Most Turkish startups are born as a limited şirket: cheaper to form, TRY 50,000 minimum capital, no board, no share certificates. Most institutional term sheets then ask for the same thing before money moves: convert into an anonim şirket. The conversion (tür değiştirme) is a defined procedure in Articles 180 to 190 of the Turkish Commercial Code No. 6102, the company survives as the same legal person, and a well-run process takes four to eight weeks. But it touches almost every document the investor will read, it fixes the capital figure that decides whether you fall under the contracted-lawyer obligation, and it has a founder-tax dimension that is easy to get wrong. This article explains why investors insist, what the statute requires, where the timetable slips, and the choices to make in the new articles before you sign the term sheet, not after.
Why the investor wants an A.Ş.
Five features of the joint-stock form explain the insistence. Share transfers: in a limited company every transfer of a capital share must be in writing with notarised signatures and, unless the articles say otherwise, approved by the general assembly, then registered (Articles 595 and 598); in a joint-stock company registered shares move by endorsement and delivery of the certificate or by written assignment, with restrictions only if the articles impose them (Articles 490 to 493). Preference shares: the joint-stock form allows privileged shares carrying different dividend, liquidation and voting rights (Article 478), which is how liquidation preference and investor veto rights are actually implemented in Türkiye. Board governance: a board of directors with investor seats and reserved matters is a statutory organ in an A.Ş.; the limited company’s managers (müdürler) fit that structure poorly. Authorised capital: a non-public A.Ş. may adopt the registered capital system so that the board can issue shares up to a ceiling for option plans and follow-on rounds (Article 332(1), Article 460). And exit: share certificates in an A.Ş. held for more than two years by an individual are outside income tax on disposal under Article 80 (repeated) of the Income Tax Law No. 193; a limited company share never is.
The statutory procedure
A limited company may convert into a joint-stock company (Article 181(1)(a)), and the converted company is a continuation of the old one (Article 180): contracts, licences, employees, bank accounts and the tax number stay. The rules on forming the new type apply, except those on minimum number of shareholders, contributions in kind and the founders’ signing of the articles (Article 184(1)). The management prepares a written conversion plan containing the old and new trade names and seat, the articles of the new type, and the number, class and amount of the shares each shareholder will hold after the conversion (Article 185). It also prepares a conversion report explaining the purpose and consequences, the fulfilment of the formation rules, the new articles, the exchange ratio and any new obligations for shareholders (Article 186); small and medium-sized companies may dispense with the report if all shareholders agree (Article 186(3)), and almost every startup does. The plan, the report, the last three years’ financial statements and any interim balance sheet must be made available to shareholders at the seat thirty days before the general assembly (Article 188), a period that shareholders in practice waive by unanimous consent. If more than six months have passed since the balance-sheet date, or the assets have changed materially, an interim balance sheet is required (Article 184(2)).
The conversion resolution in a limited company requires three quarters of the shareholders holding at least three quarters of the capital (Article 189(1)(c)). The management then registers the conversion and the new articles with the trade registry; the conversion takes legal effect on registration and is announced in the Trade Registry Gazette (Article 189(2)). Because the new type’s formation rules apply, the minimum share capital of TRY 250,000 under Article 332 as raised by Presidential Decree No. 7887 must be met at conversion: a limited company with TRY 50,000 of capital will combine the conversion with a capital increase, funded in cash or from reserves, and the increase is where the timetable usually slips, since the paid-in portion must be blocked at a bank and documented.
What does not change, and what quietly does
Employment contracts pass to the converted company with all rights and obligations (Article 190, applying Article 178), so no new employment contracts are needed. Shareholders’ personal liability for pre-conversion debts continues under Article 158 as applied by Article 190; for a limited company this matters mainly for public debts, where Article 35 of Law No. 6183 makes shareholders liable for unpaid taxes and social security premiums in proportion to their shares, a liability that follows them into the A.Ş. for the pre-conversion period. Licences and permits that were issued to the legal person continue, but sector regulators (payment services, crypto-asset service providers, health, education) often require notification and sometimes a fresh review of the shareholding and board. Trade marks and domain names stay with the same legal person; only the type suffix in the registered owner’s name changes, and the Turkish Patent and Trademark Office record should be updated. VAT, corporate tax and withholding continue uninterrupted; the conversion itself is tax-neutral for the company under Articles 19 and 20 of the Corporate Tax Law No. 5520 when carried out at book value.
The founder-tax question
The two-year exemption in Article 80 (repeated) of the Income Tax Law applies to the disposal by an individual of share certificates of resident companies held for more than two years. Limited company shares are not share certificates, so a founder selling limited company shares pays income tax on the gain with no holding-period relief. After conversion the founder holds A.Ş. shares and, once certificates are printed, share certificates. The contested point is when the two years start: the tax administration’s rulings have not been uniform on whether the holding period runs from the original acquisition of the limited company shares or from the issue of the certificates after conversion. Founders planning a secondary sale within two years of conversion should obtain a ruling or structure around the point; everyone else should print the certificates immediately after conversion so that the clock is at least running. Our note on the cost of never printing share certificates covers the mechanics.
Decisions to take in the new articles
The conversion is the cheapest moment to design the articles the investor will later demand, because everything is being rewritten anyway and a single 75 per cent resolution carries it. Decide, with the investor’s term sheet in hand: whether to adopt the registered capital system, which requires an initial capital of at least TRY 500,000 under Article 332(1), and at what ceiling; whether to create share groups now so that preference terms can attach to them at closing; whether to impose an Article 492 approval requirement on transfers, since adding it later needs a 75 per cent capital majority under Article 421(3)(c); the size and composition of the board and whether board meetings may be held electronically under Article 1527; and whether the general assembly will be held electronically. Also decide the capital figure deliberately: at TRY 1,250,000 or more the company must retain a contracted lawyer under Article 35(3) of the Attorneyship Law, so a conversion that lands at TRY 1,250,000 to look investable triggers that obligation in the month of registration. The SHA anatomy reference maps which investor terms belong in the articles and which in the shareholders’ agreement.
A realistic timetable
Week one: decide the capital, draft the plan, the new articles and the shareholders’ waiver of the report and the thirty-day inspection period; obtain the interim balance sheet if needed. Week two: shareholders’ resolution with the 75/75 quorum, notarised; open the blocked account and pay in the capital increase if any; obtain a sworn financial adviser’s or CPA’s report on the paid-in capital and, where reserves are used, on the reserves. Weeks three to four: file with the trade registry; registration; Trade Registry Gazette announcement; new signature circular; update the tax office, social security, banks and the trade mark register; print share certificates; update the share ledger. Weeks five to eight, if needed: sector regulator notifications and the investor’s closing. Companies that start the conversion only after signing the term sheet add this whole period to the closing timetable; companies that convert before going to market remove it.
Can we convert directly into an A.Ş. with the investor already subscribing?
The cleaner sequence is to convert first, then hold the investment round as a capital increase in the A.Ş. Combining the investor’s subscription with the conversion is possible but complicates the exchange ratio and the plan, and most investors prefer to subscribe into an existing A.Ş. with articles they have reviewed.
Do we lose the company’s age or track record?
No. The converted company is the same legal person (Article 180); its registration date, tax history, contracts and references continue. Tender and grant applications that require a minimum company age are unaffected.
Is a Ministry representative required at the conversion resolution?
In a limited company the conversion is resolved by the shareholders’ general assembly under the limited-company rules; the Ministry representative requirement applies to joint-stock company general assemblies, including, once you are an A.Ş., any assembly deciding a merger, division or conversion.
Related: joint-stock company · limited şirket · capital increase.
Sources. Turkish Commercial Code No. 6102 (Articles 158, 178, 180–190, 332, 421, 460, 478, 490–493, 580, 595, 598, 1527); Income Tax Law No. 193 (Article 80 repeated); Corporate Tax Law No. 5520 (Articles 19–20); Law No. 6183 on the Collection of Public Receivables (Article 35); Attorneyship Law No. 1136 (Article 35). Statute links open the official Turkish texts on mevzuat.gov.tr.
This article is provided for general information only and does not constitute legal advice. Please seek legal support for an assessment of any specific matter.
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