital in order to reach to an object. The establishment
of ordinary company does not have any conditional requirements; however it also does
not have a legal entity as do the companies stated in the Turkish Commercial Code have.

2 ESTABLISHMENT OF THE LEGAL ENTITIES STATED IN TURKISH COMMERCIAL CODE 2.1 The
Establishment Process
Prior to the detailed information on the required documents and transactions for
establishing a company, we would like to give a brief explanation regarding the basics of
Turkish system for establishing a company.
According to Turkish Commercial Legislation, each type of above mentioned legal entities
are established by presenting certain documents including the Articles of Association to
the Trade Registry and registering thereof. The important issue at this point is the contents
of the Articles of Association which may vary according to the type of the company that
will be established.
In this regard it is beneficial to know that the Turkish Commercial Code provides two types
of provisions for the issues that will take place in the Articles of Association;
1. Compulsory and statutory
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2. Compulsory and amendable

The first group of provisions is regarding the issues that must take place in the Articles of
Association, and these provisions can not be amended, they must take place in the
Articles of Association just as indicated in the Turkish Commercial Code.
The second group of provisions is regarding the issues that must take place in the Articles
of Association; however these provisions can be amended according to the needs of the
newly established company. In order to explain this type of provisions the general meeting
quorum may be given as an example. According to the Turkish Commercial Code, the
meeting quorum is an issue that must take place in the Articles of Association, and the
Code has set a minimum for the quorum. However a different quorum (on the condition
that it is not below the minimum quorum) other than the minimum stated in the Turkish
Commercial Code can be agreed.
We would like to remind you that the two types of provisions, which are compulsory, do
not constrain the non-compulsory provisions that can take place in the Articles of
Association provided that they are in accordance with the current Turkish Legislation.

2.2 The Procedural Steps and Required Documents

Consequent to the above mentioned information, please find below the main steps that
should be taken in order to establish limited liability company under the Turkish
Commercial Code:

(i) Preparation of Articles of Association ("AoA")

Joint Stock Company: The shareholders may establish various classes of shares and
allocate specific voting, dividend and liquidation privileges to such classes. Usufruct
certificates and founders shares for participation in profits are also possible. The AoA of
a joint stock company is registered in the trade registry and is therefore a matter of public
record.
Limited Company: The difference of the AoA of a limited company is that it bears relatively
different legal requirements compared to the AoA of a joint stock company. Mainly the
difference is regarding the organs of the company; such as a limited company having a
shareholders committee and managers whereas the Joint Stock Company has a general
assembly and board of directors as well as general managers.
General Partnership, Limited Partnership, Partnership Limited by Shares: The AoA of one
of these companies bears relatively less legal requirements compared to the AoA of a
Limited Company.
Cooperative Companies: A Standard form of Association of Association for cooperative
companies occupying with certain issues of business are issued for by the relevant
Ministry, and these standard Articles of Association should be used for establishing
cooperative companies occupying with issues such as agricultural cooperative
companies.

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(ii) Execution of AoA by each of the shareholders of the company or their proxy
and/or proxies on behalf of the shareholders.
Joint Sock Company: A minimum of five shareholders, which may consist of real or legal
entities, is required in order to establish a joint stock company.
Limited Company: A minimum of two and a maximum of fifty real or legal persons are
required in order to establish a limited company.
General Partnership, Limited Partnership, Partnership Limited by Shares: A minimum of
two real persons are required in order to establish the above mentioned companies.
In this point we would like to mention that if the execution of the AoA will be conducted by
proxy a duly notarized and apostilled Power of Attorney and an original document
evidencing the person is authorized for signature will also be required.

(iii) Notarization of the AoA by a Turkish Notary Public

In order to conduct the notarization five copies of the Articles of Association should be
taken to the Notary Public since one copy will be kept by the Notary Public according to
the Notary Public Law.

(iv) Application to the Trade Registry where the Company's head office is
located for the registration of the AoA of the Company together with the
other required documents.
a.

Articles of Association

b.

Signature declarations (Notarized by a local notary public and either apostilled

or certified by the Turkish Consulate)

c.

Identity card and domicile certificate (For Turkish real persons residing in
Turkey)

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d.

Passport copy (For real persons who are not Turkish citizens)

e.

Certificate of activity (For legal entity shareholders, issued by the Trade Registry
Office which such shareholder is registered or by authorized courts and
notarized by a local notary public and either certified by the Turkish Consulate
apostilled)

f.

Residence and / or work permits (For Turkish citizens who are domiciled outside
of Turkey and for foreign citizens who are domiciled in Turkey)

g.

Tax numbers (For each real founder, BoD Member and Managers, issued by the
Tax Office where the new company will have a tax account)

h.

Incorporation notice form

i.

Commitment letter

j. Statement regarding the Registration with the Chamber

k. If the founding shareholder of the Company is a legal entity, decision regarding the
participation to the Company; in addition to this decision, signature circulars of
the founding shareholder approved by a notary based on the decision of the
recent appointment of the board of directors of the Company, in case the
Company is an Joint Stock Company and the decision of the Shareholders'
Assembly, regarding the election of the directors, in case it is a Limited
Company.
l. Original of the receipt of Ziraat Bankasi (state bank of Turkish Republic) evidencing
that 0,004% of the capital of the Company has been paid to the account of
Competition Board
m. Photographs (The passport size photographs of real person establishers and the
members of Board of Directors)

(v) Publication and Announcement of the AoA as well as the authorized

signatories of the Company in the Trade Registry Gazette in order to put
third parties on notice of the establishment thereof.
Pursuant to the Turkish Commercial Code the company shall be deemed incorporated
with the registration of the company with the Trade Registry.

3. THE LICENSES AND THE RESTRICTIONS

Although the freewill is the basic principle governing the commercial and business life in
Turkey, there are some restrictions and interventions which should be taken into
consideration.
In this context, certain businesses require prior approval of the governmental authorities
and certain businesses are only conductible with certain types of companies. The
provisions regarding these approvals and restrictions are specified in a wide variety of
laws and regulations, constituting a complex and a desultory formation.

Therefore we would like to inform you about the specified issues as far as they are
determined within the legislation.

3.1 The Licenses

According to Article 5 of the Communiqu No: 2003/ 3 of the Ministry of Industry of Trade
(the "Ministry") banks, interest free banks, financial leasing and factoring companies;
companies dealing with consumer finance, credit cards, asset management and
insurance; holdings; companies operating exchange offices, public warehouses, licensed
storage and/or agricultural storages and warehouses; companies subject to the Securities
Exchange Act, Publicly Held Companies, Companies pertaining to the founding partners
and operators of Free Economical Zones are obliged to obtain the relevant approval from
the Ministry before the establishment and in order to amend their AoA.
In case the Purpose and Activities of the company to be established consist the activities
stated herein above, the establishment will be subject to the approval of the Ministry and
accomplished in a period longer than the approximate time stated in the above paragraph.

3.2 The Restrictions

Banks, interest free banks, financial leasing and factoring companies; companies dealing
with consumer finance, credit cards, asset management and insurance; holdings;
companies operating exchange offices, public warehouses, licensed storage and/or
agricultural storages and warehouses; companies subject to the Securities Exchange Act,
Publicly Held Companies, Companies pertaining to the founding partners and operators
of Free Economical Zones are required to be established as joint venture company in
order to be able to conduct business in these fields.

4. APPROXIMATE TIME PERIOD AND COSTS

4.1 Approximate Time
The establishment procedure can be accomplished within 4 to 5 days following the safe
receipt of the required documents, provided that the documents are appropriate and full.
4.2 Approximate Costs
Please kindly note that the costs for establishing a company depends on the type of the
company, capital amount and the number of shareholders of the new company. The costs
mentioned below are calculated according to the minimum capital amount and minimum
shareholder number.

The current Turkish Commercial Code has come into effect on 09/07/1956 and has been
amended many times since. However, as the years pass and the structure of the business
and Commerce changed, the current Commercial Code has been considered to be
incapable of answering to the needs of the modern times and the practice of commerce.

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Stock Limited
1. Translation and Notarization of the Documents of the Joint
Company
Company
Foreign Shareholders before Notary Public

EURO S00
2. Notarization of the AoA by a Turkish Notary Public EURO 1.000

The Others

EURO 200

EURO 200

EURO B00

EURO 600

EURO 1.000 EURO B00

3. Application to Trade Registry Office in order for the EURO 1.250
registration of the Company
4. The charge to be paid via Ziraat Bank ( state bank of Depends on the capital amount
Turkish Republic ) evidencing that 0,004 % of the of the company to be
capital of the Company has been paid to the account of established.
Competition Board
EURO 2.550
EURO 2.000 EURO1.600
TOTAL
+ The amount mentioned in
Section 4 of this chart.

5. EVALUATION OF THE DRAFT LEGISLATION

Therefore, a study for creating a new Commercial Code has been in process for over five
years. Consequently, the studies have been finalized and the draft has been given its final
structure. With this draft commercial code coming into force some significant
amendments, which we would like to mention here in proportion with their relevance to
the establishment of a company.
One of the most important alterations will be in the principal of "ultra vires" which means
the company is bound and restricted with the issues of business that are stated in its
Articles of Association. The current Turkish Commercial Code is applying this principle,
and restricting the companies with the issues of businesses stated in the Articles of
Association. However, the new draft has removed this principle text of the law.
Another important alteration will be the number of persons necessary to establish a limited company
or a joint stock company. Although at least five persons for join stock company and at least two persons
for limited company are required for the establishment of thereof; with the new draft coming into force
the joint stock companies and limited companies may be established by only one person who owns
100% of the relevant company.

Att. Bahar Yenerer - Att. Cansu Songl

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