Branches and Liaison Offices of Foreign Companies in Türkiye

Turkish Branches of Foreign Companies

As commercial enterprises grow, managing operations from a single headquarters becomes increasingly challenging. To ensure the seamless continuation of business activities, additional units such as branches are often required. Under Turkish law, foreign companies can establish branches in Türkiye to conduct their operations.

Legal Regulations

According to Article 2 of the Foreign Direct Investment Law No. 4875, establishing a new company or opening a branch is considered foreign direct investment. Article 40(4) of the Turkish Commercial Code No. 6102 addresses the branches to be opened in Turkey by companies with headquarters abroad. As per this article, Turkish branches of foreign companies shall be registered as domestic commercial enterprises.

Requirement for Parent Company

Foreign companies wishing to establish a branch in Türkiye must adhere to the regulations of the country where their headquarters are located, in addition to complying with Turkish law.

Shareholding Structure

Branches do not have a shareholding structure or shareholders, as they operate solely as extensions of the foreign parent company.

Minimum Capital Requirements

Although there are no mandatory minimum capital requirements, a specified amount of capital must be allocated during the incorporation of the branch.

Legal Personality and Liability

Branches do not possess separate legal personalities. All liabilities and assets of the branch are attributed to the parent company. Although branches are permitted to enter into agreements, any liabilities arising from such agreements are borne by the parent company. Legal disputes stemming from the branch's activities must be filed against the parent company, not the branch itself. The parent company can be sued both in Türkiye and in its own jurisdiction. However, any bankruptcy proceedings related to the branch must be initiated in the parent company's jurisdiction.

Management

The branch is overseen by one or more representatives appointed by the parent company, responsible for day-to-day operations and representing the branch. At least one representative must reside in Türkiye. 

Branch Establishment Procedure

To establish a branch in Türkiye, the parent company must decide to open the branch, and this decision must be registered with the relevant trade registry. The necessary documents for registration are outlined in Article 122 of the Trade Registry Regulation. Unlike equity companies, branches do not have articles of association and must operate by the parent company’s governing documents.

Liaison Offices

Foreign companies that wish to explore business opportunities, gain market familiarity, conduct market research, and develop business strategies before initiating commercial activities in Türkiye may choose to establish a liaison office. These offices are ideal for companies that do not intend to engage in direct commercial activities.

Legal Regulations

As per Article 3(h) of the Foreign Direct Investment Law, foreign companies are allowed to open liaison offices provided that they do not engage in commercial activities. The principles regarding liaison offices are addressed in detail in Articles 6 and 7 of the Implementing Regulation on Foreign Direct Investment Law. 

Requirement for Parent Company

The entity establishing a liaison office must be a legal entity incorporated under the laws of a foreign country and must hold the status of a company.

Fields of Activity

The activities authorized to be carried out by liaison offices that cannot engage in commercial activities are as follows: (i) market research, (ii) promotion of the products and services of the foreign company, (iii) representation and hospitality, (iv) control and supervision of suppliers in Türkiye in terms of quality and standards and supplier supply, (v) technical support (for distributors or suppliers), (vi) communication and information transfer, (vii) regional management center. 

Shareholding Structure

Liaison offices do not have a shareholding structure or shareholders, as they function solely as extensions of the foreign parent company.

Minimum Capital Requirements

There are no minimum capital requirements for liaison offices. All operational costs, including salaries and rent, must be fully covered by the parent company.

Establishment Procedures

To establish a liaison office in Türkiye, the parent company must submit an application to the Ministry of Industry and Technology, accompanied by the required documentation. To grant an operating license to the liaison office, the Ministry may stipulate that a period of at least one year must elapse from the establishment of the parent company.

Legal Personality and Liability

Liaison offices do not possess separate legal personalities. All liabilities and assets of the liaison office are fully attributed to the parent company.

Term

Liaison offices can be established for an initial period of up to three years. Extensions can be requested by the parent company before the term expires. As per Article 8(b) of the Regulation on the Implementation of the Foreign Direct Investment Law, the maximum extension period for regional management center activities is ten years, while the maximum extension period for other activities is five years. Liaison offices authorized to conduct market research or to promote the products or services of the foreign company shall not be extended.

Management

The operations of a liaison office are managed by a representative appointed by the parent company. This representative is responsible for overseeing the liaison office's activities in Türkiye.

Conclusion

Establishing a branch or liaison office in Türkiye allows foreign companies to enter the Turkish market and explore business opportunities without the complexities of forming a separate legal entity. While branches offer the ability to engage in commercial activities under the parent company’s oversight, liaison offices provide a non-commercial means to evaluate the market and build connections. Both options offer suitable benefits depending on the foreign company's objectives.