Skip to main content
SpringerLink
Log in

Considerations on the economic effect of the new Turkish commercial code provisions regarding single member companies

  • Published:
European Journal of Law and Economics Aims and scope Submit manuscript

Abstract

This article deals with both legal and economic analysis of the new Turkish Commercial Code provisions regarding single member companies. In this respect, legal provisions of the Turkish Commercial Code are examined and compared not only with the Twelfth European Union Directive and Societas Unius Personae, but also regulations of the European Union member states. Since single member companies are to be established as limited liability companies under Turkish law, this article considers the benefits of the limited liability form that can be applied to single member companies in the framework of firm theory. It also examines the benefits and risks of single member companies in terms of transaction costs and assesses the safeguards against the risks in this regard. Finally, an evaluation is made in the light of the data collected relating to the number of companies established after the new Turkish Commercial Code entered into force.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. Main concerns of lawyers about SMCs were the organ formation and operation of company abuse. See Tekinalp (2013).

  2. Since the investors invest their assets in a single firm, diversification is not a crucial consideration for closely held firms. For further information see Ribstein (1991).

  3. In American law debt investors in sole proprietorship, general and limited partnerships, business trusts and other ventures possess limited liability. See Easterbrook and Fischel (1996). On the other hand, in Turkish law only the commercial companies can be subject to limited liability.

  4. There are two kinds of creditors: voluntary and involuntary. Voluntary creditors are consumers, employees, trade creditors and lenders (Easterbrook and Fischel 1996). Involuntary creditors can be considered as tort victims and tax and regulatory authorities. Posner (2008), states that voluntary creditors are fully compensated by high interest rates, as a result of estimation of company default risk when the loan agreement signed. Defenders of the limited liability concept state that uncompensated transfers of risk of business failure from shareholders to creditors would occur on a substantial scale. Therefore, this would presumably restrict the availability of credit to limited liability companies and reduce the level of economic activity accordingly. For the historical evaluations and doctrinal discussions regarding limited liability see Halpern et al. (1980). Despite the assertions made by the defenders, consensus has been reached on the fact that limited liability aggregates the level of economic activity.

  5. For all possible answers stated in this article see Posner (2008).

  6. One should never overestimate the fact that, under some conditions, large shareholder might monitor the risk of company default better than a small trade creditor. The trade creditor on the other hand can protect himself by limiting the extension of credit to a short period (Posner 2008). These general characterizations of shareholders and corporate creditors are not universally true especially when unsophisticated creditors and employees who hold no diversified portfolios are likely to be more risk adverse and less able to appraise business risks than institutional shareholders. See Ribstein (1991: 101 fn. 92).

  7. The reasons why economic activities should be carried out in firms rather than individuals are illustrated in firm theory. For one of the first articles on this theory see Coase (1937).

  8. Three kinds of conflicts, conflicts between managers and shareholders, conflicts among shareholders and company’s other constituencies are called by economists as agency problems (Hansmann et al. 2009).

  9. It is important to mention that, market for corporate control performs better for publicly held private companies.

  10. It should be stated that, unlike unlimited liability company, in limited liability shares are fungible and each share has its fixed market price. Therefore, there is no risk of being surcharged for an investor who wants to purchase shares.

  11. [1897] A.C. 22, H.L. See Davies (2012).

  12. For a detailed evaluation of French regulation of SMCs see Çevik (1998).

  13. Twelfth Council Company Law Directive on Single Member Private Limited Liability Companies 89/667/EEC of 21 December 1989, Official Journal (OJ) L 395, 30.12.1989; This directive is changed by Directive 2009/102/EC of 16 September 2009, OJ L 258/20, 1.10.2009.

  14. For a detailed study on the Directive see Çelik (2007).

  15. White paper on growth, competitiveness and employment: The challenges and ways forward into the 21st century COM (94) 207 Final and COM (93) 700 Final.

  16. See footnote 15.

  17. European Commission, Roadmap, Single member Company, DG MARKT/F2, 03/2013, available at http://ec.europa.eu/smartregulation/impact/planned_ia/docs/2014_markt_003_single_member_company.pdf (accessed on 15 October 2014).

  18. The report “EU SMEs in 2012: at the crossroads. Annual report on small and medium-sized enterprises in the EU”, 2011/12, available at http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performance-review/files/supporting-documents/2012/annual-report_en.pdf. (accessed on 23 January 2015).

  19. European Commission Staff Working Document Impact Assesment, COM (2014) 212.

  20. COM (2014) 212.

  21. For an analysis of director’s liability in listed firms using modern finance theory see Rose (2011).

  22. See COM (2014) 212.

  23. COM (2014) 212.

  24. For ownership characteristics of different countries see Marinov and Heiman (1998).

  25. For limited liability companies see Hansmann and Kraakman (2000).

  26. Regarding the cost of bureaucracy see Williamson (1985).

  27. According to Williamson (1985: 154) the major benefit of integration derives from the fact that party with the authority in a firm can resolve disputes without litigation but by decision making. It is quite difficult to agree with this statement from a legal point of view since in some cases decision making would not be easy even though the majority principle is accepted. Moreover directors carry the burden of personal liability because of the decisions they have made.

  28. For mandatory accounting disclosure by small private companies see Arrunada (2011).

  29. See Farrar (1990); Payne (1997); Thomson (1990–1991). For Turkish Law see Tekinalp and Tekinalp 1995; Dural 1998; Yanlı 2000; Seven and Göksoy (2006); Suits that are related to Veil Piercing in Turkish law see Tekinalp (2013).

  30. Almost every US cases where veil is pierced, involved a close corporation. See Easterbrook and Fischel (1996).

  31. For the example see Easterbrook and Fischel (1996); see also Posner (2008).

  32. According to Art. 2 of Turkish Civil Code “every person is bound to exercise his rights and fulfill his obligations according to the principles of good faith.” Therefore judges would decide if there is a misuse or not accordingly. For the translation of this article see Eroğlu (2008: 1282).

  33. For some of the important cases with respect to piercing the corporate veil doctrine in Turkish law see. Supreme Court 19. HD., 2.11.2000, E. 2000/5828, K. 2000/7383; Supreme Court 19. HD., 15.6.2006 E. 2005/8774, K. 2006/5232; Supreme Court 11. HD, 5.4.2012, E. 2010/14261, K. 2012/5407 available at http://kazanci.com (accessed on 13.02.2014).

  34. For same approach in limited liability principle see Hansmann et al. (2009).

  35. In favor of this system see Eroğlu (2008).

  36. Report on Turkish Economy, Ministry of Customs and Trade, 13 February 2014, Available at http://risk.gtb.gov.tr/data/52c2bb03487c8e312c013182/T%C3%9CRK%C4%B0YE%20EKONOM%C4%B0S%C4%B0%20G%C3%96STERGELER%C4%B0_2014_02_13.pdf (accessed on 13.02.2014).

  37. Available at http://risk.gtb.gov.tr/data/52c2bb03487c8e312c013182/T%C3%9CRK%C4%B0YE%20EKONOM%C4%B0S%C4%B0%20G%C3%96STERGELER%C4%B0_2014_02_13.pdf (accessed on 13.02.2014).

  38. See press release of Hayati Yazici, Minister of Customs and Trade available at http://www.gtb.gov.tr/haberler/yazici-yeni-turk-ticaret-kanunu-uygulama-sonuclarini-basin-toplantisinda-acikladi (accessed on 13.02.2014).

  39. Available at http://risk.gtb.gov.tr/data/52c2bb03487c8e312c013182/T%C3%9CRK%C4%B0YE%20EKONOM%C4%B0S%C4%B0%20G%C3%96STERGELER%C4%B0_2014_02_13.pdf (accessed on 13.02.2014).

References

  • Arrunada, B. (2011). Mandatory accounting disclosure by small private companies. European Journal of Law and Economics, 32, 377–413.

    Article  Google Scholar 

  • Atabek, R. (1987). Tek Ortaklı Şirket. Batider, XIV(1), 23–35.

    Google Scholar 

  • Aydoğan F. (2012). Tek Kişi Ortaklığı. Vedat Publishing.

  • Berg, H. (1974). Schadensersatzanspruch des GmbH-Alleingesellschafters bei einem Schaden der Gesellschaft. In NJW, pp. 933–935.

  • Çelik, F. H. Ş. (2007). Hukukun Ekonomik Gerçekliğe Yanıtı: Tek Kişilik Şirketler. Batider, XXIV(1), 161–216.

    Google Scholar 

  • Çevik, K. (1998). Fransız ve Türk Hukukunda Tek Ortaklı Şirket/Sınırlı Sorumlu İşletme, Prof.Dr. Ali Bozer’e Armağan, Banka ve Ticaret Hukuku Araştırma Enstitüsü, 37–55.

  • Coase, R. H. (1937). The nature of the firm. Economica, 4, 386–405.

    Article  Google Scholar 

  • Davies, P., & Worthington, S. (2012). Gower’s principles of modern company law. London: Sweet & Maxwell.

    Google Scholar 

  • Dural, M. (1998). Tüzel Kişilik Perdesinin Aralanması, SPK 15. Yıl Sempozyumu.

  • Easterbrook, F. H., & Fischel, D. R. (1996). The economic structure of corporate law. Cambridge: Harvard University Press.

    Google Scholar 

  • Edwards, V. (1998). The EU twelfth company law directive. Company Lawyer, 7, 211. et seq.

    Google Scholar 

  • Eisenhardt, U. (2003). Gesellschaftrecht. Munich: Verlag C. H. Beck.

    Google Scholar 

  • Eroğlu, M. (2008). Single member companies in Turkish law. Legal Hukuk Dergisi, 64, 1269–1281.

    Google Scholar 

  • Farrar, J. (1990). Fraud, fairness and the piercing the corporate veil. Canadian Business Law Journal, 16, 474–502.

    Google Scholar 

  • Forstmoser, P., Meier-Hayoz, A., & Nobel, P. (1996). Schweizerisches Aktienrecht. Bern: Stämpfli Verlag.

  • Freedman, J. (2000). Limited liability: large company theory and small firms. The Modern Law Review, 63, 317–354.

    Article  Google Scholar 

  • Halpern, P., Trebilcock, M., & Turnbull, S. (1980). An economic analysis of limited liability in corporation law. University of Toronto Law Journal, 30, 117–150.

    Article  Google Scholar 

  • Hansmann, H., & Kraakman, R. R. (2000). The essential role of organizational law. Yale Law Journal, 110, 387–440.

    Article  Google Scholar 

  • Hansmann, H., Kraakman, R. R., et al. (2009). The anatomy of corporate law: A comparative and functional research. Oxford: Oxford University Press.

    Google Scholar 

  • Jocic, D. R. (2005). A single member company—Convenient or not for the founders. Facta Universitatis, Economics and Organization, 2(3), 209–219.

    Google Scholar 

  • Kreuzer, K. (1980). Die Glaeubigerschutzbestimmungen der GmbH-Novelle für die Einmann—GmbH und die GmbH u. Co. Zeitschrift für Wirtschaftsrecht, 9, 722–726.

    Google Scholar 

  • Lindemann, B. S. (1996). Die Beschlussfassung in der Einmann—GmbH: eine Studie über das Zustandekommen des Beschlusses in der Einmann—GmbH und über die Rechtsfolgen beim fehlerhaften Einmannbeschluss. Heidelberg: Decker Verlag.

  • Manne, H. J. (1967). Our two corporation systems: Law and economics. Virginia Law Review, 53, 259–284.

    Article  Google Scholar 

  • Marinov, B. Z., & Heiman, B. A. (1998). Company law and corporate governance renewal in transition economies: The Bulgarian dilemma. European Journal of Law and Economics, 6, 231–261.

    Article  Google Scholar 

  • Payne, J. (1997). Lifting the corporate veil: Lifting the fraud exception. Cambridge Law Journal, 56, 284–290.

    Article  Google Scholar 

  • Peifer, M. (2008). Die Pflichtenstellung des Alleingeselschafters gegenüber der GmbH. GmbH-Rundschau, 20, 1074–1078.

    Google Scholar 

  • Posner, R. (2008). Economic analysis of law. Alphen aan den Rijn: Aspen Law & Business.

    Google Scholar 

  • Power, V. J. G. (1990). Twelfth EC company law directive. ICCLR, 1, 44. et seq.

    Google Scholar 

  • Ribstein, L. E. (1991). Limited liability and theories of corporation. Maryland Law Review, 50, 80–130.

    Google Scholar 

  • Rose, C. (2011). Director’s liability and investor protection: A law and finance perspective. European Journal of Law and Economics, 31, 287–305.

    Article  Google Scholar 

  • Schwarz, G. C. (2000). Europaeisches Gesellschaftsrecht. Baden-Baden: Nomos Verlagsgesellschaft.

    Google Scholar 

  • Seven, V., & Göksoy, C. Y. (2006). Ticaret Şirketlerinde Tüzel Kişilik Perdesinin Kaldırılması. İstanbul Barosu Dergisi, 80(6), 2455–2471.

    Google Scholar 

  • Tekinalp, G. & Tekinalp Ü. (1995) Perdeyi Kaldırma Teorisi. In Reha Poroy’a Armağan, pp. 387–404.

  • Tekinalp, Ü. (2007). Tarihi Gelişim İçinde Tek Ortaklı Şirketler Sorunsalı ve Türk Hukukunun Bu Konudaki Açılımı. Dr.Hüseyin Ülgen’e Armağan, 1, 509–579.

    Google Scholar 

  • Tekinalp, Ü. (2013). Sermaye Ortaklıklarının Yeni Hukuku. Vedat Publishing.

  • Thompson, R. B. (1990–1991). Piercing the corporate veil: An empirical study. Cornell Law Review, 76, 1036–1074.

  • Werlauff, E. (2003). EU-company law, common business law of 28 states. Copenhagen: Djoef Publishing.

    Google Scholar 

  • Willamson, O. (1985). Economic institutions of capitalism. New York: The Free Press.

    Google Scholar 

  • Woodward, S. (1980). Limited liability in the theory of firm. Journal of Institutional and Theoretical Economics, 141, 601–611.

    Google Scholar 

  • Wooldridge, F. (2001). A simplified legal regime for small and medium-sized German public companies. Company Lawyer, 22, 27–30.

  • Yanlı, V. (2000). Anonim Ortaklıklarda Tüzel Kişilik Perdesinin Kaldırılması ve Pay Sahiplerinin Ortaklık Alacaklılarına Karşı Sorumlu Tutulması. Beta Publishing.

Download references

Author information

Authors and Affiliations

  1. Bilkent University Faculty of Law, Ankara, Turkey

    Aslı E. Gürbüz Usluel

Authors
  1. Aslı E. Gürbüz Usluel
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Aslı E. Gürbüz Usluel.

Ethics declarations

Conflicts of interest

The author declares that she has no conflict of interest.

Human and animal rights statement

This article does not contain any studies with human participants or animals performed by the author.

Additional information

This article is dedicated to my beloved aunt Nurten Giray who passed away during the earlier stages of drafting this work.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Gürbüz Usluel, A.E. Considerations on the economic effect of the new Turkish commercial code provisions regarding single member companies. Eur J Law Econ 42, 25–43 (2016). https://doi.org/10.1007/s10657-015-9511-2

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10657-015-9511-2

Keywords

JEL Classification

Search

Navigation