Due to the remarkable rate of development in the Turkish markets over the past 30 years, investors (especially foreign investors) that wish to share their risks, costs, responsibilities and liabilities prefer to form joint venture partnerships in relation to their investments in Turkey. A joint venture may be formed as either:
- a capital company (eg, a joint stock company or limited company), as regulated under the Commercial Code1;
- an ordinary partnership, as regulated under the Code of Obligations2.
The code defines 'joint ventures' as partnerships by which two or more real persons or legal entities unite their work power and assets in order to achieve a joint goal.
Joint ventures formed under the code are not deemed legal entities, and accordingly their registration in the trade registry is not required. However, in line with the Ministry of Industry and Trade's Communiqué 2009/23, a joint venture that has been formed by legal entities in order to carry out commercial activities may be registered with the trade registry.
Unless otherwise agreed in the joint venture agreement, each partner's share in its losses and profit are equal. Partners of a joint venture may appoint one or more of the partners or a third party to act as the managing partner. In the absence of this appointment, all partners are entitled to manage the joint venture.
All the joint venture's partners are directly, unlimitedly and severally liable against its creditors. Unlike the shareholders of capital companies, where the shareholders' liability is limited with the amount of capital it undertakes, a joint venture's partners have unlimited liability with their personal assets.
Termination and liquidation of the joint venture is regulated under the Code of Obligations. If the joint venture is in a loss during liquidation process, the loss is shared between the partners. Under Article 645 of the code, liquidation does not terminate the liabilities of the partners against third parties. Partners of the joint venture cannot perform activities competing with the activities of the joint venture. Furthermore, partners have a duty of care while performing transactions for the joint venture.
Under the Public Procurement Law4 'joint ventures' are defined as partnerships or consortia established by the mutual agreement of more than one natural or legal person in order to participate in procurement. However, the law requires the partners of a joint venture to have joint and several liability while performing their undertakings. The consortium is treated differently from a regular ordinary partnership, since each party may be liable only for their contribution undertaken for the purpose of the joint venture.
According to the Corporate Tax Law5, although joint ventures do not possess a legal entity, they are subject to the law.
Footnotes
1 Law 6102, published in the Official Gazette on February 14 2011.
2 Law 6098, published in the Official Gazette on February 4 2011.
3 Published in the Official Gazette on April 1 2009.
4 Law 4734, published in the Official Gazette on January 22 2002.
5 Law 5520, published in the Official Gazette on June 21 2006.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
