Private Limited Company (PLC) I. GENERAL INFO A) Another type of limited liability company under TCC B) Very similar to JSC, but reserved for smaller, closely-held companies (1-50 shareholders) C) Offers limited liability, without the burdensome formation and capital maintenance rules of JSCs D) Has the same audit requirements as JSCs E) Also has a General Assembly (GA) F) Has “Managers” instead of “Board Members”

II. INCORPORATION A) Same as JSC – register the signed, notarized AoA with the Commercial Register B) AoA’s mandatory content is dictated by TCC Art. 576 e.g. - company name, headquarters, purpose of the company, amount of capital, value of shares, names of managers C) AoA’s optional content is stated in TCC Art. 577

III. CAPITAL STRUCTURE A) Minimum basic capital of 10,000 TL B) Amount of capital stated as “cash” in the AoA has to be paid at the time of incorporation C) Other forms of capital (contributions in kind) are allowed to the same extent as JSCs - property, other assets recognized as “capital” - not personal labor, or commercial reputation/goodwill

IV. MANAGEMENT & AUDITING A) Management is regulated by the company’s AoA B) Generally delegated to shareholders, may also include non-shareholders (need at least 1 shareholder) C) If 2 or more managers, GA must appoint a Chairman D) Managers decide things by majority vote (Chairman has ultimate casting vote) E) Basic duties – issue directives/orders, supervise subordinates who have managerial power, prepare annual reports & financial statements, organize GA meetings and carry out GA resolutions F) Ultimate duties – care, loyalty, non-competition G) GA may remove or limit power of Managers

V. SHAREHOLDER RIGHTS & DUTIES A) Capital and other contributions - Capital contribution corresponds to issue price of share(s) - Liability is limited to capital contribution (except for company’s public debts like taxes, social security pymts—liability is shared proportionally) - AoA may require additional contributions (for new equipment, to cover losses, bankruptcy, etc.) B) Duty of loyalty/non-competition - safeguard secrets, etc C) Dividends - paid from net profits or reserve funds - share is generally in proportion to capital contribution

D) Right to obtain info on company affairs - May ask managers for info, or request inspection - Refusal may trigger GA referral or court involvement E) Transfer of company shares - Transfer must be done by written, notarized contract - Must be authorized by AoA, or by the GA - If transfer happens through inheritance or marriage laws, GA may refuse the transfer (but must first offer to buy the transferee’s shares at real value)

VI. GENERAL ASSEMBLY OF SHAREHOLDERS (GA) A) GA meetings and resolutions - GA is ultimate decision-making authority (like JSCs) - Managers must organize meetings and give at least 15 days notice - Resolutions generally passed by simple majority vote - Other important matters require 2/3 vote B) Voting - Voting power is proportional to company share (min. 1 vote) - AoA may alter this rule and grant equal voting power C) Inherent and inalienable powers/duties of GA - Amending AoA - Hiring/firing managers, auditors - Approving annual reports, financial statements, dividends - Dissolving company

Taxation of Companies I. VALUE ADDED TAX (VAT) A) Normal VAT is 18% in Turkey B) Charged on most goods and services (exported goods are exempt) C) Taxes the value added to a good at each stage of production (each seller in the chain charges and collects the VAT, then pays it to gov’t) D) Company is required to report and pay the tax monthly E) Very similar to the U.S. “sales tax” - U.S. tax is imposed once, on the ultimate consumer in retail chain - Most services are exempt from tax, along with items like groceries - Rate is lower than VAT (average of 1-10%)

II. INCOME TAX A) Partnership - partners pay income tax (business does not) B) Limited Liability Company - pays corporate tax C) Corporate Tax Basics (earnings are taxed) 1) Corporate tax rate is 20% 2) Two categories of corporate taxpayers: a. Full – registered in Commerical Register, central office in Turkey (taxed on global income) b. Limited – registered/head office abroad, branch office in Turkey (taxed on income earned in Turkey) D) Common Deductions – wages, interest pymts on debt, real prop taxes, losses during past 5 years, depreciation, charity, R&D expenses