Work Permits for Foreign Shareholders and Managers in Turkey
Since last 10 years the financial developments and the promising financial and technological progresses notably in energy, tourism and infrastructure sectors have attracted the foreign investors' interest. Since the number of foreign investments has been increasing within these developments, the question, if a company may have foreign shareholders and foreign board members has come to the fore. This was actually the result of the frequent change in laws as part of adaptation progress to E.U legislation.
One of the principals, the New Turkish Commercial Code ("TCC") regulating the shareholdering and managerial authorities in companies has also got its share of this frequent changes and the question remained same in foreign companies’ mind wishing to invest in Turkey: Can we appoint a foreign board member, shareholder, manager or assign a foreign employee?
In 2012, TCC was requiring at least one Turkish board member domiciled in Turkey which was chaotic for many multinational companies to find reliable board members at their first step into the country however this has been changed and such requirements have been abandoned. Therefore, such an amendment has motivated the foreign companies even it was again a frequent change but the requirements of work permit still remains the same. As is known, companies employing foreign personnel without work permit are fined pursuant to the Law on the Work Permits. The employer in Turkey and also the foreign employee will be faced a process with certain conditions. Both the employer and the employee shall submit an application with a certain time limit. In order to avoid delays and issues in this application process, it is essential to organize the application requirements.
The work permit procedure may vary depending on the sector and the position of the foreign employee. In this regard, it shall be considered if the manager is only a board member or if he/she is a shareholder at the same time. There are various criteria for work permit applications required by the Ministry for Labor and Social Security (the "Ministry"), some of which are as follows:
- Employment of at least five Turkish employees in the related company: This measure is applied differently for foreign shareholders and for other personnel.
- A certain share amount: Foreign shareholder shall hold a certain rate of shares which shall correspond to a minimum amount of TRY 40.000.
- Criteria for foreign direct investments: In order to promote foreign direct investments in Turkey, the work permit procedure for key personnel in such companies have been simplified. Accordingly, the work permit application criteria and procedure for key personnel employed by specific foreign direct investments differ from key personnel employed by other companies. Criteria for key personnel has been defined and regulated by the legislation on foreign direct investments. If the foreign personnel do not fulfill the requirements for key personnel pursuant to the related legislation, the work permit application procedure will be different.
Within the financial and technological developments and a big financial development potential, Turkey has been preferred by a growing number of investors and managers. Abovementioned legal amendments in the Turkish Commercial Code regarding the shareholders and board of directors in capital companies may be regarded as a facilitation of company establishments by foreign investors. Accordingly, a company may be established by foreign shareholders and a board of directors may consist of foreign board members completely. Even if the criteria may differ, the obligation to obtain a work permit applies to shareholders as well as to board members or key personnel that remains same.