Advantages of Establishing a Joint Stock Company
The two most preferred types of companies in the global financial world are the Joint Stock Companies and Limited Liability Companies. It is important to know the advantages and disadvantages of these two type of companies, particularly for entrepreneurs who are considering to establish a start-up. Among these types of companies regulated in the Turkish Commercial Code, Joint Stock Companies have more important and substantial advantages over Limited Liabilities.
- Advantages of the Joint Stock Company in Terms of the Responsibilities of the Partners
- In Joint-Stock Companies, shareholders’ responsibilities regarding corporate debts are limited. The partners are solely responsible for fulfilling the capital they owe.
- The partners can not be held responsible for the public debts of the company. This special nature of the Joint Stock Companies ensures that the shareholders’ personal assets are exempted from the losses and risks of the company. Therefore, the most preferred company type in the global economy is the Joint Stock Company.
- For Limited Liability Companies, there is no sharp restriction as in Joint Stock Companies. The partners are responsible for the public debt of the company limited by the share they hold (Tax, SGK premium debt, etc.). Therefore, all shareholders in the company are directly responsible with all of their assets due to public debt of the company.
- When the responsibilities of partners are compared in both types of companies; shareholders of Joint Stock Companies have limited liability only to the capital they owe, therefore, this is one of the primary reason Joint Stock Companies are prefered in the global financial world.
2.The Absence of obligation of Joint Stock Company Partners to Become Administrators
- In Joint-Stock Companies it is possible for shareholders to become directors at the Board of Directors, but it is not compulsory for at least one shareholder to become a director. According to common practice, shareholders in Joint Stock Companies do not hold positions in the Board as Directors and Legal Representatives. The management organization is managed by expert and professional, in the areas where the company operates,. This provides a more functional and effective progression for the company. The obligations arising from the public debts and criminal responsibilities of the company are undertaken not by the partners but by the persons assigned to that position. By this way, the responsibilities of partners are significantly limited.
- In limited liability companies, management activities are also carried out by the directors. With the company contract; the management and representation of the company may be granted to one or more partners or all partners or third parties bearing the title of manager. However, one partner at least has to assume management and represantation authority of the company. The obligations of legal representatives and management, which are obliged to undertake by at least one of the partners, constitutes an economic risk in common and also imposes legal and criminal liability arising from the managerial position of the partner.
- When comparing the two type of companies; with the regulation of the new Turkish Commercial Code, the necessity of having at least one partner in management position, even if it is possible to assign manager/s who are not shareholders of the company, increases the scope of the liability limit and increases the risk factor. In this regard, particularly Limited Liabilities with single-partner are faced with unexpected economic, legal and penal risks and challenges.
- Advantages of Joint Stock Companies in Terms of Share Transfers
- In Joint Stock Companies, the shares are divided into two types as registered share and bearer share :
- Registered shares may be transferred unless original contract expressly provided otherwise. The transfer of registered shares occurs by turn over and submission to transferee.
The transfer of bearer share take effect to the company and third parties only with submission of the shares.
- In the case of limited liability companies, capital share and share transfers are as follows:
- The transfer of the shares are only possible by the notarized transfer agreement.
At least four-thirds of the partners’,which must hold at least four-thirds of the capital base, approval is required before the transfer of shares.
- A notarized sample of signature notarized transfer contracts and decision of the Board of Directors indicating the aprroval of the transfers, must be submitted to the trade register office.
- At the beginning of common mistakes, there is the assumption that the transactions are completed after the capital share transfer of the Limited Liabilty Company is realized in the notary. But in fact, it is not deemed legitimate as long as the transfer of the capital share together with the consent of the partners are not given for registration to the trade registry office.
- When comparing two types of companies; The procedural simplicity of share transfer of Joint Stock Companies makes an important contribution to the rapidity and effectiveness of commercial activity and therefore plays an important role in the choice of Joint Stock Companies.
Joint Stock Companies may be preferred for; minimizing the financial liability and risks of both partners’ commercial activities and personal property assets, the easy and rapid change of the capital shares, and the advantages in terms of management.
Please contact us for detailed information about the content in our newsletter about Advantages of Establishing a Joint Stock Company.
