Corporate Law Series · 5 of 5
Company formation is more than registration. Partnership rules, investment approvals, the business structure, customer contracts and employment arrangements should be considered together. This final article brings the series into a practical checklist.
1. Relying only on standard articles
Articles meeting the minimum registration requirements may leave important commercial expectations unresolved. Partners can later disagree about profit retention, management workloads, a proposed share sale, confidential information or the price paid on exit.
Coordinate the articles with an appropriate shareholders’ agreement and the company’s management arrangements. Address funding, decision-making, reporting, transfer rights, valuation and deadlock. Any private arrangement remains subject to mandatory company law and does not automatically bind non-signatories or alter registered authority.
It is inaccurate to say that oral agreements have no legal value at all. Under the general rule in Code of Obligations Article 12, a contract need not follow a particular form unless the law requires one. Validity, proof and enforceability are separate questions. Some corporate transactions, including limited-company share-transfer undertakings, require specific formalities.
Practical step: record the intended arrangements clearly and check which provisions belong in the articles, which create contractual obligations and which require a specific form. A generic clause should not be assumed enforceable merely because it is signed or notarised.
2. Reviewing incentives after committing to the investment
A machinery purchase can have different treatment depending on the investment certificate, approved list, application date, purchase date and applicable programme. A business that checks these matters only after ordering may lose access to the intended certificate-based relief.
However, “VAT paid before the certificate is permanently lost in every case” is too broad. Whether ordinary input VAT can be deducted or recovered under another route is a separate issue. The certificate’s timing and transitional rules must be examined for the specific expenditure.
The framework under Decision No. 9903 and the relevant implementing rules should be reviewed before relying on older regional comparisons. Eligibility, exclusions, programme conditions and the actual approval matter; a proposed application is not a confirmed entitlement.
Practical step: check the support route before signing binding purchase or construction commitments, identify the expenditure covered and include realistic approval and compliance steps in the investment timetable.
3. Choosing the company form solely by initial cost
The appropriate form depends on liability exposure, ownership, governance, financing and the intended business. A sole proprietorship, limited company and joint-stock company have different consequences, but no single form is automatically required for every exporter or foreign partnership.
A customer may prefer a particular supplier structure. That is a commercial condition, not necessarily a statutory restriction. Finance availability also depends on the borrower, security and transaction rather than the company name alone.
Future share transfers, new investors, personal guarantees, management powers and public-debt exposure should be considered alongside incorporation cost. A more elaborate form is not automatically the best choice for every small business.
Reorganisation can be possible later, but its legal form, registry steps, contracts, employees, licences and tax consequences require planning. It should not be treated as a cost-free change of letterhead.
Practical step: compare the structures against a credible business and investment plan, then coordinate legal and accounting advice before registration.
4. Using unclear export terms or signing an unread foreign-language contract
An export relationship may be managed through quotations, purchase orders, emails, confirmations and standard terms. These communications can have legal and evidential effect. The problem is not that an email can never form a contract, but that the parties may disagree about which terms were accepted and how conflicting documents interact.
Use a clear framework for specifications, samples, quality tolerances, inspection, delivery, risk, price, payment, defects, returns and the consequences of delay. Check any agreed Incoterms rule and its edition rather than assuming that a delivery expression resolves every contractual issue.
Where more than one language is used, explain which text prevails and make sure the people signing understand the obligations. Mandatory Turkish-language rules, the parties and the nature of the transaction must be considered. Not every contract signed in Turkey is automatically invalid because it contains a foreign language, and a controlling-language clause does not override mandatory law.
The governing law, jurisdiction or arbitration clause and enforceability where assets are located require separate attention. A foreign partner’s standard form should not be accepted without reviewing liability, intellectual property and termination terms.
Practical step: align the framework agreement, purchase orders, specifications and acceptance process so that the operative terms can be identified.
5. Applying identical clauses to every employee
Production employees, designers, technical staff and sales managers can have different responsibilities and access to information. Employment documents should reflect the actual role while respecting mandatory employee protections.
Confidentiality, return of company materials, permitted use of customer information and access controls can be important. Their absence from a contract does not automatically mean that an employee is free to disclose protected business secrets: statutory duties may also apply.
A post-employment non-compete clause is not appropriate for every worker. Code of Obligations Articles 444–447 require specific conditions and proportionate limits. A broad prohibition added to all contracts may be ineffective and can unnecessarily restrict an employee’s economic future.
Copyright, industrial designs, inventions and ordinary know-how are governed by different rules. Ownership or rights of use may arise under statutory employment provisions, a valid assignment or a licence depending on the work. Do not assume either that every employee owns all output after leaving or that a single blanket sentence transfers every possible right to the employer.
Practical step: tailor the relevant documents, define responsibilities and access, and check the required form and scope of any intellectual-property arrangement. Use operational controls alongside contractual terms.
A formation review checklist
- Are the articles, shareholders’ agreement and management powers consistent?
- Are capital, shareholder loans and working-capital needs distinguished?
- Have transfer, exit, valuation and deadlock rules been examined?
- Have investment support and timing conditions been checked before expenditure?
- Does the business form fit the actual ownership and risk profile?
- Are customer documents and order-acceptance procedures consistent?
- Have language, governing law and dispute-resolution issues been reviewed?
- Are employment, confidentiality and intellectual-property arrangements suitable for the actual roles?
Early planning can reduce uncertainty, but a short consultation or a standard document cannot guarantee that a business will never face a dispute. The documents should be reviewed when ownership, operations or the legal framework changes.
Read the complete corporate law series
- Choosing a business structure in textiles
- Partnership agreements and starting a business with a friend
- Foreign partnerships: opportunities and risks
- Tax structures for manufacturers, exporters and retailers
- Five common mistakes when setting up a textile company — this article.
Sources
- Turkish Commercial Code No. 6102.
- Turkish Code of Obligations No. 6098: contractual form and employment-related obligations.
- Official investment-support legislation portal.
Next series: Textile workshop and factory leases · Contact
General information: This article explains Turkish law in English. It does not replace advice based on the company, employees and proposed transactions. The Turkish statutory texts govern.