Corporate Law

In a joint stock company, share transfer is, as a rule, free and does not require registration. In a limited liability company, share transfer is carried out before a notary, may be subject to general assembly approval, and is registered with the trade registry.

There is a significant difference between the two types regarding liability for public debts. Partners in a limited liability company may be held directly liable, in proportion to their capital shares, for public debts that cannot be collected from the company.

If an increase in the number of partners, bringing in investors, or issuing share certificates is planned, the joint stock company structure offers a more flexible framework. For small-scale businesses with few partners, a limited liability company remains simpler to manage.

The articles of association, the founders' identity documents, the signature declaration, statements regarding the capital commitment, and documents relating to the registered address form the basis of the incorporation file.

If part of the capital is committed in cash, the payment schedule is included in the articles of association. If capital in kind is to be contributed, a court-appointed expert report on its valuation must be obtained from the court.

Incorporation is initiated through MERSİS and completed at the trade registry directorate. Along with registration, tax office registration, certification of the commercial books and, where necessary, operating permits then follow.

The scope of the authority to represent the company, whether signature authority is to be exercised singly or jointly, and which transactions are subject to a general assembly resolution should be clearly set out in the articles of association. Ambiguity later turns into a dispute over authority.

Providing for a pre-emption right or a consent requirement on share transfer helps preserve the ownership structure. If these provisions are not included in the articles of association, transfer of the share to a third party cannot be prevented.

The principles of profit distribution, the reserve fund policy, and the general assembly's meeting and resolution quorums are also set out in the articles of association. Provisions contrary to the mandatory provisions of the law are invalid.

A branch is a unit attached to the head office that can nonetheless carry out transactions independently toward third parties; it has no separate legal personality, and the head office's liability continues.

A liaison office cannot carry out commercial activity; it can only perform tasks such as representation, promotion and market research. For this reason, it cannot make invoiced sales.

A subsidiary, by contrast, is a company with its own separate legal personality. As a rule, its liability is limited to its own assets; however, liability may be extended where control over it is abused.

After registration, certification of the commercial books, the tax certificate, e-invoice and e-ledger obligations, and, where applicable, sector-specific permits must be followed up. A missing obligation creates a risk of an administrative sanction.

Signature authorities must be notified to banks in a manner consistent with the trade registry gazette. A deficiency in the authorization text creates a dispute over validity when contracts are signed.

Holding the general assembly on time and approving the financial statements should not be neglected. Delay has consequences for profit distribution and the discharge of the board of directors.

A shareholders' agreement makes details that cannot be, or are not wanted to be, written into the articles of association binding between the parties. Representation in management, the right to information and profit policy fall within this scope.

Provisions on share transfer such as pre-emption, drag-along and tag-along rights make changes in the ownership structure predictable. The sanction to apply in the event these provisions are breached must also be specified.

Since the agreement does not directly bind the company, reflecting the possible provisions in the articles of association as well increases its effectiveness. Otherwise, the sanction may remain limited to compensation only.

If a shareholders' agreement exists, the dispute resolution mechanism it provides for is applied. Call and put options relating to share transfer can be used to break a deadlock.

Under Article 531 of the Turkish Commercial Code No. 6102, holders of shares representing at least one tenth of the capital, or one twentieth in publicly held companies, may request the dissolution of the company from the court where just cause exists.

Instead of dissolution, the court may order that the plaintiff partners' shares be purchased at their real value, or decide on another solution appropriate to the circumstances. This flexibility turns the request for dissolution into bargaining leverage.

If a right of withdrawal is provided for in the articles of association, the partner may exercise it. If it is not provided for, a court decision permitting withdrawal is requested where just cause exists.

Expulsion of a partner, on the other hand, becomes possible either through the occurrence of grounds specified in the articles of association or by applying to the court following a general assembly resolution. The resolution quorums vary according to the articles of association.

Exit compensation is paid to the withdrawing partner. The calculation of the amount is based on the real value of the share, and determining that value requires an examination by a court-appointed expert in most cases.

The seller's representations and warranties are the part of the agreement that gives rise to the most disputes. The scope of the representations regarding the company's financial statements, tax position, litigation and obligations must be written clearly.

The compensation regime to apply if a representation turns out to be inaccurate is separately regulated in terms of a cap and a time limit. Holding back part of the price as security is a commonly used method.

In a limited liability company, the share transfer must be executed before a notary and registered. In a joint stock company, the transfer procedure varies depending on whether share certificates have been issued.

Members of the board of directors are liable to the company, the shareholders and the company's creditors if they culpably breach the obligations arising from the law and the articles of association.

Liability may shift to the person to whom the duty is delegated. However, the delegation must have been made properly and through a written internal directive.

Liability for public debts is subject to a separate regime. Those holding the capacity of legal representative may be held personally liable, with their own assets, for tax and social security premium debts that cannot be collected from the company.

An action may be filed for the annulment of general assembly resolutions that are contrary to the law, the articles of association or the principle of good faith. The action must be filed within three months from the date of the resolution.

The right to file the action is granted to shareholders who were present at the meeting, voted against the resolution, and had this recorded in the minutes. In cases such as a defect in the calling procedure, a partner who did not attend the meeting may also file the action.

Some resolutions are subject to the sanction of absolute nullity, and their invalidity may be asserted without any time limit. Resolutions that eliminate a shareholder's non-waivable rights are assessed within this scope.

Under Article 376 of the Turkish Commercial Code, if it appears from the last annual balance sheet that half of the total of the capital and statutory reserves is no longer covered as a result of losses, the board of directors immediately calls the general assembly to a meeting and presents the remedial measures it considers appropriate.

The same article provides that, if it appears that two thirds of this total is no longer covered, and the general assembly, convened immediately, does not resolve to make do with one third of the capital or to complete the capital, the company is automatically dissolved.

If there are signs raising a suspicion of over-indebtedness, the board of directors prepares an interim balance sheet and notifies the commercial court of first instance of the place where the company's registered office is located, requesting bankruptcy. Delaying this obligation gives rise to the liability of the members of the board of directors.

A legal due diligence review is carried out before the transaction; the company's contracts, litigation, debts, intellectual property rights and employee structure are examined to produce a risk map. Identified risks are reflected in the price or in the representations and warranties.

In a merger or demerger, a merger agreement, a merger report and general assembly resolutions are prepared. Shareholders must be granted a right of inspection, and the rules on the protection of creditors must be complied with.

In acquisitions carried out through a share transfer, a share purchase agreement and closing documents are drawn up. If a competition law threshold is exceeded, the transaction cannot be completed without obtaining clearance.

Liquidation begins with a general assembly resolution or a ground for dissolution provided for by law. A liquidator is appointed, and the phrase "in liquidation" is added to the company's trade name.

The liquidator first prepares an inventory and a balance sheet, calls on the creditors, and pays the debts. The proper conduct of the call to creditors is important for any liability that may arise later.

After the debts are paid, the remaining amount is distributed to the partners, and the registration is deleted from the trade registry. For claims that emerge after deletion, revival of the company may be requested.

Disputes arising from company relationships are heard by the commercial court of first instance. Actions for annulment of a general assembly resolution, dissolution and liability fall within this scope.

As a rule, jurisdiction lies with the court of the place where the company's registered office is located. For this reason, for companies with their registered office in İzmir, the İzmir Commercial Courts of First Instance have jurisdiction.

If the contract contains an arbitration clause, the dispute is resolved through arbitration. The scope of the arbitration clause determines which claims may be brought before the courts.

Under Article 5/A of the Turkish Commercial Code, applying to a mediator before filing suit is a procedural prerequisite to filing suit for commercial claims for receivables and compensation whose subject matter is the payment of a sum of money.

For this reason, claims for a dividend receivable or compensation arising from liability may fall within the scope of mediation. By contrast, claims that are not in the nature of a monetary receivable, such as annulment of a general assembly resolution, are outside its scope.

In files containing mixed claims, mediation is required for the part relating to the monetary receivable. Making this distinction from the outset prevents the case from being dismissed on procedural grounds.

Capital companies are required to obtain a registered electronic mail address and to receive notifications through it. Failure to monitor the address leads to missed time limits.

Sending notices and formal notices through registered electronic mail makes it easier to prove the time of sending and delivery. This becomes decisive in notices of default and termination.

It must be determined in writing within the company who will monitor the address. If the authorized person leaves, the transfer of access should not be neglected.

Commercial books and commercial correspondence must be kept for the period prescribed by law. The retention obligation covers documents in addition to the books.

Failure to keep the records properly produces an outcome against the company in terms of proof. In addition, the record-keeping system is separately examined in bankruptcy and concordat proceedings.

For records kept in electronic form, accessibility and immutability must be ensured. Documenting the backup system increases evidentiary strength in the event of a dispute.