Cengiz Soylemezoglu
Seniour Lawyer
LIMITED COMPANY (LTD.)
I. DEFINITION
A limited company is a company formed by one or more real or legal persons, having a corporate title and a predetermined (fix) capital and with a liability limited to the corporate assets. The liability of the shareholders are towards the company and limited to their share of the capital.
II. INCORPORATION
A limited company can be formed by one shareholder but this number cannot exceed fifty (ComA. art. 504/I). Shareholders may be real or legal persons. There must be auditors in limited companies having more than 20 shareholders (ComA., art. 548/I)
Articles of association of a limited company must be drawn up in writing and the signatures of the founders must be authenticated by a notary (ComA. art. 505). Articles of association should also be submitted for approval to the Ministry of Industry and Trade or the local dircetorate of this Ministry, as it is also the case with corporations. The following items must take place in the articles of assocation: (i) The seat and the corporate title of the company: (ii) The subject matter of the company, (iii) The capital and the commitment of each shareholder towards the capital; (iv) How the announcements relating to the company shall be made; (v) Duration of the company; (vi) Time and method for the distribution of the dividends; (vii) Amount of the reserves: (viii) Appointment of the directors.
Following the approval by the Ministry of Industry and Trade, the articles of association with other relevant documents must be submitted to the register of commerce for registration. Upon registration the company acquires its legal personally.
The minimum capital requred to establish a limited company is 10000-YTL (ComA., art. 507/I). 25 % of this amount must be paid in either simultaneously with the formation of the company or within three monts following the registration. Remaining amount can be paid in by instalments –conditions of which must be stated in the articles of association- within three years. The share of each shareholders may not be less than 25,00-YTL. or folds of this figure. No share certificates are issued in a limited company. But, shareholders can transfer their shares to third parties or pledge them.
III. SHAREHOLDERS and their LIABILITY
Shareholders are liable towards the company and as a rule their liability is limited to their commitment of capital. Any shareholder, who has paid in all of his commitments, will no longer be under obligation. Creditors of the company cannot, in any case, direct any claim towards the shareholders.
However, there are two exceptions to limited liability regime in limited companies: (i) The company may take over the share of a shareholder who has not fully paid in his commitment, to cover the debts owned by that shareholder and sell this share afterwards. In this case, if the subsequent owner cannot also pay his commitment, the other shareholders are obligated to compensate for the outstanding amount. Their liability would still be towards the company but it will be joint liability (ComA., art. 532/III). (ii) Following the default of a shareholder in paying in his commitment for the capital, the company may expel the shareholder and acquire his share and afterwards sell it to any other person who offers to buy that share. In case the new owner cannot also pay the amount outstanding, the liability of the previous (expelled) shareholder remains intact and the company may demand payment from him (ComA., art. 531)
IV. ADMINISTRATION AND REPRESENTATION
The ComA. foresees two organs for administration and representation of the limited companies: Shareholders General Assembly and Directors.
1. Shareholders General Assembly
Shareholders General Assembly is in a comparable position to the shareholders general assembly in the corporations; its meetings, powers and the rules and procedures for adopting resolutions, are regulated in quite similar, though not identical, manner.
Ordinary general assembly must convene once each year, within three months following the end of the fiscal year. The call for the meeting should be made in accordance with the relevant provisions of the articles of association. If no provision in this regard exists in the articles of association, the notice must be sent by a registered mail, including the agenda, five days prior to the day of the meeting. The necessary procedures and formalities are duty of the directors.
Extraordinary meetings are held where the directors deem them necessary. But, the shareholder (s) who hold 10 % of the company capital (i.e. the minority) may demand for an extraordinary meeting. If the directors do not accept this demand, they have the right to request for a court order to convene the meeting.
The shareholders general assembly, in limited companies having more than twenty shareholders must convene to debate the items in the agenda and adopt resolutions; whereas the limited companies with less than twenty shareholders may adopt resolutions by correspondence (ComA., art. 536/I and II).
In both cases to adopt a resolution an absolute majority of the shares is necessary; i.e. pursuant to ComA., art 536/III, the shareholders who hold at least more than half of the company capital should vote in the positive direction.
Its powers can be summarised as the following: (i) To amend the articles of association; (ii) To appoint and dismiss the directors; (iii) To appoint and dismiss the auditors; (iv) Approve the balance sheet and loss and profit account and determine the allocation of the profit; (v) To release and discharge the directors.
2. Directors
Power to administer and represent the company is vested with the directors. To a great extend, the directors in the limited company, occupy a similar position like the members of the board of directors in corporations.
But, one significant feature of the limited companies is that, in a similar way to collective companies, in principle all the shareholders have both the right and duty to administer and represent the limited company (ComA., art. 540/I). Based on this rule all the shareholders, in their capacity as directors of the company, are eligible to administration and representation.
However, by the articles of association or pursuant to a resolution of the shareholders, one or more of the shareholders can be appointed as directors. Appointmant of a director who is not a shareholder is also allowed for (ComA., art. 540/II and 541).
V.TERMINATION
A limited company is terminated upon the occurrence of the following conditions: (i) Coming into existence of an event which was foreseen as a cause of termination in the articles of association; (ii) By the decision of the ¾ majority of the shareholders who own ¾ of the capital; (iii) Upon the bankruptcy of the company; (iv) A decision by the court, delivered pursuant to a suit filed by a shareholder; (v) Notification made by a bankruptcy administration that one of the shareholders is declared bankrupt; (vi) Loss of 2/3 of the capital.
Upon termination, a limited company is liquidated and deregistered.
