Recently I received an enquiry from a new client about the establishment of a company in Turkey. The client had been given the wrong information earlier and was terrified of the idea of having to find five shareholders to set up a joint stock company. This now incorrect information made me remember how unnecessarily difficult it was to set up a joint stock company in the past. Those who wanted to set up a joint stock company either created a complex mechanism of four to five smaller companies just to meet the requirement of the five shareholders or had to give 0.001 percent shares to some persons and make them shareholders.
As you can imagine, these unreal/dummy shareholders were sometimes difficult to manage. The real owner of the company had to take care of relations with these dummy shareholders and in some cases severe problems occurred, such as that the person who held the shares of the company wanted to take advantage of the shareholder position to generate some more money. This risky structure was finally abolished by the new Turkish commercial code that came into force.
The information given to the client was based on the old version of Turkish commercial code, which was changed a few years ago. Yes, in the past you needed a minimum of five shareholders to make a joint stock company and two shareholders to make a limited company. This minimum shareholders requirement has been changed and now you do not need a minimum of five or two shareholders to set up a company in Turkey. You can set up a sole partner company — i.e., you only need one person to set up a company. This sole shareholder can either be a legal entity or a real person. Needless to say, you can have as many shareholders as you want, as long as you stay within the limits set by the law.
Coming back to the topic, since it is now possible to make a joint stock company with only one shareholder, it might be a good idea to make a new structure and simplify your company by reducing the number of shareholders. Reducing the number of shareholders will not only give a more free state of mind to the owner of the company. There are several benefits to going through this simplification process.
Imagine that you have a company with five shareholders, all real persons including yourself. First, with fewer shareholders, your paperwork will be less; second, you don’t need to talk to people to get their signatures for the shareholders meetings and so on. Imagine that you have a company with five shareholders and all shareholders are legal entities. Just as above, the local company will have less paperwork and there will be no need to make resolutions for each of the shareholding companies. You will not need to reflect the changes in the boards or signing authorities of each shareholder. Vice versa, the shareholding companies can stop putting the local entity into their balance sheets. All official filings will cost less with fewer shareholders.
It is very easy to reduce the number of shareholders and simplify your company. Please let me know if you have any questions about this matter.
