A. MINIMUM CAPITAL REQUIREMENTS UNDER THE TURKISH COMMERCIAL CODE FOR COMPANIES HAVE BEEN INCREASED.
By Presidential Decree No. 7887 published in the Official Gazette of 25 November 2023 and numbered 32380, it has been decided to increase the minimum capital amounts determined under the Turkish Commercial Code for joint stock companies and limited liability companies to be established in Türkiye. Pursuant to the Presidential Decree, it has been decided to increase the capital amounts determined under the Turkish Commercial Code by five times more for (i) joint stock companies with regular share capital system, (ii) joint stock companies that have adopted the registered capital system and (iii) limited liability companies. Accordingly, the following changes are implemented;
- For joint-stock companies that have adopted the share capital system, the minimum amount of capital regulated in Article 332 of the Turkish Commercial Code was set at TRY 50,000. However, this amount was increased to TRY 250,000 by presidential decree.
- For private joint-stock companies that have adopted the registered capital system under the Turkish Commercial Code, the minimum amount of initial capital regulated in Article 332 of the Turkish Commercial Code was set at TRY 100,000. However, this amount was increased to TRY 500,000 in accordance with the Presidential Decree.
- For limited liability companies, the minimum capital required by Article 580 of the Turkish Commercial Code was set at TRY 10,000, but this was increased to TRY 50,000 by the Presidential Decree.
In the Official Gazette of 25 November 2023, while the first version of the Presidential Decree set the date of entry into force as October 1st, 2024, the corrective decision published on November 26th, 2023 changed the date of entry into force of the Presidential Decree as of January 1st, 2024. However, it is necessary to clarify what is the meaning of the phrase "[it] shall enter into force on the date of its publication, will be effective as of January 1st, 2024" for companies will be established and for the existing companies.
B. HOW WILL THE INCREASE IN THE MINIMUM CAPITAL REQUIREMENTS AFFECT EXISTING COMPANIES?
First of all, according to the presidential decree, these decisions will affect the joint stock and limited liability companies that will be established for the first time under the Turkish Commercial Code after 1 January 2024. In this sense, it is mandatory that the minimum capital of the companies to be established next year must be higher than the current limits. Yet, the impact of the presidential decree on existing companies should be evaluated separately.
In 2012, during the transition from the old Turkish Commercial Code No. 6762 ("oTCC") to the new Turkish Commercial Code No. 6102 ("TCC"), the minimum capital requirements for joint stock companies were increased and various regulations were introduced for companies established under Law No. 6762 to increase their capital to the limits set by Law No. 6102. In this regard, Provisional Article 10 of TCC No. 6102 provides that the required capital increases must be made in accordance with the provisions of the TCC by 14/2/2014. Accordingly, the Ministry of Trade published the "Communiqué on Increasing the Capital of Joint Stock Companies and Limited Liability Companies to New Minimum Amounts and Determining the Joint Stock Companies Whose Establishment and Amendment of Articles of Association are Subject to Permission" ("Communiqué"), and Article 7 of the Communiqué stipulates that joint stock companies with a capital of less than the stipulated minimum amount and limited liability companies with a capital less than minimum amounts must increase their capital above those limits before 14.2.2014. Regarding the companies that did not increase their capital to the minimum amounts within that period, paragraph 3 of Article 7 of the Communiqué regulates that these companies will be deemed to have dissolved at the end of provided period.
It is important to note that these provisions have specific requirements for the transition process from the oTCC to the new TCC. Therefore, it could be said that the result of being deemed dissolved cannot be applied to companies that will fall below the minimum capital requirements set out in the Presidential Decree after 2024.
Indeed, the Ministry of Trade has also published a statement explaining how the presidential decree will be applied to existing companies. The Ministry of Trade's Announcement states that: "These amounts will be applied to the newly established joint-stock and limited liability companies with effect from 1 January 2024". In addition, the Ministry of Trade’s statement further states: "Although there is no obligation to increase the capital of our existing companies whose capital is below the specified amounts at this stage, it is beneficial for them to increase their capital to at least the specified amounts in order to strengthen their equity structure”.
In conclusion, taking into account the Presidential Decree, the provisions of the Turkish Commercial Code and the announcement of the Ministry of Trade, it can be argued that existing companies below the minimum capital amounts do not have an obligation to increase their capital. However, as the Presidential Decree does not distinguish between old and new companies, it may also be argued that the Presidential Decree is binding on all companies. Therefore, in line with the Ministry of Trade's announcement, it can be assumed that it could be advisable for existing companies that fall below the minimum capital amounts to increase their capital in order to strengthen their own structures.
Kindly submitted for your information.
GÜNGÖR LAW FIRM