Foreign shareholders in Turkish companies are now advised to convert their capital increases into foreign currency within three months or the increase will be considered a shareholder loan.
This change is the result of a November 4 amendment by Turkey's Ministry of Treasury and Finance to the Capital Movements Circular that was made to comply with the new Turkish Commercial Code.
Specifically, the amendment states that any amounts met by a foreign shareholder to the corporate account of a Turkish company following a capital increase decision or a future capital increase (i.e. an advance) will be deemed a shareholder loan unless the amount is converted into capital within three months and the capital increase is not substantiated.
Until this amendment, money sent by a foreign shareholder to a Turkish company was accepted as the fulfillment of a capital commitment or a credit. In addition, foreign shareholders were able to send the money as a capital advance. But now, as a result of the November 4 amendment, if the capital increase is not completed within three months, the company will not be able to use the amount and the capital will be considered as a shareholder loan subject to a credit transaction according to exchange regulations.According to experts, the amendment is advantageous to Turkish companies since the amount received with the statement of capital increase will be converted into capital as soon as possible.
For further details on this amendment and its implications for doing business in Turkey, contact your regular CMS source or local CMS expert Hülya Kemahlı.