Preliminary Companies Pursuant to Provisions of the TTC
Introduction
Turkish Commercial Code No. 6102 (“TCC”) separately regulates the incorporation of a joint stock company and a company becoming a legal entity. A joint stock company shall be deemed established once its founders declare their will to incorporate a company in the articles of association and their signatures on the articles are notarized. Nonetheless, the company shall become a legal entity by registering with the trade registry. This points to the existence of a preliminary company (pre-company); the period preceding the moment when the company becomes a legal entity. This article will analyze the pre-company as regulated for the first time under the TCC.
The Regime under the Abrogated Code
The prevailing opinion while the abrogated Turkish Commercial Code No. 6762 (“aTCC”) was in force was that a company’s founders constituted an ordinary partnership prior to the joint stock company becoming a legal entity through registration. In fact, there was a distinction drawn between a pre-incorporation partnership established between the founders intending to establish a company by preparing the articles of association and signing them, and a pre-company in the form of an ordinary partnership (ordinary company) in the period between the signing of the articles of association and the registration of the company.
Applicable Provisions
Ordinary partnerships are not regulated in the general provisions governing commercial companies under the aTCC. The prevailing opinion was that the provisions related to the articles of association and statutory provisions of the aTCC regarding the company to be incorporated would apply to internal affairs and the provisions on ordinary partnerships under the abrogated Code of Obligations No. 818 would apply to the partnership’s external affairs. Nonetheless, the lack of coherence between the two codes resulted in certain problems, such as the retroactive application of the aTCC provisions.
Effect of the Incorporation of the Company on the Partnership
Upon becoming a real entity, the joint stock company assumes all capital subscriptions made by the ordinary partnership. The founders may request a refund of their expenses, approved by the first general assembly.
The common purpose of the ordinary partnership (affectio societatis) is the incorporation of the joint stock company. If the joint stock company may not be incorporated for any reason (the inability to obtain ministry approval for incorporation, the inability to fulfill the capital subscription requirement in progressive incorporation (a gradual incorporation procedure foreseen under the aTCC and abandoned by the TCC, tedrici kuruluş)) the ordinary partnership shall be deemed to not have achieved its purpose. Consequently, it is accepted that the ordinary partnership shall be terminated and liquidated. In such an event, a company will not assume the capital subscriptions or expenses of the founders. The partners of the partnership will be personally and jointly responsible for the actions they undertook in the name of the company to be established.
Pre-Company under the TCC
The TCC introduces a provision which acknowledges the existence of a preliminary company for the first time. TCC Art. 335/1 reads as follows: “The company shall be incorporated upon the founders’ declaration stating their will to incorporate a joint stock company in the articles of association prepared in accordance with the law and in which the founders unconditionally subscribed to pay the entire capital and on which their signatures are notarized.” As specified in the justification of the article (prepared together with the draft TCC), the pre-company has no legal personality; Article 335/1 clarifies the moment when the company is incorporated.
Although this provision is among the provisions governing joint stock companies, there is dispute on its scope. It is disputed whether this provision is applicable to all capital corporations (i.e. including limited liability companies) or to all corporations (including unlimited companies). Therefore, the wording “articles of association” hereinafter should be construed as articles of incorporation depending on the type of company to be incorporated.
Legal Characteristics
The justification of the article 355 of the TCC states that pursuant to the prevailing opinion, the pre-company is not an ordinary partnership or an association, but a special type of co-ownership. Nonetheless, the justification states that the qualities and legal attributions of the pre-company are left to be determined by scholars and jurisprudence.
The legal characteristics of pre-companies are disputed among the scholars. The justification of 355 of the TCC the article states that the pre-company is not an ordinary partnership. This shows the desire to adopt the prevailing opinion under German law. The prevailing opinion in Germany is that the pre-company is a sui generis communion of persons, which is materially similar to the corporation to be established, independent from the founders, which has its own rights and obligations. Nonetheless, Tekinalp states that the pre-company is an ordinary partnership. Pursuant to Art. 620/2 of the Turkish Code of Obligations No. 6098 (“TCO”), all partnerships that do not constitute a specific partnership as regulated under the law shall be considered as an ordinary partnership.
However, the dissenting opinion states that the TCO Art. 620, on which Tekinalp bases his argumentation, is adopted from Swiss law. Contrary to German law, Swiss law does not have detailed provisions governing pre-companies or the incorporation procedure. In fact, the fact that the prevailing opinion during the enforcement of the aTCC accepted that a preliminary partnership existed prior to the incorporation of the company shows that Swiss law principles were adopted. However, the justifications for TCC Art.335 reveal that the German law model and the prevailing opinion in Germany is adopted. Therefore the pre-company should be accepted as a joint stock company, which is in the process of establishment, having a corporative structure. Indeed, it is argued in Germany that having a corporative structure is not incoherent with the existence of a co-ownership company (Gesamthandsgesellschaft) with the legal authority to assume rights and obligations.
Characteristics of the Pre-Company
Where the prevailing opinion in German law is adopted, the pre-company is a legal being which has its own property, rights and obligations. It has the right to pursue lawsuits or be sued, it may have a bank account established in its name and even own trademarks.
The provisions of the articles of association of the company, and in the absence of any provision thereunder the statutory provisions regarding the company to be established, shall be applicable in internal affairs. The pre-company is accepted as having the same bodies of the company to be established (for example, the board of directors).
Pursuant to German Law, the pre-company is responsible for its debts and obligations, however its responsibility is limited with its properties. The founders or third persons acting on behalf of the company may also be held responsible in relation to their actions at this stage. The founders are responsible for the difference, at the incorporation stage, between the nominal value of the capital and the total value of the assets of the company, and from indebting the company prior to its registration to the registry. Those acting on behalf of the company prior to its registration are further personally and jointly responsible for realizing transactions in the name of the company.
Where Swiss law principles are adopted, the pre-company should be deemed an ordinary partnership and provisions governing ordinary partnerships should be applicable.
The Necessity for Pre-Companies
A Pre-company is a legal institution adopted from German law. German law provides detailed provisions governing the phases of incorporation as a result of which the incorporation process may last for a period from six months up to a year. Certain transactions are mandatory and must be completed prior to registration and the formation of the legal entity, and it is of vital importance that such transactions are realized by an entity, namely the “pre-company”.
As promulgated by the national assembly, the TCC established a long incorporation procedure, as it included an audit by a transactional auditor. The transactional auditor was charged with verifying compliance with laws, whether the incorporation documentation was complete, accurate and fit for purpose, and whether the valuations reflected the reality. Nonetheless, Law No. 6335 abrogated the transactional audit system. Therefore, incorporation procedures entail preparation of the articles of association and notarization of signatures thereon, the founders’ declaration, payment of the minimum subscription fee, obtaining approval for companies whose establishment requires the ministry’s approval, registration and announcement. The procedure established takes no longer than that under the aTCC. Therefore it may be argued that a provision governing the pre-company was not necessary.
Where it is accepted that the pre-company is an ordinary partnership, the necessity of its existence is debatable. Nevertheless, Tekinalp is of the opinion that the pre-company is beneficial because it clarifies the point at which a company is established; and that although an ordinary partnership (a “company”) is established, disputes between the founders will be resolved pursuant to the articles of association, and lacking a provision thereunder, under the statutory provisions governing ordinary partnerships; that once the legal entity is established the pre-company will be deemed liquidated and that the scope of the phrase “those acting on behalf of the company prior to registration” is now clarified by law.
Conclusion
A joint stock company is established through the notarization of the founders’ signatures on the articles of association, in which the founders declare their intention to establish said company. Thus, the TCC regulates the incorporation of the company and the forming of the legal entity through registration as two separate phases. From now on, the existence of a pre-company prior to registration will be acknowledged. Nonetheless the legal regime applicable to such pre-company is highly disputed.
The provision governing pre-companies may be applicable to other companies regulated under the TCC by analogy; however there is debate as to whether or not unlimited liability companies may also benefit from this provision.
All rights of this article are reserved. This article may not be used, reproduced, copied, published, distributed, or otherwise disseminated without quotation or Erdem & Erdem Law Firm's written consent. Any content created without citing the resource or Erdem & Erdem Law Firm’s written consent is regularly tracked, and legal action will be taken in case of violation.
Other Contents

The Turkish automobile and light commercial vehicle market left the 2000s behind with steadily rising sales figures and the 2010s with high and stable sales figures as well. In this period, the growth of the market was driven not only by high purchase power but also by easy access to credit and product diversity...

Turkish Commercial Code No. 6102 ("TCC") provides the right to exit from the company to the shareholders of limited liability companies and the right to squeeze out the shareholder from the company, unlike the structure of joint stock companies, with the exit and squeeze out institutions specially regulated for...

Turkish Commercial Code No. 6102 (“TCC”) preserves the rule that the board of directors shall manage and represent joint stock companies. The TCC regulates how the power of representation shall be exercised, the registration and announcement of the persons authorized to represent, the transfer of the...

Ordinary partnerships are regulated under Turkish Law between Articles 620 and 645 of the Turkish Code of Obligations No. 6098 (“TCO” or the “Code”). The Law defines an ordinary partnership contract as a contract where two or more persons undertake to combine their labour or property to achieve a common...

Merger and acquisition processes are one of the legal processes that most seriously affect the identities and legal status of companies. After the completion of legal, tax, financial and operational due diligence reports, the parties initiate the negotiation process in case they reach an agreement on proceeding with the...

A popular business model for expanding market reach and brand recognition worldwide is franchising. Despite being less common than distribution agreements in the form of mono-brand store agreements, franchising is another significant method for extending luxury brands' distribution networks. Luxury brands use...

In the decision dated 14.06.2022 and numbered 2019/149 E. 2022/894 K., the Court of Cassation General Assembly (“CCGA”) evaluated the theory of piercing the corporate veil in the context of the relationship between the guarantor and the borrowing company in a dispute arising from a loan agreement...

The European Union continues to be an important investment center for foreign investors. According to data from the European Commission's "Second Annual Report on the monitoring of foreign direct investment in the European Union", the European Union received €117 billion worth of foreign direct investment in...

Transfer of shares is arguably the first legal transaction that comes to mind among the legal transactions regarding the shares of a capital company, and the most common transaction in practice. However, the shares of a capital company may also be subject to various transactions, other than share purchase...

Law No. 6563 on the Regulation of Electronic Commerce (E-commerce Law or Law) has recently undergone a radical change in order to regulate the behavior of the players in the rapidly growing and developing e-commerce sector. The new regulations that came into force as of January 1, 2023 envisage important...

On 11 June 2021, the German Federal Parliament approved the German Supply Chain Due Diligence Act (Lieferkettensorgfaltsgesetz) (“Act”) which affects not only German entities but also their suppliers in foreign countries (including Turkish entities). The main focus of the Act, which entered into force on...

On 21 December 2007, the Federal Council approved the draft revision of the Swiss Code of Obligations, which also includes amendments to company law. On 28 November 2014, the Federal Council referred the draft revision for consultation. Following extensive discussions and a long enactment process, the...

The Turkish Commercial Code No. 6102 ("TCC") regulates maritime trade contracts under the fourth part of the fifth book of the Code. Among the types of contracts regulated in this section, the most frequently used contract in international maritime transport practice is the freight contract regulated under...

Prohibition on hidden income shifting is one of the most important issues that is broadly regulated under Capital Markets Law No. 6362 (“CML”). In conjunction with CML Article 21, which has a broader context than Article 15 of the abrogated Capital Markets Law No. 2499, another significant step has been taken...

As a result of developing commercial activities and large-scale investments, especially concluded in the fields of construction, energy and mining, companies are seeking to participate in these investments by uniting their powers and expertise to take advantage of financial opportunities together. This tendency...

The Turkish Commercial Code (“TCC” or “Law”) has enabled companies to apply different structural models and to implement new legal formations by including spin-off provisions to its Article 159 et seq. In accordance with the provisions of the law, companies may transfer a certain element, or elements, of their...

The International Federation of Consulting Engineers is a professional association established in 1913, known as the FIDIC (Fédération Internationale Des Ingénieurs-Counseils). Its members are duly elected from consultant-engineer associations of various countries, and membership to the association is...


Incoterms are a set of rules introduced by the International Chamber of Commerce (ICC) to explain the commercial terms that are widely used in international trade. The purpose of Incoterms rules is to facilitate and expedite international trade in a safe and secure manner...

The regulation applicable to all Turkish ports prepared by the Ministry of Transport, Maritime Affairs and Communications that entered into force after being published in the official gazette on October 31, 2012 (˝the Regulation˝), consolidates all the bylaws, regulations and instructions in a single Regulation...

As a rule, rights and obligations arising from an agreement have legal consequences only between the creditor and the debtor which are parties to the agreement. This principle is referred to as "privity of contract." In general, contracts for the benefit of third parties, where the fulfillment of an...

The rules of e-commerce, which grow and develop with the digitalizing world, are changing. E-commerce has become the driving force of the digital economy. However, considering the growth rate of e-commerce and the transformation it has undergone in a short time, it is obvious that some...

The dissolution of a company is a specific type of dissolution, which results in the cancellation of the legal personality which was gained by registration at incorporation. The specific proceeding which leads to the dissolution, and thus, the termination of a company upon the constitutive decision...

Companies in which shares or authority to manage is held by members of a family are considered to be “family businesses”. Family members can hold shares that control the company, as well as retain management authority. Having a family business means opportunity, security and income for...

Turkey ratified the Convention on the Contract for International Carriage of Goods by Road (“CMR”) in accordance with Act No. 3939 dated 7 December 1993, and the CMR entered into force in Turkey on 31 October 1995. In accordance with Article 1 / 1 of the CMR, the carriage of goods by road...

Ordinary partnerships are governed by Article 620 et seq. of the Turkish Code of Obligations No. 6098 (“TCO”). An ordinary partnership agreement is defined as an agreement whereby two or more persons undertake to join efforts and/or goods to reach a common goal...


The concept of disguised profit transfer in joint stock companies, in its broadest meaning, covers the transfer of company assets to related parties and may occur in different ways. This concept is regulated in detail under capital markets legislation...

Share subscription agreements, which are commonly encountered in start-up investments, set out the terms and conditions of an investor’s participation in a company as a shareholder by subscribing the new shares issued in a capital increase...

The electronic signature, which has the same legal consequences as wet signatures if it meets certain conditions, has taken its place in many legal systems and has enhanced commercial life. Although there are various types and applications in different legal systems...






























INCOTERMS are a set of rules introduced by the International Chamber of Commerce (ICC) to explain the commercial terms that are widely used in international trade. The purpose of the Incoterms rules is to contribute to and facilitate the safe and swift conduct of international trade...


















































































































