Share Structure and Transfer in Turkish Companies

Share Capital Basics in Turkish Companies

Turkish companies — whether LLCs or JSCs — are structured around share capital (sermaye). Understanding how shares are structured, transferred, and valued is essential for investors at every stage, from initial formation to exit.

Minimum Capital Requirements

Minimum capital requirements were raised by Presidential Decree 7887 in November 2023. Always verify the current minimums as they can be updated.

LLC Share Structure

Share Capital Division

In an LLC, the total share capital is divided into shares (paylar) with a minimum nominal value of 25 TRY per share. For example, a 50,000 TRY LLC capital could be divided into:

• 2,000 shares × 25 TRY each, OR
• 1,000 shares × 50 TRY each, OR
• Any other combination, provided each share is at least 25 TRY

Shares do not need to be equal in value — different shareholders can hold different nominal value shares.

Shareholder Limit

An LLC can have a minimum of 1 shareholder and a maximum of 50 shareholders. If the number of shareholders exceeds 50 (e.g., through inheritance), the company must convert to a JSC or reduce the shareholder count.

LLC Share Certificates

LLC shares are not represented by physical share certificates in the traditional sense. Ownership is documented in:

• The articles of association (shareholders listed at formation)
• The share ledger (pay defteri) — a mandatory book recording all shareholders and transfers
• The Trade Registry — shareholder changes are registered publicly

LLC Share Transfer

Transfer Restrictions

Under TCC Article 595, transferring LLC shares requires approval by partners holding at least 75% of the share capital (unless the articles specify a different threshold or mechanism). This is a significant protection:

• Minority shareholders cannot sell their shares to a third party without majority consent
• The majority can block unwanted new shareholders
• Partners who wish to exit but cannot obtain consent may petition for dissolution in extreme cases

Transfer Procedure

1. Shareholder resolution: Partners holding 75%+ of capital must consent to the transfer
2. Share transfer agreement (pay devir sözleşmesi): Written agreement between seller and buyer
3. Notarization: The share transfer agreement and related resolutions must be notarized
4. Trade Registry filing: The change in shareholders must be registered with the Trade Registry within 15 days of the transfer
5. Share ledger update: Update the company’s share ledger to reflect the new ownership

Important: LLC share transfers are only effective against third parties after Trade Registry registration. Until registered, the transfer is not publicly visible.

Preemption Rights (Ön Alım Hakkı)

The TCC and most well-drafted LLC articles include preemption rights (right of first refusal) for existing partners:

• When a shareholder wants to sell, other shareholders have the right to purchase the shares at the offered price before they are sold to a third party
• The preemption right must be exercised within the period specified in the articles (typically 30–60 days)

Preemption rights can be waived in writing by the benefiting shareholders.

Share Transfer Valuation

For tax purposes, LLC share transfers must be at a price that reflects the share’s fair value. Transfer pricing rules apply between related parties. The Revenue Administration may challenge transactions priced significantly below:

• Book value per share (net assets / number of shares)
• Going concern value or earning capacity value

For non-related party transfers, market price is generally accepted.

JSC Share Structure

Share Types

JSC shares can be:

• Registered shares (nama yazılı pay): Issued to named holders; transfer recorded in the share ledger
• Bearer shares (hamiline yazılı pay): Not issued to a named holder; transferred by physical delivery (limited practical use after MKK mandatory registration requirements)

Note: Following global AML standards, Turkish law has imposed mandatory central registry requirements for bearer shares — bearer shares must be registered with the Central Registry Agency (MKK), eliminating anonymous ownership.

Share Classes in JSC

Unlike LLCs, a JSC can issue multiple share classes with different rights:

• Preferred shares (imtiyazlı paylar): Can carry priority dividend rights, liquidation preferences, enhanced voting (up to 15 votes per share), or other preferences
• Restricted voting shares: Shares with limited or no voting rights
• Founder shares: Special rights for founders in some structures

Share class rights must be defined in the articles of association and are registered in the Trade Registry.

JSC Capital Increase

When a JSC raises capital (e.g., in a funding round):

1. Board of directors resolution (for authorized capital increases within the authorized capital limit) or extraordinary general assembly resolution
2. New shares are issued at or above par value
3. The 25% of new shares must be paid up before registration (for initial formation only — subsequent increases may have different rules per the articles)
4. Capital increase registered with the Trade Registry within 15 days of completion

JSC Share Transfer

For registered JSC shares, transfer requires:

1. Written share transfer agreement (less formal than LLC)
2. Update of the company’s share ledger (pay defteri) — maintained by the company
3. For listed shares: Transfer through the stock exchange or custodian

Articles may impose transfer restrictions (bağlam koşulları) on registered shares:

• Consent of the board or shareholders for transfers
• Preemption rights
• Lock-up periods

Transfer restrictions must be stated in the articles and are publicly visible.

Bearer JSC Shares

Under Turkish Commercial Code reforms, bearer shares of non-public companies must be registered with the Central Registry Agency (MKK). The MKK maintains a central registry of bearer share ownership, eliminating anonymous ownership.

Share Pledge

Shares can be pledged (rehin) as collateral for loans:

LLC Share Pledge

• Partner resolution (75% consent) generally required to pledge shares
• Pledge recorded in the share ledger
• Enforced per general civil pledge rules

JSC Share Pledge

• Board resolution or general assembly (if articles require)
• Pledge agreement in writing
• For listed shares: Pledge registered with MKK

Shareholder Exit Mechanisms

Well-structured company agreements typically include exit provisions:

These rights are typically defined in a shareholders’ agreement alongside the articles of association.

Frequently Asked Questions

Can a Turkish LLC have a single shareholder? Yes. A single-person LLC (tek kişilik şirket) is permitted. The sole shareholder can also be the sole manager. All corporate decisions are made by written resolution of the sole shareholder.

What is the difference between paid-up capital and authorized capital? Paid-up capital (ödenmiş sermaye) is the amount actually contributed by shareholders. Authorized capital (kayıtlı sermaye) is a system available to JSCs where the articles authorize the board to increase capital up to a maximum limit without requiring each increase to go to the general assembly. Authorized capital system requires SPK registration for public companies.

Do LLC shareholders need to consent to every share transfer? Yes — transfers of LLC shares to third parties require consent of at least 75% of the share capital. Transfers between existing shareholders may be possible without third-party consent depending on the articles.

Is an LLC or JSC better for a startup seeking venture capital investment? A JSC is strongly preferred for VC-backed startups. JSCs allow multiple share classes (preferred shares, founder shares), have no 50-shareholder limit, and have established market norms for VC term sheets. LLCs are simpler but less compatible with typical VC investment structures. Many startups convert from LLC to JSC when they seek their first VC investment.