Entering the Turkish market requires more than just capital; it requires a robust legal shield. For foreign investors holding minority stakes (e.g., 20%), protecting rights against majority founders involves a dual approach: rigorous contract law through a Shareholders’ Agreement (SHA) and strict regulatory compliance via DAB and E-TUYS processes.
1. Shareholders’ Agreement (SHA) vs. Articles of Association
While a Shareholders’ Agreement (SHA) is a binding contract between parties, it does not always offer third-party protection under Turkish law. To ensure enforceability, critical rights must be mirrored in the company’s Articles of Association (AoA) and registered with the Trade Registry.
Privileged Shares (Group A/B)
Investors should negotiate for Group B shares that grant specific privileges:
Board Nomination Privilege: The right to nominate at least one member to the Board of Directors, ensuring direct oversight.
Veto Rights: Requirement for affirmative votes from Group B shareholders on “Reserved Matters” such as capital changes, liquidation, or IP sales.
Exit Rights
The SHA must clearly define Tag-Along (right to sell alongside founders) and Drag-Along (right to force a sale during an exit event) clauses to secure future liquidity.
2. The “DAB” Requirement (Foreign Exchange Purchase Certificate)
Turkey enforces strict capital flow regulations to monitor foreign currency. For foreign capital to be legally registered as equity, the incoming foreign currency must be exchanged at a Turkish bank, and a DAB (Döviz Alım Belgesi) must be issued.
Critical Compliance Check: The DAB must explicitly state the reason for the exchange as “Capital Injection” or “Capital Increase”. If the transfer is labeled incorrectly (e.g., as a “Loan” or “Export Payment”), the Trade Registry will reject the capital increase application, potentially paralyzing the investment process.
3. E-TUYS Reporting: The Digital Obligation
Post-investment compliance is governed by the Foreign Direct Investment Law. Foreign investors are required to register their company and transaction details in the Ministry of Industry and Technology’s E-TUYS (Electronic Incentive Implementation and Foreign Investment Information System).
Deadline: The “Investor Information Form” and “Capital Information Form” must be filed within 1 month following the capital injection or share transfer. Failure to comply can result in administrative fines and regulatory scrutiny for future transactions.
Frequently Asked Questions (FAQ)
What is a DAB (Foreign Exchange Purchase Certificate)?
A DAB is a mandatory document issued by a Turkish bank proving that foreign currency sent for capital injection has been exchanged into Turkish Lira. It is required for the Trade Registry to approve a capital increase.
When must a foreign investor register with E-TUYS?
Foreign investors must register their company and transaction details in the Ministry of Industry and Technology’s E-TUYS system within 1 month following the investment or share transfer.
Is a Shareholders’ Agreement (SHA) legally binding in Turkey?
Yes, an SHA is a binding contract between parties. However, to ensure third-party enforceability and stronger legal protection, key rights (like veto powers or board nomination) must be embedded in the company’s Articles of Association (AoA).
Conclusion
A successful investment in Turkey stands on three pillars: A strong SHA for governance, a precise AoA for legal enforcement, and flawless execution of DAB and E-TUYS processes for regulatory compliance. Vergi Merkezi ensures your investment is secure from day one.
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