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Important Aspects of Turkish Company Incorporation

Çetin - Demir Law Firm advises Libyan Investors on the incorporation of As Günes Dis Ticaret İthalat İhracat ve Pazarlama A.S, a firm that aims to improve the quantity and the quality of trade between Turkey and Libya allowing Libya to more easily access Turkish Manufactured Goods. In this regard I would like to draw attention to the important aspects of incorporation of companies with foreign shareholders in Turkey.

1- Sometimes foreign shareholders designate management authority for the company in a nonmember which makes he/she company’s solely authorized representative. Do not empower anyone with such power unless he/she is a trusted shareholder. When a non-shareholder has such power, he/she becomes capable of issuing a promissory note under Company’s name. According to Turkish Legal System promissory notes are abstract acknowledgement of debt and very hard to annul. To make it clear, a nonshareholder solely authorized representative is capable of removing every asset your company has by drawing up promissory notes with the help of ill-intentioned people. In practice I have seen backdated promissory notes signed by non-shareholder solely authorized representatives after their leave from the company with an intention of inflicting damage to company.

2- Sometimes managers of Foreign owned / Turkish owned companies when entering into agreement with other companies do not care about authorized signatories thereof. Business disputes often arise as a result of an inadequately drafted/signed contract. Anyone that is considering entering into a contract for any subject or that is considering to receive cheque from a company should go over opposite party’s authorized signatory list. For Turkish Legal System has concepts of multiple and individual signatories. To make it clear, if the opposite party has chosen the concept of multiple/joint signatory and your contract or cheque is signed only by one board member of opposite party, such contract/cheque would not and does not bind anyone. This is unfortunately a common trick used by ill-intentioned people against foreigners.

3- After six months from date of incorporation, it is required to employ 5 Turkish Citizens in the company in order to be entitled to get work permission. In practice we come across with foreign-owned companies that employ 5 Turkish Citizen on paper and pay their social security contributions without really having Turkish citizens in the company in order to reduce labor expenses and have enough place for foreign illegal workers who work for less salaries. Long story short We advise against it because when social security inspectors visit your company, fines issued by them for both having fake employment and illegal employment are beyond measure.

For further information please contact :

Hüseyin Servet ÇETİN

Abdurrahman Mesud DEMİR

This information is provided for your convenience and does not constitute legal advice. It is prepared for the general information of our clients and other interested persons. This should not be acted upon in any specific situation without appropriate legal advice.This information is protected by copyright and may not be reproduced or translated without the prior written permission of Cetin-Demir Law Firm

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