The Republic of Turkey, due to its position as a bridge between Asia and Europe, has become an important commercial center. Acting as a bridge connecting the East and the West, investing in business in the Republic of Turkey has become more attractive. It should be noted that foreigners who are not citizens of the Republic of Turkey can also establish companies in Turkey. In fact, they can establish companies subject to the same procedures as Turkish citizens.
In the Republic of Turkey, companies are divided into various types depending on the liability of the partners. In companies where the partners are liable only up to the amount of their capital contribution, the principle of limited liability applies. While the company is liable for its debts with all its assets, the partners are not liable to creditors. Companies where partners have limited liability are referred to as capital companies. Examples of capital companies include Joint Stock Companies (Anonim Şirket), Limited Liability Companies (Limited Şirket), and Limited Partnership Companies divided into shares (Sermayesi paylara bölünmüş Komandit Şirket).
In companies where the partners are personally liable for the company’s debts with all their personal assets, the principle of unlimited liability applies. That is, the partners are personally liable for the company’s debts without any limitation. Examples of companies where the principle of unlimited liability applies are General Partnerships (Kollektif Şirket) and Ordinary Limited Partnerships (Adi Komandit Şirket).
It is important to evaluate these situations correctly before establishing a company. When examining developed legal systems worldwide, it will be seen that companies are divided into types according to the liability regime. Particularly, capital companies, where the partners are not directly liable to creditors, are more commonly preferred in practice.
Limited Liability of Partners in Capital Companies
Capital companies, where partners are not directly liable to creditors, are the most preferred types of companies in Turkey as well as around the world. In these companies, the liability of a shareholder is only towards the company. Once the shareholder has paid the full amount of the capital share they committed to the company, they have no further liability.
Therefore, creditors cannot directly pursue shareholders for the company’s debts. Creditors can only pursue the company for the collection of their debts. In cases of potential disputes that may arise from debts, creditors can only take legal action against the company. As mentioned, shareholders are only obliged to pay the capital debt they have committed to.
Unlimited Liability of Partners in Partnership Companies
While the principle of limited liability applies in capital companies, in partnership companies, the partners have unlimited liability for the company’s debts. In partnership companies, shareholders have unlimited rights to manage the company and its assets. The fundamental principle in the liability regime is that as the partners’ authority over management and assets increases, their liability for the company’s debts also increases.
In this case, unlike capital companies, creditors can direct their claims and disputes both to the company’s legal entity and to the partners themselves. In these types of companies, a liability regime exists where the partners are personally liable with all their personal assets.
Can foreigners who are not Turkish citizens establish a company in Turkey?
According to the laws of the Republic of Turkey, foreigners who are not Turkish citizens can establish companies in Turkey without any restrictions. They are subject to the same rules that Turkish citizens must adhere to.
Are company partners liable for the company’s debts in Turkey?
In partnership companies, the partners are personally liable for all of the company’s debts with their personal assets. In capital companies, however, the partners are not liable to creditors for the company’s debts.
