As per Turkish Law, foreign or domestic companies may establish a branch office in order to execute their activities. A branch office shall have no legal entity and shall be registered with the Trade Registry and represented by one or more representative/branch manager. There is no requirement for branch offices to have a separate capital whereas The Turkish Supreme Court requires a separate capital for branch offices and in practice a capital is allocated for branch offices. It should be noted that even though a branch office has a separate capital, which is allocated by the parent company, it may not have a separate articles of association and consequently act within the field of activity same that of its parent company. Moreover the branch is dependent on its parent company in internal relations whereas it may act independent and trade of its own account in external relations.
As per the Turkish Commercial Code (“TCC”), the branches should be represented by one or more representative/branch manager, who is residing in Turkey. To this end, either a Turkish citizen or a foreigner who has work and residence permit may be appointed as the branch representative.
Even though the branch may act independent in commercial relations with third parties, the rights and liabilities arising out of its activities belong to the parent company.
A. Establishment Procedure
In order to set up a branch office of a foreign company in Turkey, after the resolution is adopted by the Board of Directors of the parent company in this respect, the approval of the Ministry of Industry and Commerce of the Republic of Turkey (“the Ministry”) has to be obtained. Afterwards a registration shall be made with the Trade Registry, where the branch office is located and the tax office, as well. Furthermore, the Foreign Investment Directorate (“FDI”) shall be notified within a certain period.
B. Liability of Parent Company
In general, the parent company will be liable towards third parties for the transactions realized by the branch office in Turkey. In principle, in case the branch representative misuses his/her authorities, the parent company would be responsible towards bona fide third party. In case of tort, the branch representative would personally be liable towards third parties.
C. Recruitment
The branch may employ employees and there is no minimum number of employees to be employed by a branch. Please note that the branch representative should reside in Turkey.
D. Books to be Kept by the Branch Offices
– Book of Original Entry,
– Book of Final Entry,
– Book of Inventory.
