Freedom of Settlement of Foreign Companies

Att. Leyla Orak Celikboya, September 2013

Introduction

Globalization is one of the significant aspects that shape daily commercial life. It is possible to say that, through the globalization of production, commerce and economy, national borders disappear and establishing relationships between countries becomes easier and faster.

Commercial companies, which are the indispensable subject of our increasingly globalized commercial lives, have started to adapt and global companies have been formed. Such global companies can be defined as those which operate in the international arena without any differentiation of language, religion, race, nation, culture, custom, law, and that have a reputation and material trade capacity. Therefore, the freedom of settlement of companies with international operations has become an important issue.

This Newsletter article will briefly assess the freedom of settlement of foreign companies.

Freedom of Settlement of Foreign Companies in Turkey

Before analyzing the settlement requirements for foreign international companies in Turkey, it should be underscored that a company with legal personality should be recognized in countries other than that where it is established. Hence, whether such a company is defined and treated as a foreign company must be evaluated under Turkish law.

Within the scope of Turkish law, when a ‘foreign company’ is examined, it becomes clear that there is no concrete definition thereof. Despite the fact that the Turkish Commercial Code No. 6102 (TCC) does not explicitly define ‘foreign company’, scholars argue that a company whose headquarters is located abroad is regarded as a ‘foreign company’. Their argument hinges on TCC Art. 40, para. 4, which reads: “Branches in Turkey of commercial enterprises whose headquarters are located abroad shall be registered as if they are local commercial enterprises, without prejudice to the provisions of their own national laws related to the title of a company.


 

Moving the Headquarters of Foreign Companies to Turkey

Turkish law enables the headquarters of a company established abroad to be moved to Turkey. Pursuant to the Trade Registry Regulation issued by the Ministry of Customs and Trade, certain documents should be provided, such as: the documents required for registration of a commercial enterprise or a commercial company, a document certifying that the company which will settle in Turkey is actually a registered company in its country of origin (issued by the related foreign trade registry) and a document stating that the change of headquarters is in accordance with the relevant foreign law.

Also, an investigation must be made regarding whether the company bylaws of the foreign company moving its headquarters to Turkey are in accordance with and/or are adapted to be in compliance with Turkish law.

Establishment of Branches of Foreign Companies in Turkey

Foreign companies whose headquarters are located abroad may also establish branches in Turkey in accordance with Turkish Law. The aforementioned TCC Art. 40, para. 4 shall again be applicable. Pursuant to this article, the branches of commercial enterprises whose headquarters are located abroad shall be registered as if they were local commercial enterprises, and a fully authorized commercial representative who resides in Turkey shall be appointed for such branches.

Moreover, Art. 12 of the Code on Entry into Force and Application of the Turkish Commercial Code (Code No. 6103) also regulates the registration of Turkish branches of commercial enterprises or commercial companies whose headquarters are located abroad.

Pursuant to Code No. 6103, a number of conditions should be met in order to register a branch of a commercial enterprise or commercial company (with headquarters located abroad) in Turkey. Primarily, the conditions required by the legal system of the country of origin for registration of branches pursuant to the relevant types of commercial enterprises and commercial companies must be fulfilled. Furthermore, all documents such as the company’s articles of association and required declarations must be submitted to the relevant trade registry in Turkey for the registration and must be notified.


 

Moving the Headquarters of Turkish Companies Abroad

Art. 12 of Code No. 6103 pertaining to the registration of Turkish branches of commercial enterprises and commercial companies whose headquarters are located abroad also regulates Turkish companies moving their headquarters abroad.

Pursuant to the relevant article, a company residing in Turkey (whose headquarters are established within Turkey) can move abroad without being liquidated or being re-established in the country where it will relocate. However, certain conditions listed in the abovementioned article should be met. Such conditions are: having fulfilled the requisite conditions under Turkish law, the ability to continue operations in the relevant country in compliance with its legal system, providing proof that the creditors of the Turkish company are informed through notification of the address change, that the creditors are invited to pay their receivables and that their receivables are paid and secured.

Art. 116 of the Trade Registry Regulation also regulates the relocating of the headquarters of a company in Turkey abroad. This article specifies the documents required necessary for moving the headquarters of the company abroad.

Conclusion

The legislation regarding foreign companies’ freedom of settlement in Turkey and also the freedom of Turkish companies to move their headquarters abroad are briefly summarized above. The freedom and right to settlement of companies abroad becomes a more significant matter that requires detailed legal norms when the number of companies operating in an international arena increases, and where global companies increasingly appear. Developments in the globalised commercial and economic arenas should be taken into consideration for the preparation of any legislation regarding foreign companies’ freedom of settlement.