Freedom of Settlement of Foreign Companies

September 2013 Leyla Orak Çelikboya
% 0

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.

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
Parties to a Share Transfer Agreement and Privity of Contract

As a rule, rights and obligations arising from an agreement have legal consequences only between the creditor and the debtor which are parties to the agreement. This principle is referred to as "privity of contract." In general, contracts for the benefit of third parties, where the fulfillment of an...

Commercial Law 31.07.2022
Newsletter Articles
What Changes Does the Amended E-commerce Law Bring?

The rules of e-commerce, which grow and develop with the digitalizing world, are changing. E-commerce has become the driving force of the digital economy. However, considering the growth rate of e-commerce and the transformation it has undergone in a short time, it is obvious that some...

Commercial Law 31.07.2022
Newsletter Articles
Lawsuit for Dissolution of Companies for Just Cause

The dissolution of a company is a specific type of dissolution, which results in the cancellation of the legal personality which was gained by registration at incorporation. The specific proceeding which leads to the dissolution, and thus, the termination of a company upon the constitutive decision...

Commercial Law 30.06.2022
Newsletter Articles
Parting Ways in Family Businesses

Companies in which shares or authority to manage is held by members of a family are considered to be “family businesses”. Family members can hold shares that control the company, as well as retain management authority. Having a family business means opportunity, security and income for...

Commercial Law 30.06.2022
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
Branches And Liaison Offices
Commercial Law August 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.