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WHAT IS COMPANY TYPE CHANGE? WHICH COMPANIES CAN DO IT?

What is Company Type Change?

Company type change is the process of transforming from one legal company type specified in the Turkish Commercial Code to a different legal company type. This means altering the legal structure of a commercial company.

In the Turkish Commercial Code, company type change is regulated not only as a mere legal form change but also considering its effects on the company's activities and operations. This makes it easier for companies to change their types. When a company changes its type, it maintains its assets while preserving its economic and legal identity.

What are the Conditions and Required Documents for Company Type Change?

When interpreted in light of articles 180 and 181 of the Turkish Commercial Code, there is a wide freedom and freedom to choose company types regarding company type change. The principle of continuity of rights and obligations of company shareholders also applies to company type change. In this context, shareholders are required to assume any situations they may face due to type change. In order to change the company type, a type change plan is prepared and the registration of this report in the trade registry is required. The content of the type change plan is as follows:

• The trade name, registered office, and the provision regarding the new type before and after the change,
• The articles of association of the new type,
• The number, type, and amount of shares that shareholders will have after the change, or explanations regarding the shares of shareholders after the change.

For the company type change process, the company's board of directors prepares a type change report. The purpose and economic and legal justifications of the type change report are explained. The content of this report is as follows:

• The purpose and consequences of the type change,
• Fulfillment of the establishment provisions regarding the new type,
• The new articles of association,
• The exchange rate regarding the shares that shareholders will have after the change,
• Personal obligations and responsibilities arising from the type change, if any,
• Obligations arising from the new type for shareholders.

Which Companies Can Change Their Type?

Company type change means restructuring the company. This may arise as a necessary requirement for the company to adapt to new commercial conditions. The change of company type should be carried out by preserving the existing one and adding new text while preserving important ideas. The changes in company type can be as follows:

1. A capital company; to another type of capital company and a cooperative,
2. A partnership company; to a capital company, a cooperative, and a limited partnership,
3. A limited partnership; to a capital company, a cooperative, and a partnership,
4. A cooperative; can be converted to a capital company.

The most common company type change occurs from sole proprietorships to limited and joint-stock companies, and from limited companies to joint-stock companies. In previous periods, limited company types were preferred due to the ease provided during the establishment phase. However, it was observed that there are significant advantages for shareholders in joint-stock company types due to recent regulations. Therefore, the conversion of established limited companies to joint-stock companies has gained momentum.

What are the Ways to Make Changes in Company Type?

There are two methods of changing the company type. These methods are changing the company type through new establishment and changing the company type through legal shell change. Changing the company type through new establishment involves the dissolution and liquidation of the company. After these procedures are completed, a new company is established in a different type of commercial company. The assets, operations, and rights of the first company are transferred separately to the newly established company through transfer transactions.

When changing the type of a company by transforming its legal form, the existing legal entity of the company is preserved. Only the company type is converted to the desired type, and in this context, it may be necessary to modify the partnership agreement. By making the necessary adjustments required by the new company type, the process of changing the company type is completed. You can restructure your company by making legally valid changes in the type. The legal regulation regarding the change of company type is expressed in detail in the Turkish Commercial Code, numbered 6102.

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