The minimum capital amounts of joint stock and limited liability companies determined in Articles 332 and 580 of the Turkish Commercial Code No. 6102 have been amended by the Presidential Decree on Increasing the Minimum Capital Amount for Joint Stock and Limited Liability Companies dated November 24th 2023 and numbered 7887. This decision was published in the Official Gazette dated November 25th 2023 and entered into force on January 1st, 2024. In accordance with the decision, the minimum capital amounts of joint stock and limited liability companies have been changed and these amounts will be stated in the continuation of our article.
The regulation, which will be effective from January 1st 2024, affects companies established after this date. Investors and entrepreneurs who will start new ventures in the new year must comply with the revised minimum capital amounts determined in the said decision. This regulation obliges investors to start with a higher capital amount during the establishment phase.
A) EFFECTS OF THE NEW REGULATION ON COMPANIES
a) Amendments for Joint Stock Companies
With the new regulation, the minimum principal capital amount envisaged as 50,000 Turkish Liras for joint stock companies has been increased to 250,000 Turkish Liras. For non-public joint stock companies that have accepted the registered capital system, the minimum initial capital amount envisaged as 100,000 Turkish Liras has been increased to 500,000 Turkish Liras.
According to the new regulation, the amount to be paid at the establishment stage for investors who establish a joint stock company will increase from a minimum of 12,500 TL to 62,500 TL. This increase encourages the establishment of joint stock companies with a stronger capital structure. The increased amount of capital will help companies to gain a more reliable and solid position in the market by increasing their economic resilience.
b) Amendments for Limited Liability Companies
There is a similar increase for limited companies. With the new regulation, limited liability companies must be established with a capital of at least 50,000 TL during the establishment phase. This amount is five times of the minimum amount stipulated in the previous adjustment. Compliance of limited liability companies with this regulation will enable them to operate in the market with a more robust and strong structure.
c) Effects on Existing Joint Stock and Limited Liability Companies
Regarding existing joint stock and limited liability companies, it should be noted that the Decision only amended the minimum capital amounts in Articles 332 and 580 of the Turkish Commercial Code, without additional provisions for companies established according to the previous regulations. According to the statement made by the Ministry of Commerce, this regulation is currently valid only for newly established companies and there is no capital increase obligation for existing joint stock and limited companies. Existing companies will be able to continue their activities with their existing capital structures.
d) Effect on Companies in terms of Registration Procedures in Capital Increase
Existing companies wishing to increase their capital are not obliged to act in accordance with the newly determined minimum capital amounts when registering these transactions. This situation aims to create a more stable economic environment by preventing existing companies from making unexpected changes in their financial planning.
B) CIRCULAR OF THE MINISTRY OF COMMERCE ON MINIMUM CAPITAL AMOUNTS AND THE INNOVATIONS BROUGHT BY THE CIRCULAR
According to the circular issued by the Ministry of Commerce:
- The minimum capital amount should not be less than 250 thousand TL in newly established joint stock companies and 50 thousand TL in limited liability companies.
- In registration procedures regarding a capital increase decision, the capital must not be less than the new minimum capital amounts.
- In registration procedures regarding a partial division, in case of capital reduction, it is necessary to establish a transaction in such a way that the capital of the divided company does not fall below the new minimum capital amount.
- In registration procedures regarding a type change, it is necessary to establish a transaction in such a way that the capital of the new type is not less than the new minimum capital amount.
- In the calculations to be made regarding the loss of the company's capital and legal reserves within the scope of Article 376 of the Law, it is necessary to take the registered capital of the company as a basis and to establish a transaction within the framework of the explanations included in this circular in cases where measures need to be taken.
- Within the scope of Article 20 of the Law on the Enforcement and Implementation of the Turkish Commercial Code No. 6103 and the provisional Article 10 of the Implementing Law No. 6102; the capital increase registration requests should not be met unless there is a clear court decision that the capital increase can be made if the companies deemed to be dissolved due to the lack of capital adjustment want to continue their activities.
This circular obliges companies to comply with the newly determined minimum capital amounts in important transactions such as capital increase, division and type change. In particular, the increased capital amounts of the companies that will increase the capital must comply with the new minimum capital amounts. This regulation is of great importance in terms of strengthening the capital structures of companies and ensuring their financial sustainability.
C) OBLIGATION OF JOINT STOCK COMPANIES TO HAVE A CONTRACTED LAWYER
According to the third paragraph of Article 35 of the Attorneyship Law No. 1136, joint stock companies with a principal capital of five times or more than the minimum principal capital amount stipulated in the TCC must have a contracted lawyer. In accordance with the current regulations, while joint stock companies with a principal capital of 250,000 TL or more are obliged to have a contracted lawyer, this limit has been increased to 1,250,000 TL as a result of the new regulation. In other words, as of January 1st 2024, the obligation to have a contracted lawyer will apply to joint stock companies with a principal capital of 1,250,000 TL or more.
This amendment aims to enable joint stock companies to receive more professional support in legal matters and to act more effectively in legal processes. The obligation to have a contract attorney is an important regulation in order to minimize the legal risks of companies and increase their legal compliance. This arrangement will help large companies in particular to come up with faster and more effective solutions to legal issues.
D) ECONOMIC AND LEGAL EFFECTS OF THE NEW REGULATION
The economic and legal effects of the new regulations are wide-ranging. Increasing the minimum capital amounts aims to strengthen the financial structures of companies and to operate on a more solid ground in the market. These changes will increase the sustainability and financial security of companies in the long term, although they will initially create a greater capital requirement for new entrepreneurs.
Increased capital requirements also create new opportunities for investors and entrepreneurs. Companies established with a larger capital can achieve a more competitive position in the market and appeal to a wider range of investors. This will increase confidence in the Turkish economy and increase its potential to attract new investments.
E) COMPLIANCE FOR EXISTING COMPANIES
The fact that existing joint stock and limited liability companies are not affected by these regulations allows them to continue their activities with their existing capital structures. However, companies planning to carry out transactions such as capital increase or type change in the future will need to adapt to the new minimum capital amounts. This is an important factor that companies should take into account in their long-term strategic planning.
CONCLUSION
These regulations, which will enter into force on January 1st 2024, are of great importance in terms of strengthening the capital structures of joint stock and limited companies in Turkey and placing them on a more solid basis in the market. Increasing the minimum capital requirements for new entrepreneurs and investors will increase economic security and the sustainability of companies. The fact that existing companies are not affected by these regulations allows them to continue their activities with their existing capital structures. The circulars and statements of the Ministry of Commerce on this issue will guide companies in adapting to the new regulations. In this context, it is of great importance for companies to adapt to these new regulations in order to guarantee their long-term success.
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