Nationality Of Legal Entities

October 2012 Süleyman Sevinç
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Introduction

There is no clear definition, nor any explicit set of criteria, regarding the nationality of legal entities that is regulated under the Turkish legal system. Nonetheless, under the relevant articles of the Turkish Commercial Code (“TCC”) No. 6102, there are some specific articles that reference the nationality of a company.

One of the articles that refers to the nationality of a company is Article 421 of the TCC regarding joint stock companies. It establishes the voting quorum for amendment of the articles of association. Article 421 states that; “Unless regulated otherwise by law or under the articles of association, the resolutions for amendment of the articles of association shall be adopted with the majority of votes present at the general assembly meetings in which at least half of the company’s capital is represented.” In the same article, it is indicated that resolutions related to moving a company’s headquarters out of Turkey shall be unanimously adopted by the shareholders representing all shares of the capital or by their representatives. This reference indirectly confirms that the concept of ‘nationality of a company’ is accepted under Turkish law.

Despite the lack of a clear definition, the distinction between domestic and foreign companies is based on headquarters’ location as indicated in Article 40 of the TCC. Pursuant to this article: “the branches of commercial enterprises whose headquarters is registered in Turkey must be registered and announced with the trade registry where the branch is located.” and also “the branches of commercial enterprises whose headquarters is registered outside Turkey will be registered as local commercial enterprises, while the foreign laws which govern their trade names will be observed.

Nationality of Entities regulated under the Banking Law

Turkish Banking Law No. 5411, published in the Official Gazette dated 01.11.2005 and numbered 25983 (re.), distinguishes between companies incorporated in Turkey and foreign companies incorporated outside of Turkey. Article 6 of the Banking Law regulates permission for establishment or opening branches and representative offices in Turkey. It holds: “The establishment of a bank in Turkey or the opening up of the first branch in Turkey by a bank established abroad shall be permitted upon affirmative votes of at least five members of the Banking Regulation and Supervision Board provided that the establishment conditions laid down in this Law are fulfilled.” Under Article 6/4 of the Banking Law, it is stated that: “The banks established abroad may open up representative offices in Turkey with the permission of the Board provided that they do not accept deposits or participation funds and [that] they operate within the framework of the principles to be set by the Board.”

Article 7 of the Banking Law states the conditions for establishment of a bank in Turkey. Further, requirements for the opening of a branch in Turkey by foreign banks are enumerated in Article 9 as follows:

“a) Its primary activities must not have been prohibited in the country where they are headquartered,

b)The supervisory authority in the country, wherein the headquarters of the bank is located should not have negative views regarding its operation in Turkey, c)The paid-in capital reserved for Turkey should not be less than the amount indicated in Article 7,

d)The members of the board of managers should have adequate professional experience to be able to satisfy the requirements laid down in the corporate governance provisions and to perform the planned activities,

e) It must submit an activity program indicating work plans for the fields of activity covered by the permission, the budgetary plan for the first three years as well as its structural organization, and

f) The group including the bank must have a transparent partnership structure.”

Nationality of Entities regulated under the Mining Law:

Turkish Mining Law No. 3213, published in the Official Gazette dated 15.06.1985 and numbered 18785, provides that mining rights are exclusive to Turkish citizens and that only “legal persons incorporated under Turkish Law” are accorded such exclusivity. Pursuant to the Article 6 of the Mining Law: “Mining rights shall be granted to the Turkish citizens that are qualified to enjoy civil rights, companies that are legal entities established in accordance with the laws of the Republic of Turkey and whose statute prescribes that mining is included in their field of activity, public economic enterprises authorized on this matter and their entities, subsidiaries and affiliates and other public institutions and administrations.”

Nationality of Entities regulated under the Direct Foreign Investment Law:

Article 2/a of Turkish Direct Foreign Investment Law No. 4875, published in the Official Gazette dated 17.06.2003 and numbered 25141, defines a foreign investor as

“1) Real persons who possess foreign nationality and Turkish nationals who reside abroad, and

2) legal entities established under the laws of foreign countries and international institutions who make foreign direct investment in Turkey.”

Conclusion

As evidenced above, although there is no clear definition, nor any explicit set of criteria, regarding the nationality of legal entities, there are some provisions in the TCC, the Banking Law, the Mining Law and the Direct Foreign Investment Law that reference the nationality of legal entities. Considering the relevant aforementioned regulations, the general opinion under Turkish law is that a company incorporated in Turkey under Turkish law has Turkish nationality.

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