Increased Minimum Capital Requirement for Joint Stock and Limited Liability Companies

Published in the Official Gazette on 25.11.2023, the Presidential Decree No. 7887 dated 24.11.2023, significantly amends the minimum capital requirements for joint stock and limited liability companies in Turkey. This pivotal change, augmenting the capital amounts set forth since the enactment of the Turkish Commercial Code (TCC) No. 6102 in 2012, carries substantial implications for the corporate sector.

Under this Decree, the minimum capital requirement for joint stock companies, as outlined in Article 332 of the TCC, has escalated from 50,000 TRY to 250,000 TRY. For non-public joint stock companies operating under the registered capital system, the threshold has risen from 100,000 TRY to 500,000 TRY. Moreover, for limited liability companies governed by Article 580, the minimum capital has surged from 10,000 TRY to 50,000 TRY. These heightened capital requirements are set to take effect from 01.01.2024.

The Crucial Role of Minimum Capital Requirements for New Enterprises

The Decree’s elevation of the minimum capital requirement for both joint stock and limited liability companies holds particular significance for emerging and small-scale entrepreneurs. These new capital thresholds necessitate careful investment planning and informed decision-making regarding the most suitable company structure.

The changes in capital requirements will undoubtedly make the establishment of joint stock companies more challenging, especially for small businesses, and will increase the costs of setting up a company. This is primarily due to the differences in the establishment processes of joint stock companies compared to limited liability companies.

As we detailed in our article on capital investments in Turkey, during the initial phase of establishing a joint stock company, at least 25% of the company’s total committed capital must be paid by the shareholders. Under the new regulation, the amount to be paid at the establishment stage will rise from 12,500 TRY to a minimum of 62,500 TRY, marking an increase of at least 50,000 TRY for investors establishing a joint stock company.

While a similar increment is applicable to limited liability companies, they benefit from greater flexibility in establishment costs, owing to the absence of an upfront capital payment requirement and the provision to fulfill the entire committed capital within 24 months post-establishment.

Implications for Existing Joint Stock and Limited Liability Companies

With the regulation effective January 1, 2024, it primarily impacts companies established thereafter. Investors and entrepreneurs initiating new ventures in the new year must adhere to the revised minimum capital amounts stipulated in the Decree.

Regarding the existing joint stock and limited liability companies, it should be noted that the Decree only amends the minimum capital amounts in Articles 332 and 580 of the TCC, without additional provisions for companies established under the old regulations. According to a statement from the Ministry of Trade, this regulation currently applies only to newly established companies, meaning there is no capital increase obligation for existing joint stock and limited liability companies.

Yet, it’s noteworthy that risk removal from the system by the Ministry if they fail to meet the updated qualifications under Article 332/3 of the TCC post-January 1, 2024. Consequently, these companies should consider increasing their capital to align with the revised minimum capital requirements as of January 1, 2024.

Furthermore, it should be considered that future regulations might mandate capital increases for other existing joint stock and limited liability companies. Therefore, companies should be prepared for potential new regulations in this direction.