Corporate Law & Governance in Turkey

Turkish corporate law offers a well-structured but demanding framework for international investors. The Turkish Commercial Code (Türk Ticaret Kanunu, or TCC), which entered into force in 2012 and has been amended several times since, governs company formation, governance, shareholder rights, and dissolution. Businesses that fail to align their internal documents with TCC requirements face regulatory penalties, shareholder disputes, and potential invalidation of corporate decisions. This article walks through the essential legal tools available to foreign and domestic investors: entity selection, governance architecture, shareholder protections, dispute mechanisms, and the practical economics of operating a Turkish company.

Turkey recognises several corporate forms, but the two dominant vehicles for commercial activity are the Anonim Şirket (AŞ, joint stock company) and the Limited Şirket (LTD ŞTİ, limited liability company). The choice between them shapes governance obligations, capital requirements, transferability of shares, and access to capital markets.

An AŞ requires a minimum paid-in capital of TRY 250,000 (approximately EUR 7,000-8,000 at current rates, though this figure fluctuates with exchange rates). It must have at least one shareholder, a board of directors, and, in certain cases, a statutory auditor or an independent audit firm. Shares in an AŞ are freely transferable unless the articles of association impose restrictions, making this form attractive for joint ventures and future equity rounds. The TCC, Article 329, defines the AŞ as a company with a predetermined capital divided into shares, where shareholders bear liability only to the extent of their subscribed capital.

An LTD ŞTİ requires a minimum capital of TRY 10,000 and can have between one and fifty shareholders. Share transfers in an LTD require a notarised deed and, unless the articles provide otherwise, approval by shareholders representing at least three-quarters of the capital. This approval requirement is both a protection mechanism and a potential trap for minority investors who may find their exit blocked. The TCC, Article 573, establishes the LTD as a company where shareholders are not personally liable for company debts beyond their capital contributions.

In practice, international investors establishing a Turkish subsidiary for operational purposes typically prefer the LTD for its lower capital threshold and simpler governance. Those planning to raise local financing, list on Borsa Istanbul, or bring in multiple institutional investors generally opt for the AŞ. A common mistake is selecting the LTD purely for cost reasons without considering that future share transfers will require notarial involvement and shareholder consent, which can delay M&A transactions by weeks.

A non-obvious risk is that both entity types require registration with the relevant Trade Registry (Ticaret Sicili Müdürlüğü) within fifteen days of incorporation. Missing this deadline triggers administrative fines and can affect the validity of contracts entered into before registration. The Trade Registry operates under the Ministry of Customs and Trade and maintains a publicly accessible database.

Incorporating a company in Turkey follows a defined sequence under the TCC and the implementing regulations of the Central Registry Record System (Merkezi Sicil Kayıt Sistemi, or MERSİS). MERSİS is the electronic platform through which all company formation and amendment filings are processed. Since 2013, pre-application through MERSİS has been mandatory before physical filing at the Trade Registry.

The formation process for an LTD or AŞ typically involves the following steps:

• Drafting and notarising the articles of association (ana sözleşme)
• Depositing at least twenty-five percent of the subscribed capital into a blocked bank account (for AŞ; LTD requires full payment within twenty-four months)
• Obtaining a potential tax identification number for foreign shareholders
• Filing the MERSİS application and receiving a system-generated draft
• Submitting physical documents to the Trade Registry within fifteen days of notarisation
• Publishing the formation notice in the Turkish Trade Registry Gazette (Türkiye Ticaret Sicili Gazetesi)

The entire process, when documents are in order, takes between five and ten business days from notarisation to registration. Delays typically arise from incomplete foreign document legalisation. Documents issued abroad must be apostilled or, where Turkey has no apostille treaty with the issuing country, legalised through the Turkish consulate and then translated by a sworn translator (yeminli tercüman) in Turkey.

A practical scenario: a European holding company establishing a Turkish LTD subsidiary often underestimates the time needed to prepare the parent company's corporate documents - certificate of incorporation, articles of association, and a board resolution authorising the Turkish investment. Each document requires apostille and sworn translation. Allowing three to four weeks for this preparatory phase is realistic.

Foreign shareholders may hold one hundred percent of a Turkish company's shares in most sectors. Certain sectors - broadcasting, aviation, maritime transport, and private security - impose foreign ownership caps or licensing requirements under sector-specific legislation. The Foreign Direct Investment Law (Doğrudan Yabancı Yatırımlar Kanunu), Law No. 4875, guarantees equal treatment of foreign and domestic investors and permits free repatriation of profits and capital.

To receive a checklist for company formation in Turkey, including document requirements for foreign shareholders, send a request to info@vlo.com.

The TCC introduced a modernised governance framework in 2012, drawing heavily on OECD corporate governance principles. For an AŞ, the board of directors (yönetim kurulu) is the central governance organ. It may consist of one or more members, who need not be shareholders. At least one board member must be a natural person. The TCC, Article 375, lists non-delegable powers of the board, including determining the company's strategic direction, supervising management, and maintaining the internal control system.

Board members owe fiduciary duties to the company. The TCC, Article 553, establishes personal liability of board members for losses caused by their negligence or wilful misconduct in performing their duties. This liability is joint and several where multiple board members are at fault. Importantly, a board member who records a dissenting vote in the minutes and notifies the statutory auditor is released from liability for that specific decision - a procedural safeguard that international managers should use actively.

For LTD companies, management is vested in one or more managers (müdür). At least one manager must be a Turkish resident or a Turkish citizen, unless an exemption applies. This residency requirement is a frequent compliance gap for foreign-owned LTDs where the sole manager is based abroad. The TCC, Article 623, governs the appointment and powers of LTD managers.

The TCC also introduced mandatory independent audit requirements for companies exceeding certain thresholds of assets, revenue, and employee count, as determined by Presidential Decree. Companies subject to independent audit must engage an audit firm registered with the Public Oversight, Accounting and Auditing Standards Authority (Kamu Gözetimi, Muhasebe ve Denetim Standartları Kurumu, or KGK). Failure to comply with audit obligations can result in the dissolution of the company by court order under TCC Article 530.

A common governance mistake made by international clients is treating the Turkish subsidiary as a purely administrative entity and neglecting to hold annual general assemblies (olağan genel kurul). Under TCC Article 409, the ordinary general assembly of an AŞ must convene within three months of the end of each financial year. Failure to hold the assembly within this period exposes the company to regulatory scrutiny and can complicate banking relationships.

In practice, it is important to consider that Turkish courts have consistently held board members personally liable where they failed to maintain proper accounting records or delayed filing for insolvency when the company was technically insolvent. This mirrors the wrongful trading doctrine familiar to English law practitioners, but the Turkish standard is grounded in TCC Articles 553 and 376.

A shareholders agreement (hissedarlar sözleşmesi or pay sahipleri sözleşmesi) is a private contract between shareholders that supplements the articles of association. Turkish law does not regulate shareholders agreements in a dedicated statute; they are governed by the general principles of the Code of Obligations (Borçlar Kanunu, Law No. 6098). This creates an important structural distinction: provisions in the articles of association bind the company and all shareholders, while provisions in a shareholders agreement bind only the parties to it and cannot be enforced against the company directly.

This distinction has significant practical consequences. A drag-along right, a right of first refusal, or a non-compete obligation placed only in the shareholders agreement cannot be enforced against a third-party acquirer of shares or against a new shareholder who did not sign the agreement. International investors accustomed to common law jurisdictions, where shareholders agreements are the primary governance document, often fail to mirror key provisions in the articles of association. Turkish courts have repeatedly declined to invalidate share transfers that violated shareholders agreement provisions not reflected in the articles.

Minority shareholders in an AŞ holding at least ten percent of the capital (or five percent in publicly held companies) have statutory rights under the TCC, including the right to call a general assembly, request appointment of a special auditor (özel denetçi) under TCC Article 438, and initiate a derivative action against board members. In an LTD, the threshold for calling a general assembly is lower, and individual shareholders may request information from managers under TCC Article 614.

Squeeze-out and sell-out rights are available in Turkish law for AŞ companies where a shareholder acquires ninety-eight percent or more of the capital, under TCC Article 208. This threshold is significantly higher than the ninety percent threshold common in EU jurisdictions, which means minority shareholders in Turkey retain blocking power at lower ownership levels than international investors may expect.

A practical scenario involving minority protection: a foreign investor holds thirty percent of a Turkish AŞ and suspects the majority shareholder of diverting business opportunities to a related entity. The minority shareholder can request appointment of a special auditor by applying to the commercial court of first instance (asliye ticaret mahkemesi). The court may appoint an auditor even without the majority's consent. The auditor's report can then form the basis for a derivative claim against the board under TCC Article 553.

To receive a checklist for drafting a shareholders agreement compliant with Turkish corporate law, send a request to info@vlo.com.

Corporate disputes in Turkey are heard by specialised commercial courts of first instance (asliye ticaret mahkemesi), which operate in all major cities. Istanbul has multiple commercial court divisions, each handling specific subject matters. Appeals go to the regional courts of appeal (bölge adliye mahkemesi) and, on points of law, to the Court of Cassation (Yargıtay), specifically its commercial chambers.

The most common corporate disputes include:

• Annulment of general assembly resolutions under TCC Article 445
• Derivative claims against board members for breach of duty
• Disputes over share transfer validity and pre-emption rights
• Dissolution claims based on deadlock or oppression
• Claims for return of unlawful dividend distributions

An action to annul a general assembly resolution must be filed within three months of the resolution date. This is a strict limitation period - courts do not extend it. The plaintiff must have been present at the assembly and recorded an objection, or must have been wrongfully excluded from the assembly. A non-obvious risk is that even procedurally defective resolutions become unchallengeable after three months, so monitoring general assembly procedures is a continuous governance obligation, not a one-time exercise.

Dissolution of a company by court order is available under TCC Article 531 where the company's purpose has become impossible or where the interests of a shareholder are being oppressed in a manner that makes continued participation unreasonable. Courts have interpreted this provision broadly in recent years, granting dissolution in deadlock situations where two equal shareholders cannot agree on management. However, courts typically explore less drastic remedies first, including ordering a buyout of the aggrieved shareholder's stake.

Pre-trial mediation is mandatory for commercial disputes with a monetary value before filing a lawsuit, under the Commercial Code and the Mediation in Civil Disputes Law (Hukuki Uyuşmazlıklarda Arabuluculuk Kanunu, Law No. 6325). A party that files a lawsuit without first attempting mediation will have its claim dismissed on procedural grounds. The mediation process typically takes two to four weeks. If mediation fails, the mediator issues a final minutes document (son tutanak) that the plaintiff must attach to the statement of claim.

International arbitration is a viable alternative for disputes with a cross-border element. Turkey is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and Turkish courts generally enforce foreign arbitral awards. The Istanbul Arbitration Centre (İstanbul Tahkim Merkezi, or ISTAC) provides institutional arbitration under rules modelled on international standards. Parties to shareholders agreements and joint venture contracts frequently include ISTAC or ICC arbitration clauses. A common mistake is including an arbitration clause in the shareholders agreement but not in the articles of association, leaving disputes about the validity of corporate resolutions - which are not purely contractual - outside the arbitration clause's scope.

Litigation costs in Turkish commercial courts are moderate by international standards. Court filing fees are calculated as a percentage of the amount in dispute, with caps for high-value claims. Lawyers' fees for commercial litigation typically start from the low thousands of USD, rising significantly for complex multi-party disputes. The losing party bears court costs and a portion of the opposing party's legal fees as determined by the Bar Association minimum fee schedule (avukatlık asgari ücret tarifesi).

A practical scenario: a foreign company holds shares in a Turkish joint venture and the Turkish partner has caused the company to enter into contracts with related parties at above-market prices. The foreign shareholder can simultaneously request a special auditor appointment, file a derivative claim against the board, and seek interim injunctive relief (ihtiyati tedbir) to prevent further related-party transactions pending the outcome of the main proceedings. Injunctive relief applications are decided by the commercial court within days in urgent cases, without prior notice to the defendant.

Turkish corporate law intersects with several regulatory regimes that international investors must track. Publicly held companies - including those with more than five hundred shareholders even if not listed - fall under the supervision of the Capital Markets Board of Turkey (Sermaye Piyasası Kurulu, or SPK) and must comply with the Capital Markets Law (Sermaye Piyasası Kanunu, Law No. 6362). SPK regulations impose disclosure obligations, related-party transaction approval requirements, and corporate governance principles that go beyond the TCC baseline.

For private companies, the primary compliance obligations relate to beneficial ownership disclosure. Turkey has implemented a beneficial ownership registry under the Financial Crimes Investigation Board (Mali Suçları Araştırma Kurulu, or MASAK) framework. Companies must identify and register ultimate beneficial owners holding more than twenty-five percent of shares or voting rights. Failure to comply with beneficial ownership reporting obligations carries administrative fines and can trigger enhanced scrutiny in banking relationships.

Corporate restructuring in Turkey is governed by two parallel frameworks. The TCC provides for merger (birleşme), demerger (bölünme), and conversion (tür değiştirme) of companies under Articles 136 to 194. These procedures require shareholder approval by qualified majority, creditor notification, and Trade Registry filings. The timeline for a straightforward merger between two private companies is typically three to five months from board resolution to registration.

For financially distressed companies, the Enforcement and Bankruptcy Law (İcra ve İflas Kanunu, Law No. 2004) provides the primary insolvency framework. The concordat (konkordato) procedure, significantly reformed in 2018, allows a debtor company to apply to the commercial court for a temporary injunction against creditor enforcement while preparing a restructuring plan. The court appoints a commissioner (komiser) to supervise the process. The concordat procedure has become the dominant restructuring tool for Turkish companies, replacing the earlier composition with creditors mechanism.

A practical scenario involving restructuring: a foreign-owned Turkish manufacturing company faces liquidity pressure due to currency volatility and rising input costs. The company's management, advised by Turkish counsel, files a concordat application with the commercial court, attaching a restructuring plan and financial projections. The court grants a three-month preliminary injunction (geçici mühlet), extendable to a further three months, during which creditors cannot enforce claims. This breathing space allows the company to negotiate with its main creditors and restructure its debt without triggering formal insolvency.

Many international investors underappreciate the interaction between Turkish corporate law and foreign exchange regulations administered by the Central Bank of Turkey (Türkiye Cumhuriyet Merkez Bankası). Capital contributions in foreign currency, profit repatriation, and intercompany loans are subject to reporting obligations under the Foreign Exchange Law (Türk Parası Kıymetini Koruma Hakkında Kanun, Law No. 1567) and its implementing decrees. Non-compliance with foreign exchange reporting does not invalidate transactions but triggers administrative fines that accumulate over time.

The risk of inaction in compliance matters is concrete: companies that allow beneficial ownership filings to lapse, fail to hold annual assemblies, or neglect audit obligations for more than two consecutive years become eligible for dissolution proceedings initiated by the Trade Registry or the Ministry of Trade. Restoring a company to good standing after such proceedings requires court involvement and can take six months or more.

To receive a checklist for ongoing corporate compliance obligations in Turkey for foreign-owned companies, send a request to info@vlo.com.

What are the main risks for a foreign investor holding a minority stake in a Turkish company?

The primary risk is that minority protections in Turkey operate through statutory thresholds that differ from those in EU or common law jurisdictions. A minority shareholder holding less than ten percent of an AŞ has limited statutory rights and cannot independently call a general assembly or request a special auditor. Shareholders agreement protections that are not mirrored in the articles of association are enforceable only between the contracting parties, not against the company. Additionally, the three-month limitation period for challenging general assembly resolutions is strict, meaning that a minority shareholder who does not monitor governance closely can lose the right to challenge a harmful resolution permanently. Structuring minority protections correctly at the outset - through both the articles and a shareholders agreement - is significantly less costly than litigating later.

How long does a corporate dispute typically take to resolve in Turkish courts, and what does it cost?

A first-instance commercial court judgment in a straightforward corporate dispute - such as annulment of a general assembly resolution - typically takes twelve to twenty-four months from filing to judgment, depending on the court's workload and the complexity of the case. Appeals to the regional court of appeal add six to twelve months, and a further cassation review can extend the total timeline to four or five years. Mandatory pre-trial mediation adds two to four weeks but does not significantly affect the overall timeline if mediation fails. Legal fees for commercial litigation start from the low thousands of USD for simple matters and rise to the mid-to-high tens of thousands for complex multi-party disputes. International arbitration through ISTAC or ICC is faster for parties who have included a valid arbitration clause, with typical timelines of twelve to eighteen months for a final award.

When should a company choose arbitration over Turkish court litigation for corporate disputes?

Arbitration is preferable when the dispute has a cross-border element, when confidentiality is important, or when the parties want to select arbitrators with specific expertise in corporate law. Turkish courts have exclusive jurisdiction over certain corporate matters - including annulment of general assembly resolutions and court-ordered dissolution - which cannot be submitted to arbitration. For disputes that are purely contractual, such as breach of a shareholders agreement or a share purchase agreement, arbitration offers procedural flexibility and enforceability in multiple jurisdictions under the New York Convention. A well-drafted dispute resolution clause should distinguish between corporate law disputes (subject to Turkish court jurisdiction) and contractual disputes (subject to arbitration), routing each category to the appropriate forum. Failing to make this distinction is a common drafting error that leads to jurisdictional challenges at the start of proceedings.

Turkish corporate law provides a coherent and increasingly sophisticated framework for international business, but it rewards careful structuring and active governance. Entity selection, document architecture, board composition, and compliance obligations each carry specific legal consequences that differ materially from Western European or common law norms. The cost of correcting structural errors after a dispute arises - through litigation, restructuring, or regulatory proceedings - consistently exceeds the cost of proper legal advice at the formation and governance stage. Businesses operating in Turkey benefit from treating corporate law not as a one-time setup exercise but as an ongoing operational discipline.

Our law firm Vetrov & Partners has experience supporting clients in Turkey on corporate law and governance matters. We can assist with company formation, shareholders agreement drafting, board governance structuring, corporate dispute strategy, and compliance with Turkish regulatory requirements. To receive a consultation, contact: info@vlo.com