Throughout a company’s lifetime, it may become necessary to restructure its legal form due to expansion, the entry of new partners, tax optimization, or the need to adapt to market conditions. One of the legal mechanisms that makes this possible without dissolving the existing business is the transformation of the company’s legal type. This is regulated under the Turkish Commercial Code No. 6102, which allows a company to change its form while maintaining its legal personality.
This article provides a comprehensive overview of the transformation process, including legal, procedural, and practical aspects, referencing the relevant articles of Turkish law that are important for business owners and legal advisors.
What Is a Company Type Transformation?
Company type transformation is the conversion of a company from one legal form to another without losing its legal personality. For instance, a limited liability company (Ltd.) may transform into a joint stock company (A.Ş.) without liquidation. This allows the business to continue operations under a new legal framework while retaining all existing rights, obligations, and identity.
Legal Basis for Transformation in Turkish Law
The Turkish Commercial Code clearly outlines the rules for company type transformation:
Article 180: Allows a company to change its type without terminating its legal personality.
Articles 181 to 194: Provide detailed procedures, including reporting requirements, asset valuation, creditor notifications, and registry obligations.
Permissible Types of Transformation
Under Turkish law, transformation is allowed between the following types:
From a general partnership (kolektif) to a limited liability company (Ltd.) or joint stock company (A.Ş.).
From a limited partnership (komandit) to other types.
From a limited liability company to a joint stock company and vice versa.
From a joint stock company to a limited liability company.
However, sole proprietorships cannot be directly converted into companies. Instead, the sole proprietorship must be terminated and a new company must be established.
Step-by-Step Procedure for Company Type Transformation
- Preparation of the Transformation Plan and Report
The company’s partners or board of directors prepare a report that outlines:
The reasons for the transformation,
The benefits and expected outcomes for the company and its shareholders,
The financial and operational implications.
- Asset Valuation
A certified independent financial expert (typically licensed by the Capital Markets Board) assesses the company’s assets and liabilities to determine their fair market value. This step ensures transparency and protects all stakeholders.
- Drafting the New Articles of Association
Since the new company type will have different legal requirements, new articles of association must be prepared to comply with the new legal structure (e.g., joint stock company bylaws).
- Decision to Transform
In limited companies, this decision must be made by the general assembly of shareholders.
In joint stock companies, it must be made by the general meeting with a legally required quorum and majority.
- Notarization of the Decision
The resolution must be notarized to gain legal effect.
- Registration with the Trade Registry
All transformation documents, including the valuation report and new articles of association, must be submitted to and registered with the relevant trade registry office.
- Notification of Creditors
The company must inform all creditors about the transformation, who are then entitled to raise objections or demand guarantees within a legally specified timeframe.
- Announcement in the Trade Registry Gazette
To finalize the legal process and ensure public disclosure, the transformation must be published in the Turkish Trade Registry Gazette.
Legal Effects of the Transformation
The company retains its same legal identity and tax number.
All contracts, licenses, rights, and liabilities remain in effect.
The transformation does not create a new legal entity or result in liquidation.
Only the legal framework and governance structure of the company change.
When Should a Company Consider Transformation?
Transformation is advisable under the following circumstances:
When new investors or partners are joining the company.
When the company is expanding and needs a more appropriate structure.
To benefit from legal or tax advantages.
To reduce shareholders’ legal liability (as in switching to a joint stock company).
To comply with sector-specific legal requirements (e.g., in finance, energy, or real estate).
Important Considerations and Risks
A company undergoing liquidation or bankruptcy cannot be transformed.
All taxes and debts must be settled before the transformation process.
In regulated sectors, prior approval from competent authorities (e.g., Capital Markets Board, Competition Authority) may be required.
Legal and financial advisors should be consulted to avoid complications or rejection of the process.
If the process is not conducted according to law, the transformation may be challenged or rejected by the registry.
Company type transformation under Turkish law is a powerful legal tool that allows businesses to restructure while preserving their legal identity. Although the process may seem complex, it enables companies to align their structure with strategic goals, partner needs, and legal obligations. With the support of a qualified legal advisor, the transformation can be carried out safely, efficiently, and in full compliance with the law.