News and developments

Turkey Moves to Improve the Investment Environment

I.    Introduction

The Law on the

Amendment of Certain Laws for the Improvement of the Investment Environment No.

7099 ("Law") was published in the Official Gazette last month (March

10, 2018) and introduced significant amendments to various laws, including the

Turkish Commercial Code No. 6102 ("TCC"), the Tax Procedural Law, the Law

on Legal Fees and the Law on Movable Property Pledges in Commercial Actions.

This article addresses significant

amendments and new rules stipulated by the Law for the Turkish Commercial Code.

The Law aims to enhance

Turkey's investment environment by reducing the number of transactions required

to set up a company, by supporting investors, and by lowering the expenses associated

with the incorporation of joint stock and limited liability companies.

Save for certain

exceptions as explicitly stated in the Law, the Law entered into effect on

March 10, 2018.

II.       Explanations on amendments regarding the

Turkish Commercial Code

By amending Article

40/2 of the TCC, the Law requires every merchant to submit its trade name and

signature to be used under such trade name to the relevant Trade Registry. If

the merchant is a legal entity, the trade name and signature specimens of

persons authorized to sign documents on behalf of the legal entity must also be

submitted to the Trade Registry. Signature specimens may be given in the

presence of an authorized officer of any Trade Registry by submitting a written

statement. This amendment repealed the notarization requirement for trade names

and signature specimens before an authorized Notary Public prior to submission to

the relevant Trade Registry. On the other hand, prior to this amendment, individuals

residing outside of Turkey were permitted to have their signature specimens signed,

notarized and apostilled abroad. However, following this amendment, individuals

residing outside of Turkey will be required to sign their signature specimens

in the presence of an authorized officer of a Trade Registry in Turkey.

Pursuant to the changes

made to Article 64 of the TCC, opening approvals of company books of joint

stock companies and limited liability companies shall only be processed by the

Trade Registries. With this amendment, Notary Public officials are no longer

authorized to carry out opening approvals of company books. Therefore, investors

are released from the requirement to pay additional notary fees for opening

approvals of company books during the establishment of joint stock and limited

liability companies.

Prior to the changes

put into effect by the Law, if a company recommended a person affiliated with

the company to its shareholders to represent them during shareholders' meetings,

Article 428 of the TCC obliged such a company to recommend another person for

the same position, who should be completely independent and neutral, and to

announce both of these persons to their shareholders. In practice, this

obligation caused substantial problems and put significant additional burdens

on small-scale joint stock companies. In light of this, Articles 428, 430 and

431 of the TCC have been repealed in order to reduce the obligations imposed on

small-scale joint stock companies. The justification of the abolishment decision

also stipulates that representative appointments set forth under Article 428 were

introduced for joint stock companies listed on the stock exchange and for public

companies whose shares are distributed to numerous shareholders; however, due

to the text of Article 428, this rule also created additional burdens for small-scale

joint stock companies. It is also put forth in the justification that, since

Article 428 will not be applicable within the scope of the Capital Markets Law

No. 6362, as per Article 30 thereof, small-scale joint stock companies should

not face additional costs due to the representative appointment rules as foreseen

under Article 428.

In light of the

amendments to Articles 575, 585 and 587, Notaries Public are no longer

authorized to approve the signatures of founders and the articles of

association of limited liability companies. The articles of association must be

signed by the founders in the presence of authorized officers from the

directorates of the Trade Registry. This amendment has entered into effect as

of March 15, 2018. Thanks to these amendments, investors are no longer required

to pay additional notary fees for the approval of the signatures of the founders

and the articles of association of limited liability companies during the

establishment of such limited liability companies.

Article 585 of the TCC

has been amended and the requirement concerning the payment of at least one-fourth

of the subscribed capital prior to the establishment of a company has been abolished

for limited liability companies. This amendment has also entered into effect as

of March 15, 2018.

As per Article 68 of

the Law on the Amendment of Certain Laws for the Improvement of the Investment

Environment No. 6728, published in the Official Gazette on August 9, 2016, Article

543/2 titled "Distribution after Liquidation" has been amended and the prescribed

period for the distribution of a company's remaining assets to its shareholders

following the latest announcement to the company's creditors has been decreased

from one year to six months.

III.    Conclusion

These amendments to the Turkish Commercial Code aim

to improve the investment environment in Turkey, boost the national economy,

and reduce the costs of company incorporation and doing business in Turkey. The

Law also introduces significant amendments regarding the liquidation and incorporation

of companies and secondary legislation may be required in order to bring

uniformity to the practice of Notaries Public and Trade Registries in Turkey.

Authors: Gönenç

Gürkaynak, Esq., Nazlı Nil Yukaruç and Büşra Üstüntaş, ELIG, Attorneys-at-Law

(First published by

Mondaq on April 11, 2018)

Content supplied by ELIG Gürkaynak Attorneys-at-Law