TÜRKIYE Law and Practice Contributed by: Selim Keki, Çisem Altundemir and Erkin Tuzcular, Balcıoğlu Selçuk Eymirlioğlu Ardıyok Keki Attorney Partnership
1. Introductory 1.1 Forms of Corporate/Business Organisations
1.2 Sources of Corporate Governance Requirements The TCC is the main source, setting out the gen - eral rules applying to companies at the highest level. It is accompanied by an extensive set of secondary legislation (regulations, directives, and communiqués issued by the Ministry of Trade) setting out further details mostly relating to the practical implementation of the principles under the TCC. There is a second law that sets specific addi - tional rules for so-called public companies: the Capital Markets Law (Law No 6362). Public companies are (i) companies publicly traded on the stock exchange (listed companies) and (ii) companies that have more than 500 sharehold - ers. The most prominent piece of secondary legislation applying to public companies is the Corporate Governance Communiqué numbered II-17.1 issued by the Capital Market Board (the “Communiqué” ). With that said, secondary leg - islations and announcements of both the Turk - ish Capital Markets Board (CMB) and the Borsa Istanbul (Istanbul Stock Exchange) also regulate corporate governance requirements. 1.3 Corporate Governance Requirements for Companies With Publicly Traded Shares Corporate governance principles applying to listed companies are mainly regulated under the Communiqué. The Communiqué includes both mandatory requirements and non-mandatory requirements. Mandatory requirements are only imposed on listed companies. The exact require - ments that are mandatorily applied to a company depend on its so-called corporate governance group. This in turn is determined by the CMB by taking into account the company’s market value and market value of free-floating shares.
Joint stock companies (JSC) and limited liability companies (LLC) are the preferred entity types for conducting commercial activities in Türkiye. They are both so-called capital companies, in which the shareholders are (save for specified exceptions) not liable for the company’s debts and are hence limited to their capital commit - ments. There most notable exceptions to this rule are: (i) some provisions allowing the lifting of the cor - porate veil, most prominently in the section of the Turkish Commercial Code (Law No 6102 or TCC) regulating company groups and affiliation, under Articles 202, 206 and 209; and (ii) solely in the case of LLCs, the shareholders’ liability for unpaid public debts of the company. An LLC is easier to maintain than a JSC and is set to be the more common legal form, whereas a JSC is intended for companies that aim to be or already are listed on a stock exchange. How - ever, due to historic reasons (namely the imprac - ticability and inflexibility of the rules applying to LLCs before 2012), JSCs are disproportionately popular in Türkiye. Even today, a JSC is still preferred in cases where shareholders with potentially conflicting interests come together, such as in a joint ven - ture. Also, in a number of sectors (such as bank - ing, insurance and financial leases) only JSCs can operate. The LLC would be more suitable when a simple and fully owned structure is desired.
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