a. Overview

Other common form of company in Turkey is limited liability companies which are also regulated mainly by the Turkish Commercial Code. Although limited liability companies are structurally very similar to joint stock companies, certain procedures require more formalities than the latter, such as share transfers. They are, nevertheless, favoured in certain circumstances.

The rules governing the establishment of a limited liability company are almost identical to a joint stock company, except that in speciic regulated sectors (such as certain inancial services sectors), it is not possible to operate as a limited liability company.

b. Shareholding

The Turkish Commercial Code allows limited liability companies to be incorporated with a single shareholder, although the maximum number of shareholders permitted for such companies is 50. Individuals and legal entities of any nationality may be shareholders in a limited liability company.

– Share Capital: The Turkish Commercial Code requires limited liability companies to be incorporated with a minimum share capital of TRY 10,000 (subject to minimum share capital requirements in certain speciic sectors where operating as a limited liability company is allowed). The registered share capital system is not an option for limited liability companies, and they may only adopt the principal share capital system.

Rules governing the contribution of share capital in cash or in kind and deposit and payment requirements are identical to the rules and requirements for joint stock companies.

– Shares and Share Certiicates: The share capital of a limited liability company shall be divided into shares with a nominal value of at least TRY 25 or its multiples (i.e. TRY 50, TRY 100 etc.). Limited liability companies may only issue registered, not bearer, share certificates.

– Dividends: Please see (Joint Stock Company, Shareholding, Dividends) above.

– Minority Rights: Please see (Joint Stock Company, Shareholding, Minority Rights) above.

c. Mandatory Corporate Bodies

– Managers: A limited liability company shall be managed and represented by one or more managers appointed by the shareholders. If there is more than one manager, then there is a board of managers as per the Turkish Commercial Code. Unlike joint stock companies, at least one of the managers must also be a shareholder. There is no restriction on the nationality of managers, however, should any manager be a foreign national, a tax identiication number must be obtained for them in Turkey.

Except that managers can be appointed for an unlimited term, the rules governing, among others, the appointment of managers, their liabilities, delegation of duties and electronic meetings are identical to those of a joint stock company. The meeting quorum (in case of a board of managers) is also the same, however, unlike joint stock companies, the chairman of the board of managers has a casting vote in case of a deadlock.

– General Assembly: Similarly with a joint stock company, certain decisions are reserved to be exclusively adopted by the shareholders of a limited liability company; however such list is more extensive for limited liability companies as it also includes, among others, approval of any share transfer and squeeze-out of existing shareholder through a court order.

There is no meeting quorum for the general assembly meeting of a limited liability company, and, unless a higher quorum is required as per the Turkish Commercial Code and/or the

company’s articles of association, an airmative vote by the majority of the shareholders attending the general assembly meeting shall suice to adopt a resolution.

Please also see (Joint Stock Company, Mandatory Corporate Bodies, General Assembly) for other matters concerning general assembly meetings of limited liability companies.

d. Liablity

The managers of a limited liability company are subject to the same liability regime as the directors of a joint stock company. However, this is not the case for the shareholders of a limited liability company. Accordingly, the shareholders of a limited liability company may be personally liable for the unpaid public debts (such as tax or social security premiums) of the company if the company cannot fulil its obligation to pay such public debts. Other than this liability, shareholders shall be limited to the unpaid portion of their share capital contribution.

e. Share Transfers

The share transfers of limited liability companies are subject to more formalities than those of joint stock companies. However, these are not prohibitive.

In order to afect the transfer of shares of limited liability companies, a share transfer agreement must be executed in writing before a notary public in Turkey. Upon the execution of such agreement, the general assembly of the limited liability company must convene to approve the relevant share transfer, unless otherwise set forth under the articles of association. However, approval will be deemed to have been granted if the general assembly does not reject the share transfer within three months of the execution of the share transfer agreement. The share transfer must then be registered before the trade registry. It should also be noted that the articles of association of a limited liability company may include a provision prohibiting or restricting the transfer of shares.

f. Mergers

Please see (Joint Stock Company, Mergers) above.

OTHER FORMS

In addition to the more prevalent joint stock company and limited liability company, the Turkish Commercial Code also allows for the establishment of general partnerships (kollektif şirket), limited partnerships (komandit şirket) and partnerships limited by shares (sermayesi paylara bölünmüş komandit şirket).

a. General Partnerships

General partnerships are companies established, and maintained, by at least two individuals for the purpose of operating a commercial undertaking and where the shareholders are liable without limitation towards company creditors.

Each shareholder of a general partnership has management rights, however, the articles of association may bestow management upon one shareholder or multiple or all shareholders. In the event of a shareholder being granted management rights through the articles of association, he/she may only be removed from such position through a court judgment based on justiiable reasons. However, shareholders who have been granted management rights through a decision of the shareholders may be removed from their positions upon a majority vote of the shareholders.

Although a manager may perform all acts and transactions required for the company to achieve its purpose of establishment, all actions and transactions which are outside the ordinary scope of business require the unanimous vote of the shareholders.

b. Limited Partnerships

Limited partnerships are companies established for the purpose of operating a commercial undertaking and where certain shareholders have limited liability and certain shareholders have unlimited liability towards creditors. As such, limited partnerships must have at least two shareholders. It is worth noting that if a limited liability or joint stock company were to become a shareholder in a limited partnership, such company may only assume limited liability towards creditors. The shareholders with unlimited liability may stipulate all types of assets and rights as share capital, including cash, real estate and commercial good-standing, whereas the shareholders with limited liability may only stipulate assets and rights which are cash-convertible.

Limited partnerships may only be managed and represented by the shareholders with unlimited liability. Furthermore, shareholders with limited liability may not hinder the acts or actions of the shareholders who have unlimited liability and management rights. In this regard, shareholders with limited liability only have voting rights with respect to actions and transactions which are not in the ordinary course of business and afect relations between the shareholders, such as mergers and changes to the articles of association.

c. Partnerships Limişted by Shares

In contrast to general partnerships and limited partnerships, whose share capital are not divided into shares, the share capital of partnerships limited by shares, as the name suggests, is divided into shares, which are transferrable. Partnerships limited by shares must be established and maintained by at least ive shareholders, at least one of whom must have unlimited liability towards creditors.

Only shareholders with unlimited liability may have management rights in partnerships limited by shares and, although such companies have no board of directors, the shareholder(s) with management rights have the duties and responsibilities of the board of directors of a joint stock company.