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Joint stock and limited companies are close to each other in that both are capital companies, but they differ in matters such as share transfer, capital increase, liability for public debts and expulsion from the company. Since Turkish Commercial Code (TTK) No. 6102 made it possible for joint stock companies to be established with a single shareholder as well, the question of which company type will be more advantageous for newly established companies has gained importance. When deciding on converting a limited company into a joint stock company, or on the choice of type when establishing a new company, it is useful to know the advantages and disadvantages of both company types.
Currency note
This article was prepared in accordance with the legislation and practice in force on the date of publication. The legislation on this subject, in particular the minimum capital amounts prescribed for company types, may have changed since that date. You are advised to consult a lawyer on the current position.
The fact that a limited liability company can be incorporated with a minimum capital of TRY 10,000, compared with TRY 50,000 for a joint stock company, makes the limited liability company a preferred option. Both limited liability companies and joint stock companies are capital companies and display similar features, in that their shareholders have no personal liability for the company's debts, with the exception of public debts. However, it may be said that limited liability companies display features close to those of partnerships, given that an upper limit has been set on the number of their shareholders; that shareholders of a limited liability company may be excluded from the company under certain conditions, whereas no mechanism for exclusion exists in a joint stock company other than for default in paying the subscribed capital; and that, while shareholders of a limited liability company are subject to non-compete and loyalty obligations, the legislature has not placed shareholders of a joint stock company under such obligations.
Main differences explained in the article
| Limited liability company | Joint stock company | |
|---|---|---|
| Number of shareholders | An upper limit has been introduced | — |
| Halka arz | Not possible | Possible |
| Registered capital system | — | May be chosen |
| Hisse devri | Necessarily through a notary | By delivery, endorsement and delivery, or assignment of receivables |
| Public debts | Shareholders are liable in proportion to their shares | Shareholders who are not board members are not liable |
| Expulsion from the company | Possible on the grounds in the articles of association or for just cause | None, except in the case of default on the capital commitment |
| Rekabet etmeme ve sadakat | Shareholders have these obligations | Shareholders are not subject to these obligations |
First of all, in joint stock companies, unlike limited companies, shares may be offered to the public. This is a significant advantage for the institutionalisation of the company. Furthermore, in joint stock companies the registered capital system may be chosen even if the shares are not offered to the public.
Registered capital system
If the registered capital system is adopted, decisions to increase capital up to the specified ceiling may be taken by the board of directors and no amendment to the articles of association will be required. This means savings on the effort and costs of general assembly procedures and on trade registry announcement fees.
In limited liability companies, share transfers must be carried out through a notary. This means notarial costs for the transferor and the transferee in every share transfer. In joint stock companies, on the other hand, bearer shares can be transferred by delivery, and registered shares by endorsement and delivery. Uncertificated shares can be transferred by way of assignment of receivables.
Limited liability company
Share transfers are necessarily made through a notary.
Joint stock company
Although shareholders of a limited liability company are not liable for the company's debts, this rule does not apply to public debts such as tax and social security (SGK) debts. Shareholders of a limited liability company are liable for all public debts in proportion to their shares. In joint stock companies, by contrast, shareholders who are not members of the board of directors bear no liability for public debts, however large their shareholding may be. In addition, joint stock companies are obliged to retain a contracted lawyer, failing which an administrative fine is imposed on the company. There is no such obligation for limited liability companies.
In joint stock companies, shareholders cannot be excluded from the company, save for the exception of expulsion for default in paying the subscribed share capital. In limited liability companies, however, a shareholder may be excluded from the company on the grounds set out in the articles of association or, where there are just grounds, on the basis of those grounds. This possibility in limited liability companies paves the way for the company to continue operating efficiently by excluding shareholders who obstruct its functioning.
Related legislation: Turkish Commercial Code No. 6102 (mevzuat.gov.tr)
According to the article, both types are capital companies, and the partners have no personal liability for the company's debts, except for public debts.
If a joint stock company adopts the registered capital system, the board of directors may decide on capital increases up to the specified upper limit, and no amendment to the articles of association is required. The article states that this provides savings on general assembly procedures and trade registry announcement fees.
In limited liability companies, share transfers must be made through a notary; this means notary costs for the parties with each transfer.
According to the article, partners of a limited liability company are liable for all public debts, such as taxes and social security (SGK) debts, in proportion to their shares. In joint stock companies, shareholders who are not board members have no liability for public debts, regardless of their shareholding ratio.
In limited liability companies, a partner may be expelled for the reasons specified in the articles of association or where just cause exists. In joint stock companies, there is no mechanism for expulsion from the company other than in the case of default in paying the subscribed capital.
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