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The Circular on Minimum Capital Requirement: Regulation on Registry Procedures Related to the Capital of Companies!


M. Özkan Özdoğan


The minimum capital requirement amounts were increased effective January 1, 2024, as stipulated by the Presidential Decision published in the Official Gazette dated November 25, 2023 (“Decision”)[1]. However, unlike previous amendments, the Ministry of Trade (“Ministry”) did not impose a necessity for increasing capital concerning existing companies with capital below the specified amounts.


Additionally, the Ministry introduced certain regulations on registration procedures to ensure consistency with the circular distributed to all registries of commerce (“Circular”), effective January 1, 2024. The following regulations outline the registration process:


  • If a new company to be incorporated pursuant to the Decision is a joint-stock company, it must meet the minimum capital amount of at least TRY 250,000 (approximately USD 8,000) and if it is a limited liability company, it must meet the minimum capital amount of at least TRY 50,000 (approximately USD 2,000) for the registration of incorporation;

  • If an existing company decides to increase capital, it must ensure that the increased amount meets specified requirements for the registration of the said capital increase process;

  • In the case of a capital reduction during the registration process of partial demerger, the capital of the demerged company must remain above specified capital amounts;

  • In the registration process to be carried out in the case of a conversion of company type, it is essential for the new type to possess a capital amount equal to or above the new minimum capital requirement;

  • If the company experiences insolvency, the company’s registered capital shall be served as the basis for calculating the loss of the company’s capital and legal reserve fund, and in cases where measures are required, the new minimum capital amounts shall be considered as the basis; and

  • Companies deemed to be dissolved due to failure to reach the previous minimum capital amounts may increase their capital to the new minimum capital amount, provided that there is an explicit court decision in the capital increase procedures.


Conclusion

Even if it appears to be intended for implementation unity, we believe that the Circular will cause certain problems arising from both implementation and legal technicalities. Contrary to the Ministry’s announcement that existing companies are not obliged to meet the specified capital amount, the Circular practically forces companies wishing to complete the registration procedures listed in the Circular to reach the minimum capital amounts. Therefore, companies with capital below the specified amounts must comply with the said registration procedures as outlined above.


We think that it would be reasonable to enact a regulation through a law amendment, especially in terms of removing this duality between existing and new companies. We continue to monitor this matter and will keep you informed of any further developments.


 


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