Converting a Limited Liability Company into a Joint Stock Company in Türkiye: Procedure and Legal Implications

Introduction

Conversion is the transformation of a commercial company from one legal form into another while preserving its legal personality, assets, and economic identity. Under Article 180 of the Turkish Commercial Code (“TCC”), the converted company continues to exist as the same legal entity without dissolution or liquidation. Upon registration of the conversion with the Turkish Trade Registry (the “Registry”), its assets, rights, and obligations remain unaffected, while shareholders’ rights are preserved in accordance with Article 183 of the TCC.

This article outlines the key steps and documents required to convert a limited liability company into a joint stock company under Turkish law.

• Valid Conversions (TCC, Art. 181)

Under Article 181 of the TCC, a capital company may be converted into another type of capital company or a cooperative. Accordingly, a limited liability company may be converted into a joint stock company, or a cooperative.

• Protection of Company Shares and Rights (TCC, Art.183)

Shareholders’ rights and interests are preserved in a conversion. Holders of non-voting shares are granted either shares of equal value or shares carrying voting rights.  Holders of privileged are granted shares with equivalent rights or appropriate compensation. Holders of dividend right certificates are granted equivalent rights, or compensated for the fair value of their existing rights as of the date of the conversion plan.

• Provisions Applicable to Conversions (TCC, Art.184)

The provisions governing the incorporation of a new company type generally apply to the conversion. However, the rules for capital companies concerning the contributions in kind, and the founders’ signing of the articles of association do not apply.

Conversion Procedure

Since 2024, the statutory minimum capital is TRY 50,000 for limited liability companies and TRY 250,000 for joint stock companies. These thresholds should be considered when planning a conversion, particularly where a capital increase is required to meet the minimum capital applicable to the new company type.

In practice, the conversion of a limited liability company into a joint stock company may therefore be carried out together with a capital increase. The TCC and the Trade Registry Regulation (“Regulation”) set out the principal procedural steps and documentation requirements for the conversion.

1. MERSİS Application

The conversion process is initiated through the Central Registry Recording System (“MERSİS”). Following completion of the electronic application and generation of the relevant application/request number, the required documents are submitted to the competent Trade Registry Directorate.

2. Application Petition

An application petition addressed to the relevant Trade Registry Directorate must be submitted, specifying, among other required information, the tax office with which the company will be affiliated. The petition must be signed by an authorised representative of the company or an attorney acting under a power of attorney. Where signed by an attorney, the original or a certified copy of the power of attorney must be submitted.

3. Financial Advisor’s Report and Balance Sheet

A report prepared by a certified public accountant or, where the company is subject to independent audit, its auditor must be submitted confirming the status of the company's paid-in capital, whether the capital has been impaired, and the company's net assets.

Where relevant, the report must also address assets and rights registered with the land registry, ship registry, intellectual property registries or similar registries. The report must be accompanied by the latest balance sheet approved by the competent management body or, for companies subject to independent audit, the auditor. The balance sheet must not be more than six months old.

4. Declaration of Registered Assets and Rights

The company must submit a declaration identifying assets and rights registered with the land registry, ship registry, intellectual property registries or other relevant registries, together with their registration details. Supporting documents evidencing the company's ownership of such assets and rights must also be provided. Separate declarations should be prepared for each relevant registry or authority to be notified.

5. Conversion Plan and Conversion Report

The company's management prepares a written conversion plan setting out:

• the company's existing trade name and registered office;

• its proposed new legal form;

• the draft articles of association of the joint stock company; and

• the number, type and value of the shares to be held by the shareholders following the conversion.

A conversion report explaining the purpose and consequences of the conversion must also be prepared in accordance with the TCC. For SMEs, the preparation of the conversion report may be waived with the unanimous approval of all shareholders.

6. Shareholders’ Right of Examination

For at least 30 days before the general assembly meeting at which the conversion will be approved, the conversion plan, conversion report and financial statements for the preceding three years must be made available to shareholders for examination.

An interim balance sheet must also be prepared where more than six months have elapsed since the date of the latest balance sheet or where material changes have occurred in the company's assets since that date.

7. General Assembly Approval

Following expiry of the 30-day examination period, the conversion plan is submitted to the general assembly for approval.

For a limited liability company, the conversion resolution must generally be approved by at least three-quarters of the shareholders representing at least three-quarters of the share capital. The general assembly resolution must be notarised.

8. Additional Registry Documents

Depending on the circumstances, the following additional documents may also be required:

• a signature declaration under the company's trade name, if not previously submitted;

• any approval or opinion required from the Ministry of Trade or another competent authority;

• information regarding the company's branches or, if applicable, a declaration confirming that it has no branches; and

• where the conversion is accompanied by a capital increase, the documentation required for the capital increase.

9. Registration and Publication

Following approval by the general assembly, the conversion and the articles of association reflecting the company's new legal form are registered with the Trade Registry. The conversion becomes effective upon registration and is subsequently announced in the Turkish Trade Registry Gazette.

Legal Implications of the Conversion

1. Liability for Company Debts (TCC, Arts. 190 and 158)

Under Article 190 of the TCC, Article 158 applies to conversions regarding shareholders’ personal liability for company debts. Accordingly, where a shareholder was personally liable for a company debt before the conversion, such liability continues after the conversion, provided that the debt arose, or the circumstances giving rise to it occurred, before publication of the conversion resolution.

This is particularly relevant to the conversion of a limited liability company into a joint stock company. While shareholders of a limited liability company are generally not personally liable for the company’s private-law debts, they may be personally liable for certain public debts under applicable legislation. Any such liability arising before the conversion is not extinguished merely because the company is converted into a joint stock company.

Claims based on a shareholder’s continuing personal liability are generally subject to a three-year limitation period commencing from publication of the conversion resolution. If the relevant receivable becomes due after publication, the limitation period begins on the maturity date.

For debts and liabilities arising after the conversion, the rules applicable to the new company type apply.

2. Employment Relationships (TCC, Arts. 190 and 178)

Under Article 190 of the TCC, Article 178 also applies to conversions. Accordingly, employment agreements continue with the company following the conversion, together with all rights and obligations arising from them, unless the employee objects.

If an employee objects, the employment agreement terminates at the end of the applicable statutory notice period, and the parties remain bound by their respective obligations until that date.

Employees may also request security for receivables that have become due or will become due in accordance with Article 178. To the extent applicable, persons who were personally liable for employment-related obligations before the conversion remain jointly and severally liable for the relevant pre-conversion obligations in accordance with Article 178.

Accordingly, the conversion does not, in itself, terminate or otherwise interrupt existing employment relationships or affect employees’ accrued rights.

3. Action for Protection of Shareholding Rights (TCC, Art. 191)

If shareholders’ shares or rights are not adequately preserved in the conversion, a shareholder may apply to the competent commercial court for appropriate compensation within two months following publication of the conversion resolution in the Turkish Trade Registry Gazette.

The court’s decision applies to all shareholders in the same legal position. The costs of the proceedings are generally borne by the company, although the court may allocate them differently in exceptional circumstances. The action does not affect the validity of the conversion.

4. Action for Annulment of the Conversion (TCC, Art. 192)

Where the conversion does not comply with Articles 134 to 190 of the TCC, shareholders who did not vote in favour of the conversion and recorded their objection in the meeting minutes may seek annulment within two months following publication of the resolution in the Turkish Trade Registry Gazette. Where publication is not required, the period runs from registration.

If the irregularity can be remedied, the court grants a period for rectification. If it is not remedied within that period, the court may annul the conversion resolution and take the necessary measures.

5. Liability for Damages (TCC, Art. 193)

Persons involved in the conversion process are liable for losses caused to the company, its shareholders or creditors through their fault. This may include members of the management bodies, auditors and other persons participating in the conversion. Liability arising under other provisions of the TCC remains reserved.

Conclusion

Conversion from a limited liability company into a joint stock company enables a business to adopt a new corporate form without interrupting its legal personality, assets, rights or obligations. While the TCC provides a structured framework for the process, careful planning is required to address capital requirements, shareholder rights, corporate approvals, employment relationships and potential liabilities, as well as the applicable Trade Registry formalities. Proper preparation of the conversion plan and supporting documentation, together with timely completion of the required corporate and registration steps, is therefore essential to ensure an efficient and legally compliant conversion.

With thanks to Işkın İdil Kunt, Mehmet Enes Polat and Doğukan Mahir Fındık for their contributions.