April 2010
ESTABLISHING A BRANCH BY FOREIGN LEGAL ENTITIES IN TURKEY
The commercial enterprise (undertaking) have been regulated in the articles between 11-13 of Türk Ticaret Kanunu (Code of Commerce and hereafter it will be referred to as TTK). According to the TTK, business establishments or factories or other establishments which are commercially operated are deemed as commercial enterprises. If we extend this definition, we can define commercial business as it is an enterprise which aims to gain income which exceeds the income of artisan (craftsman) and where activities are continuously and independently executed. The main characteristics of the commercial enterprise are to perform economical activities (aim to endowment of income) continuity and independence (it means to take independent decisions in internal and external affairs of the company and to perform independently).
According to the TTK, all commercial enterprises have to have a head (main) office. The head office of the commercial enterprise is a place where administrative, legal and commercial activities of the company are collected and executed. This place may be a different place then the place where the commercial enterprise’s technical activities take place.
The commercial enterprises which perform in country or abroad may prefer to manage their business activities locally though having partially independent offices in other words though their branches when their business activities’ scope is extended. The characteristic of branches are:
• The branch and the head office should be belong to the same natural or legal entity.
• Similarity of the business activity: The business activity of the branch and the head office should be the same or similar.
• The branch and the head office should take place in a different location. As a rule, virtually the branch should be operated in a different location than the head office. At the same time the distance does not important. For example while the head office takes place in the top floor, the branch may operate in the ground floor of the same building.
• The branch has to use the head office commercial title with the “branch” affix.
• Branches must be registered at the trade registry and they must be announced at the place where they take place.
• Apart from their head offices the branches should be registered at the Chamber of Commerce and Industry where they take place and they should pay premium.
• The branches have dependence on the head office. Incomes, losses, rights and liabilities gain by the branch are deemed to be owned by the head office. The branch has not separate assets from the head office because only the head office may allocate assets for the branch. Therefore, branches cannot be defined as an independent commercial enterprise.
In accordance with the branch dependency, branches may only perform activities which are as same the head office only if they have granted the related authorizations by the head office.
The organization of branches is also dependent on the head office. For example, to appoint the branch’s employees or to promote the branch’s employee are done by the head office unless the branch has been authorized to do so.
• Separation of management: Considering the branch is entitled to do transactions by itself it has to be a separate accountancy from the head office. Therefore, its commercial books also should be kept separately from the head office. At the same time it is also possible all related branch recordings to be recorded by the head office on the condition to keep a separate book.
• Branches are independent for their external relations: The branch is entitled to realise all transactions with the third parties on its own as the head office. The independency of the branch for the external relations is fallen with the limitation of the authority given by the head office. When the branch has exceeded the authorities given by the head office, the head office will be liable for the transactions done by the branch against the third parties.
In the light of the mentioned features, on the contrary the branch’s internal relations, the branch is absolute independency in its external relations.
In order for establishing a branch by a foreign legal entity in Turkey, first of all the foreign legal entity should appoint a representative person with full authorizations who resides in Turkey. After a representative person to be appointed, the application should be made to the Industry and Commerce Ministry and the General Directorate of Domestic Trade with providing all documentations.
In order for establish a branch by foreign entities in Turkey, the necessary documents need to be presented to the Industry and Commerce Ministry are as follows:
1. A petition written by the company or company’s representative person: In this letter, the title of the company, the date of establishment, the nationality of the company, the capital, the representative person ’s name and surname in Turkey who has full authorities, the letter of undertaking given by the representative person where he undertakes to obey all laws and legislations for all transactions will be performed by himself within the borders of Turkey, the address of the branch, the area of activity of the branch and information about the branch’s capital have to be provided.
2. The resolution for establishing a branch taken by the authorized bodies of the company and its translation (declaration of establishment form)
3. The origin of the Memorandum of Association and its translation
4. The articles of incorporation which shows when and where and under which law the company has been established and the activity documents which shows company is still active. Not only the origin of these document but also their translations are also required.
5. The origin and translation of the Turkish representative person ’s power of attorney. This power of attorney should contain the necessary matters and also the followings:
- To perform transactions have been shown in the Memorandum of Association and to represent the company
- To represent the company in cases which arise from transactions had been done in name of the company before all courts as the plaintiff, defendant and third party.
- To delegate a representative person with the same authorizations in case when the representative person has to temporally leave Turkey
- To have authority to appoint representative person for the additional branches which branches are dependent on the head office
The documents given above should be translated by one of the following way:
- By the Turkish Consulate in the country where the main company has been established.
- By the Foreign Relations Ministry of Turkey
- In accordance with the provisions of “Removing the Obligation of Certification of Foreign Formal Documents” which has been prepared within the scope of the Lahey Private International Law Conference.
After the permission to establish a branch has been taken from the Industry and Commerce Ministry, an application should be made to the Trade Registry Office with the following documents and the branch should register at the registry.
1. Permission of the Industry and Commerce Ministry
2. Petition signed by the company’s official
3. Power of attorney certified by public notary
4. Attached declaration which certified by the Industry and Commerce Ministry and its announcement
5. Registration form of the Trade Chamber
6. Specimen of signature of the representative of the branch
7. Undertaking given in accordance with article 29 of the Company Register Regulation
8. Certified ID by public notary if the representative of the branch is Turkish, if he is foreigner a certified copy of his passport
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