Change of Legal Form

A change of legal form is a company converting to another company type without liquidation. The company’s legal personality, assets, debts, contracts and tax identity are preserved; only its legal type changes. It is governed by Arts. 180-190 of the Turkish Commercial Code.

Most Common Case

The most common change of legal form in practice is from a limited liability company to a joint stock company. The main reasons are:

• Creating preferred shares and share classes before a funding round; see Funding Round,
• Transferring shares without notarisation and general assembly approval,
• Limiting shareholders’ personal liability for the company’s public debts; see Shareholder Liability for Public Debts,
• Preparing for a public offering.

Process

1. Conversion plan: The new type’s articles and shareholders’ shares and rights in the new company are set out.
2. Conversion balance sheet and report: Show that the company’s equity covers the new capital; a valuation report is obtained if necessary.
3. Inspection right: Shareholders may inspect the documents before the general assembly resolution.
4. General assembly resolution: Adopted with the qualified quorum required by the Code.
5. Registration: The change takes effect on registration with the trade registry and publication.

Points to Watch

• The new type’s minimum capital must be met.
• Shareholders’ shares and rights must be preserved; if a shareholder’s rights are reduced, its consent or compensation is required.
• Limited company shareholders’ liability for public debts relating to the period before the conversion does not automatically end with the conversion.
• Counterparties, banks and public authorities should be notified. Contract clauses on change of control or change of legal form should be checked.