The Turkish Commercial Code numbered 6102 dated 01.07.2012 (“TCC”) has introduced several new advantages of establishing joint stock companies (“JSC”) which has decreased the number of investors who choose to operate within limited liability companies (“LLC”). Therefore, since 01.07.2012 the number of newly established joint stock companies and limited liability companies which changed their legal forms into joint stock companies has increased at a remarkable amount.
The advantages of joint stock companies over limited liability companies pursuant to TCC may be listed as; less responsibilities to shareholders, not collecting income tax from the sale of shares, less share transfer requirements, ability to go public, ability to issue shares to bearers, returnability of loans lent to shareholders and being able to amend the articles of association easily; all of which would be explained briefly below.
2. Responsibilities of Shareholders:
The shareholders of joint stock companies which are not members of the board of directors cannot be held responsible of the companies’ tax and/or SSI premium debts which could not be collected from the company itself. However, shareholders of limited liability companies are liable (with their personal assets) of them.
3. The Income Tax of Share Sales:
If a share of a JSC is sold after 2 years of its issuance, the income would not be taxable; whereas the income generated from the sale of a LLC share is taxable regardless of the date of its issuance.
4. Share Transfer Requirements:
The transfer of joint stock companies’ shares are much easier (and cheaper) than the transfer of limited liability companies’ shares. To explain; the transfer of a JSC share is not required to be notarized or announced by Turkish Trade Registry Gazette (“TTRG”), whereas the share transfer of a LLC would not be valid if it is not notarized, registered by the relevant trade registry and announced at TTSG.
5. Public Offerings:
TCC enabled the joint stock companies to go public, unlike the limited liability companies.
6. Bearer Share Certificates:
Joint stock companies can legally issue bearer and registered share certificates and whereas limited liability companies can only issue registered share certificates.
7. Shareholder Loans:
The loans lent to JSC’ shareholders and the people related to them which substitute for its equity capital can always be reinstated. However the loans to LLC’ shareholders and the people related to them can only be reinstated after all of the other receivables.
8. Amendment of Articles of Association:
The articles of association of a JSC can be amended by the votes of %50 of its shareholders. Differently, it is only possible to amend a LLC’s articles of association with the resolution of 2/3rd shareholders.
In conclusion, it is much more advantageous to establish a JSC or to change the form of a LLC to a JSC.
Gülaç Law Firm