I received a letter from a reader that mainly focuses on the question of whether foreign persons can become shareholders in an “adı şirket” or not. The word “adı şirket” has no exact translation in English, but may be translated as one of the following: a “basic company,” an “unincorporated company” or a “partnership.” For the purposes of this article, I will refer to it as an unincorporated company.
The letter reads as follows: “Dear Mr. Çektir, after following with interest your column for the past few months, I am now seeking your advice. I, in partnership with my business partner -- a Turkish citizen, am planning on entering the construction business in Turkey on a medium to long-term basis. I would like to know what would be the best way to set this up legally. As far as I know, foreign citizens are allowed to set up limited companies, so this could be an option for us but, as I understand it, this can be a complicated arrangement to run and if the worst comes to the worst and we have to dissolve. We would prefer a simpler approach to begin with; i.e., in the form of an 'adı şirket' perhaps.”
Forming a limited company in Turkey takes only one day
Limited companies are the most common form of companies in Turkey. The reason for this is that you need just two shareholders to form a limited company, whereas the minimum number of shareholders is five for joint stock companies. The required minimum capital for limited companies is also lower than that of joint stock companies.
Although forming a company is absolutely not a difficult job if there is a simple business plan, in some cases consultants can mislead investors, either intentionally or unintentionally, about the complexity and the length of the company formation process. There are only a few limitations to the jobs that foreigners are permitted to have in Turkey. A foreigner can become a director of a limited company, though I must note that they should have a work permit to do so.
What happens if one of the two shareholders leaves the limited company?
A major disadvantage is that limited companies can easily be blocked by one of the partners or by a single director, as in your case. Limited companies are more suitable for societies like family businesses, where the parties know each other very well and there is actually a company boss.
In respect to dissolving the company, it will not be possible for the company to continue functioning if either of you leave the company; there must be at least two shareholders for the establishment and operation of a limited company. It is, of course, possible to go to court to terminate the company. Once one of the two partners leaves, a limited company should end and be terminated.
The court shall examine the claims and defenses of parties and will appoint an officer to run the company during the termination/insolvency process if appropriate. The process may take four months to one year, depending on the complexity of the transactions accomplished during the commercial life of the company.
NOTE: Berk Çektir is a licensed attorney at law and available to answer questions on the legal aspects of living in Turkey. Send enquiries to b.cektir@todayszaman.com. The names of the readers are disclosed only upon written approval of the sender.
DISCLAIMER: The information provided here is intended to give basic legal information. You should get legal assistance from a licensed attorney at law while conducting legal transactions and not just rely on the information in this corner.
