Branches And Liaison Offices

August 2013 Naciye Yılmaz
% 0

Developing commercial relations and the need for access to new markets drives commercial enterprises to establish branches or liaison offices in different places. This newsletter article will assess the differences in the legal principles and procedures that govern the establishment of branches and liaison offices.

Branches

Definition and Elements. There is no definition of branch under Turkish Commercial Code No. 6102 (“TCC”). However, Article 9/2 of Law No. 5174 on the Union of Chambers and Commodity Exchanges of Turkey and Chambers and Commodity Exchanges (“Law No. 5174”) stipulates that “although connected to the registered office [headquarters], workplaces which have a separate equity and accounting or workplaces for which accounts are kept in a registered office and have no separate equity but perform commercial activities” shall be considered as branches. Therefore, the essential elements of a branch are; (i) to be connected to the registered office, (ii) to be independent, (iii) to operate in a different place, (iv) to have separate accounting.

Regarding branch operations, it is mentioned that the branch’s operations should be identical or similar to the registered office’s operations. Nevertheless, branches independently perform commercial operations.

Consequences. The TCC regulates certain obligations for the branches of commercial enterprises. First, branches must be registered with the trade registry as per Art. 40/3 TCC and to the chamber pursuant to Law No. 5174. Therefore, branches of commercial enterprises having their registered offices in Turkey shall be registered to the trade registries of the place where they are situated. Paragraph 4 of the same article sets forth that branches of foreign-based commercial enterprises “shall be registered similarly to domestic commercial enterprises, but provisions pertaining to the trade name of their country of origin are reserved”. For such branches, a commercial representative should be appointed with full authorization. Moreover, as per Article 9 of Law No. 5174, branches shall also be registered in chambers of the places where they are situated.

Second, pursuant to the Article 48 TCC, “all branches should use the trade name of the registered office by mentioning the qualification of being a branch”. Branches of foreign-based commercial enterprises should “mention the locations of the registered office and the branch and the qualification of being a branch in their trade name”.

In addition, since the branch is property of the commercial enterprise, pursuant to Art. 202 of the Turkish Code of Obligations (“CO”) and Art. 11 TCC, in the event of the transfer of a commercial enterprise, the branch shall also be subject to the transfer unless otherwise stipulated in the transfer agreement.

It should be also mentioned that it is possible to file a lawsuit in the place where the branch is situated against the registered office pursuant to the Art. 14/1 of Civil Procedure Law No. 6100. However, this possibility of filing such a lawsuit is limited by the operations of the branch.

Opening a Branch. Commercial enterprises wiling to open a branch in Istanbul should file an application with the trade registry with necessary documentation and deposit a fee for this purpose. The related documentation is different for domestic and foreign-based commercial enterprises. However, there is no differentiation for the required documentation related to the type of the commercial enterprise (limited liability, joint stock companies etc.).

Liaison Offices

Definition and Elements. Pursuant to the Article 6 of the Application Regulation of the Foreign Direct Investment Law (“Application Regulation”), the Ministry of Economy is competent to provide authorization to commercial enterprises established under foreign laws that want to open a liaison office, under the condition that such liaison offices do not perform commercial operations. The Ministry of Economy is also authorized to extend this authorization. Article 8 of the Application Regulation stipulates fields of activity for liaison offices. Therefore, liaison offices may be defined as representation offices which are attached to the foreign-based commercial enterprise and which can provide services such as representation, hosting, securing Turkish suppliers as well as quality control and audit of these suppliers, communication and transfer of information, planning and researching without conducting commercial activities.

Thus, foreign-based commercial enterprises may open branches or liaison offices. It should be emphasized that liaison offices must not conduct commercial activities. Therefore, the expenses of a liaison office shall be entirely covered by the foreign-based commercial enterprise.

Opening a Liaison Office. Commercial enterprises that wish to open a liaison office in Turkey should apply to the Ministry of Economy with the necessary documentation. Pursuant to Article 8 of the Application Regulation, the Ministry of Economy shall provide authorization for 3 years at maximum. Therefore, it is necessary to apply to the General Directorate of Incentive Implementation and Foreign Investment before the expiration of the authorization in order to secure an extension.

Article 7 of the Application Regulation lists the required documentation for opening a liaison office. These documents are as follows:

  • Application form;
  • Declaration comprising the scope of activity of the liaison office and a declaration with a commitment stating that the liaison office shall not perform any commercial activity, and a document indicating the signature authorization for the person signing the document on behalf of the foreign-based commercial enterprise;
  • Certificate of activity which is duly authenticated with an Apostille;
  • Activity report or balance sheet and income statement of the foreign-based commercial enterprise;
  • Authorization certificate to be provided to the person/persons authorized to conduct the activities of the liaison office; and
  • Power of attorney in the event the establishment procedures shall be handled by a person other than authorized person/persons.

Conclusion

Foreign-based commercial enterprises have several possibilities for conducting business in Turkey. Two of these possibilities are opening a branch or a liaison office as detailed above. However, while evaluating these possibilities, determination of the scope of the company’s activity is important since the liaison offices must not perform commercial activities, but rather aims to represent the commercial enterprise within the market and to provide it information related to the market. Subsequent to the determination of the scope of activity, application and authorization procedures shall be followed before the relevant authorities.

All rights of this article are reserved. This article may not be used, reproduced, copied, published, distributed, or otherwise disseminated without quotation or Erdem & Erdem Law Firm's written consent. Any content created without citing the resource or Erdem & Erdem Law Firm’s written consent is regularly tracked, and legal action will be taken in case of violation.

Other Contents

Newsletter Articles
Carriage of Goods by Road under the Turkish Commercial Code

Turkey ratified the Convention on the Contract for International Carriage of Goods by Road (“CMR”) in accordance with Act No. 3939 dated 7 December 1993, and the CMR entered into force in Turkey on 31 October 1995. In accordance with Article 1 / 1 of the CMR, the carriage of goods by road...

Commercial Law August 2017
Newsletter Articles
Ordinary Partnerships

Ordinary partnerships are governed by Article 620 et seq. of the Turkish Code of Obligations No. 6098 (“TCO”). An ordinary partnership agreement is defined as an agreement whereby two or more persons undertake to join efforts and/or goods to reach a common goal...

Commercial Law April 2014
Newsletter Articles
Nationality Of Legal Entities
Commercial Law October 2012
Newsletter Articles
Board Members’ Financial Rights in the Context of Disguised Profit Transfers

The concept of disguised profit transfer in joint stock companies, in its broadest meaning, covers the transfer of company assets to related parties and may occur in different ways. This concept is regulated in detail under capital markets legislation...

Commercial Law February 2022
Newsletter Articles
Newsletter Articles
Newsletter Articles
General Assembly Summons Lawsuits
Commercial Law August 2021
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Actual Carrier in Carriage of Goods by Sea
Commercial Law February 2021
Newsletter Articles
Newsletter Articles
Newsletter Articles
Freight Forwarder Contract under Turkish Law
Commercial Law September 2020
Newsletter Articles
Veto Rights in Joint Stock Companies
Commercial Law August 2020
Newsletter Articles
Newsletter Articles
Ship Hypothéque under Turkish Law
Commercial Law May 2020
Newsletter Articles
Newsletter Articles
Newsletter Articles
Legal Liability of Limited Company Managers
Commercial Law January 2020
Newsletter Articles
Employer’s Remedies under FIDIC Silver Book
Commercial Law October 2019
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Transfer of Seized Shares
Commercial Law July 2019
Newsletter Articles
Newsletter Articles
Newsletter Articles
Corporatization of Football Clubs
Commercial Law April 2019
Newsletter Articles
Newsletter Articles
2016 York Antwerp Rules
Commercial Law March 2019
Newsletter Articles
Newsletter Articles
Amendments on Capital Loss and Insolvency
Commercial Law September 2018
Newsletter Articles
Foreign Currency Payment Ban
Commercial Law September 2018
Newsletter Articles
Newsletter Articles
Installment Sales Agreements
Commercial Law July 2018
Newsletter Articles
Newsletter Articles
Newsletter Articles
Arrest of Ships under Turkish Law
Commercial Law May 2018
Newsletter Articles
Share Pledges in Joint Stock Companies
Commercial Law May 2018
Newsletter Articles
Newsletter Articles
Updated FIDIC Contracts
Commercial Law April 2018
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Features of Joint Venture Contract
Commercial Law October 2017
Newsletter Articles
Newsletter Articles
Stock Option Plans in Turkey
Commercial Law June 2017
Newsletter Articles
Voting Agreements under Turkish Law
Commercial Law May 2017
Newsletter Articles
Newsletter Articles
Pre-emptive Right in Joint Stock Companies
Commercial Law April 2017
Newsletter Articles
Holding Company Structure under Turkish Law
Commercial Law January 2017
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Loss Of Capital in Joint Stock Companies
Commercial Law September 2015
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Non-Compete Obligation Of The Commercial Agent
Commercial Law December 2014
Newsletter Articles
Right To Request Special Audit
Commercial Law October 2014
Newsletter Articles
Special Committee Of Preference Shareholders
Commercial Law October 2014
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Conditional Capital Increase
Commercial Law March 2014
Newsletter Articles
Newsletter Articles
General Communiqué On Electronic Books
Commercial Law December 2013
Newsletter Articles
Domination Agreements
Commercial Law January 2014
Newsletter Articles
Newsletter Articles
Representation in Joint Stock Companies
Commercial Law December 2013
Newsletter Articles
Squeeze-Out in Group Companies
Commercial Law November 2013
Newsletter Articles
Shareholder Agreements
Commercial Law November 2013
Newsletter Articles
The Regulation On Private Health Insurance
Commercial Law October 2013
Newsletter Articles
Newsletter Articles
Newsletter Articles
Freedom of Settlement of Foreign Companies
Commercial Law September 2013
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Conversion of the Commercial Enterprise
Commercial Law April 2013
Newsletter Articles
Newsletter Articles
Trade Registry Regulation
Commercial Law January 2013
Newsletter Articles
Newsletter Articles
Financial Leasing Agreements
Commercial Law December 2012
Newsletter Articles
Newsletter Articles
Newsletter Articles
Advance Dividend
Commercial Law September 2012
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles
Newsletter Articles

For creative legal solutions, please contact us.