Hi! In our first blog post, we covered "Which Business Entity is the Best for Start-ups?" and shared with you why joint-stock companies are the best business type for start-ups. If you haven't read it yet: (link to the blog post) Let's find out the details of a joint-stock company and look at its establishment processes.
In a nutshell, what is a Joint-Stock Company?
Defined as a company of which capital is definite and divided into shares, responsible for its debt limited only to its assets in the Turkish Commercial Code, joint-stock companies can be established for all kinds of economic-commercial interests and economic purposes that are not prohibited by law.
What Are the Features Offered by Joint-Stock Companies?
Joint-stock companies must be established under a business name and register this name in the trade registry office. The trade name you will register must be related to the subject of the work you will operate.
Joint-stock companies are companies with legal entities. Their legal entities are recognized following the registration in the trade registry.
During the establishment process, the purpose of establishing the joint-stock company should be clearly outlined in the articles of association.
While publicly held joint-stock companies require a minimum capital of 50,000 TRY, the relevant figure is a minimum of 100,000 TRY for non-public joint-stock companies.
During company establishment, one-quarter of the capital must be blocked. The remaining amount must also be paid within 24 months following the registration of the company.
A joint-stock company can be established by a single individual as well as multiple natural and legal entities. The upper limit for establishing a joint-stock company is a maximum of 500 shareholders.
Shareholders are only liable to the company with the capital shares they have committed.
Among the business types in the Turkish Commercial Code, only joint-stock companies have the right to issue stocks and bonds.
Although joint-stock companies can be represented by shares, it is required to pay its entire capital to issue bearer shares.
Joint-stock companies are corporate taxpayers with a 20% rate as the basis of tax assessment.
What Are the Establishment Processes of Joint-Stock Companies?
Article 335 of the TCC on establishing a joint-stock company will guide us within this context. In this article, it is stated that "A company is incorporated upon the declaration of the founders of their intention to incorporate a joint-stock company in the articles of association drafted in compliance with the law, by which they have unconditionally undertaken to pay the capital in full, where their signatures are notarized or which they sign before the head or deputy head of trade registry offices." Thus, we can understand that the first step of establishing a joint-stock company is to prepare the articles of association and then pay the capital.
During the company establishment, at least 25% of the shares committed in cash must be deposited into a bank account opened on behalf of the company before the company's registration. As you can remember, we have previously stated that the minimum capital requirement for a joint-stock is 50,000 TRY. Practically, this process is completed by depositing 12,500 TL, 25% of 50,000 TRY, to the bank.
Also, it is stated in the TCC that joint-stock companies are subject to permission of the Ministry of Customs and Ministry of Trade for company establishment. Following this step, the company must be registered and announced in the trade registry.
What Are the Things You Have to Include in the Articles of Association of a Joint-Stock Company?
The TCC lists what needs to be included in the joint-stock company's articles of association;
Company’s trade name and location of the headquarters,
Company’s scope of activity with its fundamental points specified and defined,
Company’s capital and the nominal value of each share, condition and circumstance of their payment,
Whether share certificates are registered or bearer; privileges provided for certain shares; transfer restrictions,
Rights and non-monetary assets contributed as capital and their values; amount of shares to be given in consideration of these, in case of an acquisition of a business and non-monetary assets; consideration of goods and rights purchased by the founders on behalf of the company for the incorporation of the company and amount of the fee; the allowance or the bonus that needs to be paid to those who provided services during the incorporation of the company,
Benefits to be provided from the company profit to the founders, members of the Board of Directors, and other persons,
Number of members of the Board of Directors; members authorised signatories on behalf of the company,
Invitation for General Assembly; voting rights,
If duration of the company is limited to a period, such period,
The form of announcements related to the company,
Types and amounts of capital shares subscribed by shareholders,
Accounting period of the company.
Documents Required to Establish a Joint-Stock Company;
Company Registration,
Company’s Trade Name,
Business Rental Contract,
Capital Sum,
Certificate of Residence of Shareholders,
Copy of Shareholders' Identity Cards,
Shareholders' Equity Ratio,
Document representing the 25% of the capital in the bank account.
Well what kind of benefits does being a joint-stock company offer startups?
In joint-stock companies, the company is responsible for its debts only with its property holdings. Shareholders are not responsible for company debts. This feature of joint-stock companies allows investors to become your shareholders confidently. Some investors even require the relevant company to be a joint-stock before investing. Then let's look at what a joint-stock company offers different from other business types: If you would like to merge with a company, you can be the assignee shareholder.
It will not be possible to claim the dissolution of your company due to one of your shareholders' debts.
If you or your venture fails, you can maintain the sustainability of your entrepreneurial career since joint-stock companies allow shareholders and the Board of Directors to have the minimum liability.
In case the company makes a business exit, the joint-stock company with printed stocks and certificates is exempt from income tax for holding the company shares for two years. Namely, the exit status is not subject to pay income tax arising from income gain.[1]
In conclusion, considering the approaches to business risks in terms of investors and entrepreneurs, it can be clearly seen that the best choice is limited and joint-stock companies, that is, the companies with share capitals. However, in case you would like to decide on the company type after putting your idea into effect, even on a small scale, establishing a sole proprietorship can also be a good starting point.[2]"
We hope you have enjoyed reading our blog post and learned new things. The following blog post in our series: What is a Limited Company and How to Establish One?. See you soon, stay healthy :)
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Sources Turkish Commercial Code Numbered 6102 Joint-Stock Company Establishment Processes
Joint-Stock Company Establishment Guide (Hacıpaşaoğlu & Şencan, 2018)
[1] Paraşüt Mikro Group. "The Diary of an Entrepreneur: Which Company Type Is the Best for Establishing a Business? (Girişimci Günlüğü: Hangi tür şirketi kurmak daha mantıklı?)". Erişim: 6 Kasım 2021. https://www.isnadsistemi.org/guide/isnad1/isnad-dipnotlu/isnad-dipnotlu-atif-sistemi/web-sayfalarinin-kaynak-gosterimi/. [2] Erdem Mümtaz Hacıpaşaoğlu & Okan Şencan, Startup Law (Startup Hukuku), Istanbul, Sola, 2019, page 77.
