What is a Joint Stock Company and How is One Formed?

Definition and Purpose of a Joint Stock Company

Whereas in partnerships non-material contributions (e.g. personal labour) come to the fore, a joint stock company is a type of capital company, so the important element here is capital, and anyone who subscribes to this capital may, as a rule, acquire the status of shareholder.

Under the Turkish Commercial Code, “a joint stock company is a company whose capital is definite and divided into shares, and which is liable for its debts only with its own assets.” “Shareholders are liable to the company only to the extent of the capital shares they have undertaken to provide.” (TCC art. 329/1-2)

Purpose of a joint stock company

Joint stock companies not prohibited by law for any economic purpose and subject may be formed.

How Is a Joint Stock Company Formed?

Under the TCC, who undertake shares and the natural and legal persons who sign the articles of association are the founders. It should be noted that the obligation to sign the articles of association is laid down only for the founders; no such obligation applies to those who join the company at a later stage.

“the company is established when the founders declare, in articles of association that have been drawn up in accordance with the law and in which they unconditionally undertake to pay the entire capital, and whose signatures are certified by a notary or signed before the trade registry director or deputy director, their intention to form a joint stock company.”

Turkish Commercial Code, Art. 335/1

Under the Code, “the company is established when the founders declare, in articles of association that have been drawn up in accordance with the law and in which they unconditionally undertake to pay the entire capital, and whose signatures are certified by a notary or signed before the trade registry director or deputy director, their intention to form a joint stock company.” (TCC art. 335/1)

The formation process described in the article consists of the following stages:

1. Drafting the articles of associationThe articles of association are drawn up in accordance with the law and include the matters listed in the law.
2. Subscription of capitalThe founders unconditionally undertake to pay the entire capital.
3. Certification of signaturesThe signatures are certified by a notary, or the articles of association are signed in the presence of the trade registry director or deputy director.
4. Ministry permission, if requiredMinistry permission is required for the formation of certain companies such as banks and insurance companies.
5. Tescil ve ilanThe company is registered with the trade registry of the place where its head office is located and published in the Turkish Trade Registry Gazette.

What the Articles of Association Must Contain

The articles of association shall set out the following matters:

• a) The trade name of the company and the place where its head office is to be located.
• b) The business purpose of the company, with its essential points specified and defined.
• c) The capital of the company and the nominal value of each share, together with the manner and conditions of their payment.
• d) Whether the share certificates are to be registered or bearer certificates; the privileges attached to particular shares; restrictions on transfer.
• e) Rights and assets in kind contributed as capital other than money; their values; the number of shares to be issued in return for them; where a business or an asset in kind is taken over, the consideration for it; and the price of the goods and rights purchased on the company’s account by the founders for the establishment of the company, together with the amount of any fee, allowance or reward to be paid to those who render services in the establishment of the company.
• f) The benefits to be derived from the company’s profit by the founders, the members of the board of directors and other persons.
• g) The number of members of the board of directors and which of them are authorised to sign on behalf of the company.
• h) How general assemblies are to be convened; voting rights.
• ı) Where the company is limited to a fixed term, that term.
• i) How announcements concerning the company are to be made.
• j) The types and amounts of the capital shares undertaken by the shareholders.
• k) The accounting period of the company.

Contributions in Kind and in Cash in a Joint Stock Company

In joint stock companies the capital may be contributed in kind or in cash.

The capital in kind contributed, and any businesses and assets in kind to be taken over on formation, are valued by experts appointed by the commercial court of first instance at the place where the company’s head office is to be located. The founders and interested parties may object to this report.

Ministry Permission, Registration and Publication

Cases requiring Ministry permission

As a rule, no ministerial permission is required for the formation of a joint stock company. Permission from the Ministry is, however, required for the formation of companies such as banks, financial leasing companies, factoring companies, consumer finance and card services companies, asset management companies and insurance companies.

Registration and publication of the company

The entire articles of association of the company are registered with the trade registry of the place where the company’s head office is located and published in the Turkish Trade Registry Gazette within thirty days following the formation of the company, following the obtaining of permission in the case of joint stock companies to be formed with the permission of the Ministry of Customs and Trade, and, for other companies, in accordance with the provision on the notarial certification of the articles of association.

Source Used

• Tamer Bozkurt, Corporate Law