Company’s Capital in Turkey (2024)

On of the most frequently question asked by the investors is the required company’s capital in Turkey. Therefore, with this article we are planning to give comprehensive information on the subject.

What Is Capital?

If we are to define it briefly, the capital; It is the money put by the partners to cover the expenses of a company, or all commodities that can be converted into money. Capital shows the partnership (shareholder) structure of the company.

 

For Whom Capital is Needed?

• There is no capital available to individual companies.
• Company’s Capital in Turkey is obligatory for Joint Stock Companies or Limited Liability Companies
• There is a clause about capital in the articles of association of capital companies.  In that article; The amount of capital, who committed, how many shares and the value of the shares are written in detail.

Are There Any Conditions and Practices Related to Company’s Capital in Turkey?

•        Those who have equity in the business are referred to as shareholders.
•        Company shareholders; may be an individual or another company.
•        A limited company or a joint stock company may have a single shareholder.
•        Stock and certificate can be printed against the company’s capital in Turkey
•        Capital can be divided into groups; As A group, B group, C group. These clarifications can be made by issues such as the election of the Board of Directors, determining the voting rates in decision making and the conditions for the transfer of shares.
•        There is an obligation to pay ¼ of capital in the establishment of a joint stock company. However, the requirement to contribute ¼ of capital to the establishment of a limited liability company is eliminated.
•      Unit share price in limited companies cannot be less than 25 TL. In joint stock companies, there is no such restriction, the value of the share can be determined as 1 TL or even 1 kuruş.

Should The Company’s Capital in Turkey Be Paid in Cash?

•        Capital can be committed with cash or real estate at the time of establishment.
•        In capital increases, in addition to the above article, capital can be met in the following ways;
•        Waiver of claim
•        Capital reserves
•        Retained earnings
•        Premiums on capital stocks
•        Other funds

When Should The Committed Capital Be Paid in Turkey?

·       In joint stock companies,1/4 of the cash capital must be paid during the establishment (starting capital) and the remaining amount must be paid in 24 months. In LLC Company Formation, there is no need to make the capital payment at the beginning.  However, there is a commitment to make the payment in 2 years.

·       In the case of capital increases, 1/4 of the portion of the cash increase is payable prior to registration.

What Is The Minimum Capital Amount?

• Minimum requüred capital is 50,000 TL for joint stock companies and 10,000 TL for limited liability companies.
•  The value of the capital may be determined differently under special laws.
• 100.000 TL paid capital is required in order to obtain work permit for foreigners.
• 30.000.000 TL to establish a bank
• 30.000.000 TL to establish a GMYO company
• 27.047.116 TL for the Natural Gas Storage company

Should the company’s capital in Turkey stay in the safe or in the bank? Can capital be spent?

For Joint Stock companies Until the registration of the capital (establishment, capital increase), the 1/4 is blocked by the bank. However, after the capital is registered, you can go to your bank with the necessary documentation and remove the block. For limited liability companies, the allocated capital is not required to be deposited in advance.

After the capital has been paid (unblocked), you can use the capital at any time and pay your salaries, rent, taxes and other expenses.

What is outstanding capital? When should it be closed?

It is the unpaid portion of the committed capital. For example, you made a commitment of 50.000 TL but paid 12.500 TL which is ¼ of it. There is a capital of 37,500 TL yet to be paid and this is called “unpaid capital”.

For company formation in Turkey and cash capital increases ¼ of the amount has to be paid, and the remaining amount must be paid in 24 months. If the remaining amount has not been paid within 24 months, there is no sanction.

Prior to the next capital increase or the issuance of shares, the unpaid portion must be closed and paid to the company account.

In order to make the payment, the shareholder sends the relevant amount to the company account from his / her own account via EFTor ATMs and adds the name and surname of the payer and adds the phrase “capital payment” in the statement.

How is the capital increase carried out? Is it necessary?

If the company needs cash, partners (or new partners) can decide to add new capital to cover costs or expenses.

The General Assembly decides on the capital increase in joint stock companies. A ministry representative (commissioner) must be present in this general assembly.

Capital increase can be cash, or it can be through real estate, withdrawal from receivables or the use of other funds from internal sources.

In capital increase, it can be either by keeping the number of shares constant and increasing the value of the unit share or by issuing new shares.

Before the capital increase, the existing capital must be paid in full. Otherwise, there can be no capital raise. After the capital increase, certain financial ratios must be met or the capital increase cannot be achieved. If your company’s equity is less than zero, review your financial ratios before making a capital increase decision. Capital increase may be required to eliminate situations such as “bankruptcy” or “technical bankruptcy”.

What is insolvency and technical bankruptcy? What does need to be done?

If the company loses a certain percentage of its equity, that is action plans should be prepared to eliminate this situation. This issue is  technical. Therefore, you should evaluate it with your financial advisor or legal advisor.

What are the shareholders’ duties and responsibilities?

In joint stock companies, the general assembly (shareholders) changes the articles of association, elects the board of directors, dismisses them, decides on capital increase decreases, makes decisions on issues such as mergers and divisions, and decides on dividend distribution.

The committed capital is paid to the company’s account.

Shareholders are liable for taxes and public debt as much as the capital they invested.

Since the company’s capital in Turkey is subject to registration, you can inquire from the Trade Registry Gazette or from the Trade Registry Directorates in the provinces.

Shareholding in limited companies is subject to registration, you can see the partnership structure (share breakdowns).

Due to shareholding in joint stock companies is anonymous and is not subject to registration, you cannot see the partnership structure (share breakdowns). In joint stock companies, you can check the shareholding structure from the share book or the Attendant list.

What is the profit distribution?

A result of company activities during the year, if there is a profit after tax payment profit can be distributed by the decision of the general assembly.

While a part of the profit is kept in the company as reserve fund, the remaining part is distributed to the shareholders in proportion to the share.

What is thin capitalization, how is its effect on the company calculated?

Shareholders should put as much capital into the company as it needs. They can keep the capital low and lend money when the company needs it, but this is not a situation preferred by the financial administration

thin capitalization concept means shareholders or related persons lend or loan to the company more than 3 times the capital.

If the creditor shareholder or related person obtains an interest or exchange difference income from the company, this amount can not be stated as tax expense.