Subject to the provisions of the Turkish Commercial Code No 6762, the Turkish Ministry of Industry and Trade approves the establishment of the capital corporations regulated by the Code, which have an ever increasing importance in the economic life of Turkey, their applications for the statutory modifications and the creation of branches in the country by foreign capital corporations or their participation in the existing corporate entities.

Turkey has non- discrimination and equal treatment for foreign investors. They have the same status with the local once. There are no rules requiring a Turkish participation in the capital ormanagement for local company with foreign capital. Almost all sectors in Turkey are opened to foreign investors and companies can be established with 100% foreign capital.



Joint Stock Companies ( JSC's) are business associations with legal personality. A corporation has a fixed capital. The Articles of Association must state a legally required minimum capital: at least 50.000 TL. The amount of this state reflects the initial financial strength of the corporation and is divided into shares (stocks) each having equal value and having the nature of negotiable instruments. Persons, either natural or legal, contribute or promise to contribute a certain amount of capital at the corporation in return for shares. Those corporations, which have more than 250 shareholders or those which offer their shares or bonds to the public, are subject to the Capital Market Law (CML)  no. 2499, dated 1981. A corporation is formed by at least 5 persons and must be registered in Commercial Registry to acquire its existence. Corporations may be incorporators of other corporations. Liability of members is limited with their subscribed capital shares.

Ministry of Industry and Trade keeps the permission authority of the establishment of JSCs open to public and subject to capital markets regulations. All other general purpose companies can apply directly to commercial registries throughout Turkey, with the necessary documents and can be established with the registration in the Commercial Registry.


As auditing is built on the questioning of correctness and appropriateness, it can be said that it plays a critical role in bringing about the "transparency" required to provide and maintain the environment of trust in markets. The purpose of auditing in Joint Stock Companies is to protect, on one hand, both the company and the partners and their creditors and, on the other, the future partners or creditors. In this concept, regarding to the CML no.2499, it will be possible to include shareholders (minority) who represent 5%of the share capital and some several rights of the shareholders, in the context of audit in the broad sense. In fact, the broad sense of audit will also include the discharge from liability between founders, broad members and auditors( TCC art.310), the right to prosecute the board of directors (TCC art. 341),the right to defer the certification of the balance sheet (TCC art.377), the right for several shareholders to ask for explanation in case of doubt (TCC art.363.f.1) and to get informed (TCC art. 362, 363.f.3) and the right to study the commercial books and the correspondence of the joint stock company ( TCC art.363,f.2). On the other hand, audit in narrow sense can be done by bodies and organizations which are only assigned and empowered for this purpose.


The Turkish Commercial Code (TCC) was adopted in 1956, inspired by arguably the best codes of its age. Given the fact that Turkey, as a candidate for EU membership and as an emerging market, aims to attract foreign investment, Turkish corporate legislation needed to be brought into line with the rest of the world in order to continue the economic integration that started with globalization. In 2006, the Turkish Ministry of Justice formed a commission composed of scholars, judges, and practitioners for the preparation of the draft Turkish Commercial Code (hereinafter to be referred to as the "Draft Code"). Turkish law allows regulators including the Capital Markets Board (CMB), the Banking Regulation and Supervision Board (BRSA), and the Under secretariat of the Treasury (GDI) to set their own auditing requirements for the entities under their respective jurisdictions. The Draft Code will be the fundamental code regulating all types of JSCs, both public and private.



The Draft Code introduces a radical change concerning the JSCs' auditors. One of its significant changes is the abolition of the requirement to have statutory auditors among the statutory bodies of JSCs. According to the system, auditing of JSCs of all sizes shall be conducted by independent auditing companies pursuant to a contract between the JSC and such auditing firm. As opposed to the current practice where real persons, who are not sworn independent auditors, are appointed as statutory auditors, or alternatively, in small-scale JSCs, by a minimum of two independent sworn-in auditors or public accountance to ensure compliance with Law, Turkish Accounting Standards and the Articles of  Association. The auditing function will have to be performed by a sworn independent auditing firm.

Pursuant to the TCC, an internal audit committee is one of the corporate organs of a company. Under the Draft Code, an audit committee is no longer considered an organ of a company. The Draft Code adopts a reformist and unifying approach that orders to all types of companies to retain external auditors and be audited by eligible, Professional, and independent auditors complying with international accounting standards and acting with due care.


The auditing is carried out both internally and externally. External audit is performed primarily by the Ministry of Industry and Trade of Turkey. The Tax Offices also have the absolute authority to audit the Company accounts. The aim of this auditing is to protect the public economic order.

There are two tips of internal auditing. Voluntarily the companies may subject their accounts to auditing trough auditing individuals or firms (sworn financial accountants such as the big four auditing companies).Separate from this outsourced internal auditing, the TCC makes auditing mandatory in a different regime. It is realized by minimum of one and maximum of five statutory auditors appointed by the Board of Directors. If they are more than one, the statutory auditors act as a board. They could be appointed to office for three years and be re-elected provided that the Board of Directors of the JSC has no other reservation.

The statutory auditors are real persons appointed to audit the activities of the JSC. They need not to be accountants or hold any similar title however they cannot be elected among persons with family relation to the Board of the Directors members and more than a half of the statutory auditors shall be Turkish Citizens (if it is only one auditor he/she shall again be Turkish Citizen).In the practice, the statutory auditors are appointed from independent accountants or shareholders.


Most of the reforms contemplated by the Commission are reflected in the Draft Code, and it is now awaiting ratification by the Council of Ministers. Given the fact that the world is suffering an enormous financial crisis due to the current credit crunch, it is now even more vital for an emerging market like Turkey to be attractive for foreign investors. The only way to accomplish this is to create a transparent and secure business environment.