The question arrives in the first call with a foreign fund, usually phrased carefully: can we invest directly into the Turkish company, or do they have to flip first? The answer under Turkish law is short. Yes, you can, the law has said so since 2003, and nothing about the company’s sector or your fund’s domicile changes that for a software business. What the law does not tell you is what the closing will actually look like — and that is where the deal is won or lost on time rather than on terms.
This is the investor-side companion to our US–Türkiye corporate law concordance. It follows a direct investment by a foreign fund into a Turkish joint-stock company from the first document to the first filing after closing. Article references are to the Turkish Commercial Code (Law No. 6102, “TCC”) unless stated otherwise.
The law is short and it says yes
The Foreign Direct Investment Law (Law No. 4875) was written to replace a permission system with a notification system; its first article says so in as many words. Article 3(a) makes direct foreign investment free and puts foreign investors on equal footing with domestic ones, subject only to international agreements and special laws. Article 2 defines a foreign investor broadly enough to include foreign-law entities, international organisations, foreign nationals and Turkish citizens resident abroad; it defines the investment to include acquiring shares off-exchange in an existing company, which is exactly what a venture round is.
Three further paragraphs of Article 3 are the ones a fund’s investment committee cares about. Investments may not be expropriated except in the public interest and against compensation. Net profits, dividends, sale and liquidation proceeds and payments under licence or management agreements may be transferred abroad freely through banks. And disputes under private-law investment agreements may go to national or international arbitration where the parties agree and the conditions in the relevant legislation are met.
The “special laws” carve-out is real but narrow: broadcasting and civil aviation, for instance, cap or condition foreign ownership. A company writing software, running a marketplace or selling a subscription is not in that territory. If a founder tells you the round must be structured abroad “because foreign funds can’t invest in Turkish companies”, that is not the reason. The real reasons, where they exist, are on the fund’s side — an LPA that restricts non-US holdings, or a portfolio-company template that assumes Delaware — and those are legitimate, but they are not Turkish law.
You are buying new shares, and the company issues them
A US priced round is a purchase of authorised but unissued stock. A Turkish round is a capital increase: the company’s capital, a number fixed in its articles, is raised, and the new shares that represent the increase are subscribed by the investor. That single difference explains most of the sequence.
The general assembly resolves to increase capital and amend the capital article — or the board does, if the company has adopted the registered capital system and the increase fits under the ceiling in its articles (Art. 460). The investor signs a subscription undertaking, unconditional and in writing, stating the number, nominal value and class of shares and the amount to be paid (Art. 459). The price above nominal — the share premium, which is where the valuation actually lives — is paid in full before registration; at least a quarter of the nominal value is paid before registration and the rest within twenty-four months (Art. 344, applied to capital increases by Art. 459(3)). The money goes into a special account at a bank in the company’s name, blocked until the registry confirms the increase has been registered (Art. 345). Then the increase is registered with the Trade Registry, published, and the investor is entered in the share ledger.
Two practical consequences follow. First, “closing” is two events, not one: the day money moves and the day the registry registers. Investment agreements in Türkiye are drafted around that gap, with the blocked account doing the work an escrow does elsewhere. Second, the investment agreement does not issue shares. It organises the corporate acts that do. A well-drafted one sets out who signs what on which day, what happens if the registry raises a query, and what unwinds if registration fails.
What the fund has to bring
None of this is difficult, and all of it takes longer than a Delaware closing because a Turkish registry examines what it registers. The foreign investor needs a certificate showing its existence and good standing under its home law, its authorising resolution, and a power of attorney for whoever signs in Türkiye — each apostilled and translated by a sworn translator. Before it can be entered as a shareholder it needs a Turkish tax identification number, obtained as a “potential” number for a non-resident. If the fund itself will sit on the board, Article 359(2) permits a legal entity to be a director, acting through one registered natural person; the fund’s name goes on the board, not a partner’s.
The company’s bank will run its own know-your-customer process on the incoming investor, including beneficial ownership. Funds with layered structures should start that conversation before signing, because a bank asking for a limited partnership’s beneficial owners three days before the money is due is the single most common cause of a slipped closing date.
One check belongs at the very start: what is investing. Turkish company law expects a shareholder to be a natural or legal person. Most fund vehicles qualify, but a fund organised as a partnership without separate legal personality under its home law should confirm early how it will be recorded, or whether a general partner or holding entity should be the shareholder of record.
Where your rights live
American investor rights are mostly contractual and mostly enforceable against the company. Turkish investor rights split into two homes with different reach, and the negotiation is largely about which right goes where.
The articles of association bind everyone — the company, current and future shareholders, the registry. This is where share privileges go: preference in dividends, in liquidation proceeds, in pre-emption or in voting (Art. 478), the last capped at fifteen votes per share (Art. 479). It is also where a board seat becomes a corporate right rather than a promise, through a right of representation granted to a share group (Art. 360), and where transfer restrictions on registered shares are created (Arts. 492–493). Creating privileged shares and introducing transfer restrictions each require the votes of 75% of the capital (Art. 421(3)); moving the company’s seat abroad requires unanimity (Art. 421(2)). A minority investor’s veto is built here, as a privilege attached to its share group, not as a covenant.
The shareholders’ agreement binds only its parties. Drag-along, tag-along, anti-dilution, information rights beyond the statutory minimum, non-compete and exit undertakings all live here, because the articles cannot impose obligations on shareholders beyond paying for their shares (Art. 480(1), the single-obligation principle). A resolution passed in breach of the agreement is valid; the breaching shareholder owes damages. Turkish practice therefore reinforces these clauses with penalty amounts, call and put options and powers of attorney. Our anatomy of a Turkish shareholders’ agreement walks through the standard set.
Two statutory defaults surprise foreign counsel. Every shareholder has a pre-emptive right in every capital increase, in proportion to its holding (Art. 461); it can be limited only for just cause and with 60% of the capital, so each round begins with the existing holders waiving it. And every shareholder may inspect the financial statements before the general assembly and question the board (Art. 437), with a court-appointed special audit available if the general assembly refuses (Art. 438). Information rights are not something a Turkish investor starts from zero to negotiate.
The ten-day filing that freezes your votes
Article 198 is the provision most often missed by foreign investors, and its consequence is severe. An enterprise that comes to hold — directly or indirectly — 5%, 10%, 20%, 25%, 33%, 50%, 67% or 100% of a company’s capital, or whose holding falls below one of those thresholds, must notify the company and the competent authorities within ten days of completing the transaction. The notification is registered and published. Until it is made, the rights attached to those shares, including voting rights, are frozen (Art. 198(2)). A fund is an enterprise for these purposes. A seed investor crossing 5% and a lead crossing 20% both file; the company’s counsel usually prepares it, but the obligation is the investor’s.
If the round gives the fund control — a majority of votes, the right to appoint a majority of the board, or control by agreement (Art. 195) — the company becomes a dependent company in a group, and its board must prepare an annual dependency report on its dealings with the controlling shareholder (Art. 199). What that means in the first year is set out in our note on group companies under Articles 195–209.
Money in, money out
Share capital is denominated in Turkish lira. The fund wires currency; the bank converts it; the subscription is for a lira amount. Investment agreements manage the exchange-rate exposure between signing and payment by fixing the number of shares and the lira amount, with the foreign-currency figure as the commercial reference. Once in, the money is the company’s, subject to the blocked-account mechanics above.
On the way out, Law No. 4875, Article 3(c) guarantees free transfer of dividends, sale proceeds and liquidation proceeds through the banking system. Dividends paid to a non-resident shareholder are subject to withholding at the statutory rate of 15% under Article 30(3) of the Corporate Tax Law, as applied by the current Presidential Decision and reduced where a double tax treaty applies; adding profit to capital is not a distribution. How a later sale of the shares is taxed depends on the seller’s residence, the holding period and the treaty in force, and belongs in a tax memo before signing rather than after.
Three transaction costs have no US analogue and should be in the model. Stamp duty applies to signed agreements stating a monetary value, with exemptions for some instruments; where and how the shareholders’ agreement is executed is decided with this in mind. A levy of 0.04% of the capital increase is paid to the Competition Authority (Law No. 4054, Art. 39). And if the round confers control and the parties’ turnover crosses the thresholds set by communiqué, the acquisition is notifiable to the Competition Board — since 2022 the Turkish-turnover thresholds are not applied to technology undertakings active in Türkiye, so a target with little local revenue can still be caught.
After registration
The company enters the fund in the share ledger (Art. 499) — only the person recorded there is a shareholder in the company’s eyes, so this is not a formality to leave for later. New board members are registered, and the signature authorities are updated. The foreign investor’s statistical notifications under Article 4 of Law No. 4875 are made through the E-TUYS system as the implementing regulation requires. If the round included privileges or transfer restrictions, the amended articles are now the public text of the company’s constitution and can be read by anyone at the registry, which is a point some funds prefer to know before the term sheet rather than after.
From there the calendar is ordinary: an ordinary general assembly within three months of the financial year-end (Art. 409), the dependency report in the same window if the fund controls the company, and the ten-day Article 198 filing every time a threshold is crossed in either direction.
When direct is not the answer
Direct investment is the default for a fund comfortable holding a Turkish entity. It is not the only structure and it is sometimes not the right one. Where the round is too early to price, Turkish law has no native SAFE (only companies holding the technoventure badge now have a statutory convertible-debt route, under Article 3(15) of Law No. 5746 as added by Law No. 7582 in 2026); otherwise the economics are built through undertakings and a later capital increase, as our note on SAFEs under Turkish law explains. Where the fund’s own documents require a US or UK holding, or where a later US round is already in view, the company may reorganise under a foreign parent before or at the round; Delaware C-Corp or Turkish joint-stock company sets out that decision. And where the target is still a limited company, conversion to a joint-stock company usually precedes closing, because limited company share transfers require a notarised agreement, shareholder approval and registration (Art. 595) that no fund wants repeated at exit.
What the fund should ask before the term sheet is a short list: is the company an A.Ş.; are the share ledger and board resolution book in order; are there existing privileges or transfer restrictions in the articles; is the registered capital system in place; and who currently holds pre-emptive rights that will have to be waived. Five answers, and the closing timeline writes itself.
Sources. Turkish Commercial Code No. 6102 and Foreign Direct Investment Law No. 4875. Statute links open the official consolidated Turkish texts on mevzuat.gov.tr.
This note is for general information and is not legal advice. It reflects Turkish legislation as at publication; rates and thresholds set by Presidential Decision or communiqué change and should be confirmed against the current text.
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