1.1 Description of the Legal Entities Stated in the Turkish Commercial Code

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1 Legal Guide to Forming a Corporation in Turkey 1. TYPES OF BUSINESS ORGANIZATIONS In Turkey, one of the two options may be adopted in order to carry out business activities; as individuals engaged in commercial activity or through a legal entity pursuant to the Articles of Association and relevant Turkish Commercial Code. The individuals who carry their business activities, solely, under the title "merchant" or through the ordinary company, as stated in article 520 of Turkish Commercial Code, do not have a legal entity. However there are seven types of legal entities provided under Turkish Commercial Code and Turkish Code of Obligations, by which business activities can be carried out. The legal entities provided under the Turkish Commercial Code can be named as; Joint Stock Companies (Anonim Sirket), Limited Companies (Limited Sirket), General Partnership (Kollektif Sirket), Limited Partnership (Komandit Sirket), Partnership Limited by Shares (Sermayesi Paylara Bölünmüş Komandit Şirket), and Cooperative Companies (Kooperatif), Due to the speciality of the legal entities provided under Turkish Commercial Code we would like to take this opportunity to inform yourselves about the certain attributes of the above mentioned legal entities and leave the Ordinary Company out for the time being. Notwithstanding the nationality, any real person or legal entity, who has legal capacity under the provisions of the Turkish Code of Obligations, may become a shareholder of a corporation. Any limitation other than the legal capacity does not exist under the Turkish Code of Obligations in respect of being a shareholder. Under Turkish laws, foreign investors may incorporate or participate to any and all kinds of companies, which are available to local investors in accordance with the equal treatment principle defined in the Foreign Direct Investment Law. Pursuant to Article 3 of the Foreign Direct Investment Law, unless otherwise provided by the international agreements and relevant specific laws, foreign investors can invest directly in Turkey without any limitation and shall be subject to the same treatment and provisions with domestic investors. Please find below a brief description of each of the entities and procedures to be followed during the establishment process. 1.1 Description of the Legal Entities Stated in the Turkish Commercial Code Joint Stock Company The joint stock company is a company established with a minimum number of five shareholders, which may consist of real persons of legal entities. The minimum capital Cumhuriyet Caddesi Gezi Apartmanı No: 9 Kat: 5 D: 9-10 Taksim Istanbul - Turkey 1

2 requirement is NTL ,- and the capital is divided into shares and each shareholder's liability is limited to the value of his shares. A joint stock company may be established either as a public company or as a private company. In case the joint stock company is established in the form of a public company; it means either its shares are registered for trading on a stock exchange or its shares are offered to the public pursuant to the Capital Market Law No: Another possibility for a joint stock company to be classified as public company is the presumption of law; which indicates that a joint stock company with more than 250 shareholders is assumed to be a public company Limited Company The limited company is a company established with at least two and at most fifty real persons or legal entities. The Partners' liability is in proportion to the amount of the capital, which they have committed. However, partners have personal liability against the company debts to government offices (e.g. taxes, social security premiums, etc.). The minimum capital requirement for limited company is NTL General Partnership General Partnership is the partnership of two or more real persons established for the purposes of operating a commercial enterprise under a trade name, containing legal status and all partners being under several and unlimited liability against the creditors of the partnership Limited Partnership The limited partnership differs legally from the general partnership because at least one partner (who is called the "general partner") is unlimitedly liable for all the debts and obligations of the partnership against the third parties, whereas the other partners (who are called the "limited partners") are not liable for the debts and obligations of the partnership against third parties Partnership Limited by Shares Cumhuriyet Caddesi Gezi Apartmanı No: 9 Kat: 5 D: 9-10 Taksim Istanbul - Turkey 2

3 The partnership limited by shares contains the characteristics of both the joint stock company and the limited partnership. Its capital is divided into shares and, depending on the Law it is agreed under its bylaws, one or more partners are jointly, severally and unlimitedly liable to the creditors of the partnership similar to the "general partner" as described above Cooperative Company The cooperative company is an association of an indefinite number of real and legal persons, the main purpose of which is the furtherance or safeguarding of a defined economic interest of its members by their mutual efforts. The capital of the cooperative company is not fixed in advance and its liability to its own assets, unless otherwise agreed by its articles of association. 1.2 Description of the Individual Merchants and Ordinary Company Individual Merchant An individual merchant is a real person who manages a commercial enterprise, even if partially, on behalf of himself. However in order to protect the third persons; if a real person has announced the public that he has established and commenced operating a commercial enterprise or registered his enterprise through a commercial registry; he then is assumed to be individual merchant whether or not he as commenced business in actual fact Ordinary Company The ordinary company, which is established pursuant to the article 520 of the Turkish Code of Obligations, is a company with two or more partners who enter into obligations of combining their labor and / or capital in order to reach to an object. The establishment of ordinary company does not have any conditional requirements; however it also does not have a legal entity as do the companies stated in the Turkish Commercial Code have. 2 ESTABLISHMENT OF THE LEGAL ENTITIES STATED IN TURKISH COMMERCIAL CODE 2.1 The Establishment Process Prior to the detailed information on the required documents and transactions for establishing a company, we would like to give a brief explanation regarding the basics of Turkish system for establishing a company. According to Turkish Commercial Legislation, each type of above mentioned legal entities are established by presenting certain documents including the Articles of Association to the Trade Registry and registering thereof. The important issue at this point is the contents of the Articles of Association which may vary according to the type of the company that will be established. In this regard it is beneficial to know that the Turkish Commercial Code provides two types of provisions for the issues that will take place in the Articles of Association; 1. Compulsory and statutory Cumhuriyet Caddesi Gezi Apartmanı No: 9 Kat: 5 D: 9-10 Taksim Istanbul - Turkey 3

4 2. Compulsory and amendable The first group of provisions is regarding the issues that must take place in the Articles of Association, and these provisions can not be amended, they must take place in the Articles of Association just as indicated in the Turkish Commercial Code. The second group of provisions is regarding the issues that must take place in the Articles of Association; however these provisions can be amended according to the needs of the newly established company. In order to explain this type of provisions the general meeting quorum may be given as an example. According to the Turkish Commercial Code, the meeting quorum is an issue that must take place in the Articles of Association, and the Code has set a minimum for the quorum. However a different quorum (on the condition that it is not below the minimum quorum) other than the minimum stated in the Turkish Commercial Code can be agreed. We would like to remind you that the two types of provisions, which are compulsory, do not constrain the non-compulsory provisions that can take place in the Articles of Association provided that they are in accordance with the current Turkish Legislation. 2.2 The Procedural Steps and Required Documents Consequent to the above mentioned information, please find below the main steps that should be taken in order to establish limited liability company under the Turkish Commercial Code: (i) Preparation of Articles of Association ("AoA") Joint Stock Company: The shareholders may establish various classes of shares and allocate specific voting, dividend and liquidation privileges to such classes. Usufruct certificates and founders shares for participation in profits are also possible. The AoA of a joint stock company is registered in the trade registry and is therefore a matter of public record. Limited Company: The difference of the AoA of a limited company is that it bears relatively different legal requirements compared to the AoA of a joint stock company. Mainly the difference is regarding the organs of the company; such as a limited company having a shareholders committee and managers whereas the Joint Stock Company has a general assembly and board of directors as well as general managers. General Partnership, Limited Partnership, Partnership Limited by Shares: The AoA of one of these companies bears relatively less legal requirements compared to the AoA of a Limited Company. Cooperative Companies: A Standard form of Association of Association for cooperative companies occupying with certain issues of business are issued for by the relevant Ministry, and these standard Articles of Association should be used for establishing cooperative companies occupying with issues such as agricultural cooperative companies. Cumhuriyet Caddesi Gezi Apartmanı No: 9 Kat: 5 D: 9-10 Taksim Istanbul - Turkey 4

5 (ii) Execution of AoA by each of the shareholders of the company or their proxy and/or proxies on behalf of the shareholders. Joint Sock Company: A minimum of five shareholders, which may consist of real or legal entities, is required in order to establish a joint stock company. Limited Company: A minimum of two and a maximum of fifty real or legal persons are required in order to establish a limited company. General Partnership, Limited Partnership, Partnership Limited by Shares: A minimum of two real persons are required in order to establish the above mentioned companies. In this point we would like to mention that if the execution of the AoA will be conducted by proxy a duly notarized and apostilled Power of Attorney and an original document evidencing the person is authorized for signature will also be required. (iii) Notarization of the AoA by a Turkish Notary Public In order to conduct the notarization five copies of the Articles of Association should be taken to the Notary Public since one copy will be kept by the Notary Public according to the Notary Public Law. (iv) Application to the Trade Registry where the Company's head office is located for the registration of the AoA of the Company together with the other required documents. a. Articles of Association b. Signature declarations (Notarized by a local notary public and either apostilled or certified by the Turkish Consulate) c. Identity card and domicile certificate (For Turkish real persons residing in Turkey) Cumhuriyet Caddesi Gezi Apartmanı No: 9 Kat: 5 D: 9-10 Taksim Istanbul - Turkey 5

6 d. Passport copy (For real persons who are not Turkish citizens) e. Certificate of activity (For legal entity shareholders, issued by the Trade Registry Office which such shareholder is registered or by authorized courts and notarized by a local notary public and either certified by the Turkish Consulate apostilled) f. Residence and / or work permits (For Turkish citizens who are domiciled outside of Turkey and for foreign citizens who are domiciled in Turkey) g. Tax numbers (For each real founder, BoD Member and Managers, issued by the Tax Office where the new company will have a tax account) h. Incorporation notice form i. Commitment letter j. Statement regarding the Registration with the Chamber k. If the founding shareholder of the Company is a legal entity, decision regarding the participation to the Company; in addition to this decision, signature circulars of the founding shareholder approved by a notary based on the decision of the recent appointment of the board of directors of the Company, in case the Company is an Joint Stock Company and the decision of the Shareholders' Assembly, regarding the election of the directors, in case it is a Limited Company. l. Original of the receipt of Ziraat Bankasi (state bank of Turkish Republic) evidencing that 0,004% of the capital of the Company has been paid to the account of Competition Board m. Photographs (The passport size photographs of real person establishers and the members of Board of Directors) (v) Publication and Announcement of the AoA as well as the authorized signatories of the Company in the Trade Registry Gazette in order to put third parties on notice of the establishment thereof. Pursuant to the Turkish Commercial Code the company shall be deemed incorporated with the registration of the company with the Trade Registry. 3. THE LICENSES AND THE RESTRICTIONS Although the freewill is the basic principle governing the commercial and business life in Turkey, there are some restrictions and interventions which should be taken into consideration. In this context, certain businesses require prior approval of the governmental authorities and certain businesses are only conductible with certain types of companies. The provisions regarding these approvals and restrictions are specified in a wide variety of laws and regulations, constituting a complex and a desultory formation.

7 Therefore we would like to inform you about the specified issues as far as they are determined within the legislation. 3.1 The Licenses According to Article 5 of the Communiqué No: 2003/ 3 of the Ministry of Industry of Trade (the "Ministry") banks, interest free banks, financial leasing and factoring companies; companies dealing with consumer finance, credit cards, asset management and insurance; holdings; companies operating exchange offices, public warehouses, licensed storage and/or agricultural storages and warehouses; companies subject to the Securities Exchange Act, Publicly Held Companies, Companies pertaining to the founding partners and operators of Free Economical Zones are obliged to obtain the relevant approval from the Ministry before the establishment and in order to amend their AoA. In case the Purpose and Activities of the company to be established consist the activities stated herein above, the establishment will be subject to the approval of the Ministry and accomplished in a period longer than the approximate time stated in the above paragraph. 3.2 The Restrictions Banks, interest free banks, financial leasing and factoring companies; companies dealing with consumer finance, credit cards, asset management and insurance; holdings; companies operating exchange offices, public warehouses, licensed storage and/or agricultural storages and warehouses; companies subject to the Securities Exchange Act, Publicly Held Companies, Companies pertaining to the founding partners and operators of Free Economical Zones are required to be established as joint venture company in order to be able to conduct business in these fields. 4. APPROXIMATE TIME PERIOD AND COSTS 4.1 Approximate Time The establishment procedure can be accomplished within 4 to 5 days following the safe receipt of the required documents, provided that the documents are appropriate and full. 4.2 Approximate Costs Please kindly note that the costs for establishing a company depends on the type of the company, capital amount and the number of shareholders of the new company. The costs mentioned below are calculated according to the minimum capital amount and minimum shareholder number. The current Turkish Commercial Code has come into effect on 09/07/1956 and has been amended many times since. However, as the years pass and the structure of the business and Commerce changed, the current Commercial Code has been considered to be incapable of answering to the needs of the modern times and the practice of commerce. Cumhuriyet Caddesi Gezi Apartmanı No: 9 Kat: 5 D: 9-10 Taksim Istanbul - Turkey 7

8 1. Translation and Notarization of the Documents of the Foreign Shareholders before Notary Public Therefore, a study for creating a new Commercial Code has been in process for over five years. Consequently, the studies have been finalized and the draft has been given its final structure. With this draft commercial code coming into force some significant amendments, which we would like to mention here in proportion with their relevance to the establishment of a company. One of the most important alterations will be in the principal of "ultra vires" which means the company is bound and restricted with the issues of business that are stated in its Articles of Association. The current Turkish Commercial Code is applying this principle, and restricting the companies with the issues of businesses stated in the Articles of Association. However, the new draft has removed this principle text of the law. Another important alteration will be the number of persons necessary to establish a limited company or a joint stock company. Although at least five persons for join stock company and at least two persons for limited company are required for the establishment of thereof; with the new draft coming into force the joint stock companies and limited companies may be established by only one person who owns 100% of the relevant company. Att. Bahar Yenerer - Att. Cansu Songül Joint Company EURO S00 Stock Limited Company EURO 200 The Others EURO Notarization of the AoA by a Turkish Notary Public EURO EURO B00 EURO Application to Trade Registry Office in order for the EURO EURO EURO B00 registration of the Company 4. The charge to be paid via Ziraat Bank ( state bank of Depends on the capital amount Turkish Republic ) evidencing that 0,004 % of the of the company to be capital of the Company has been paid to the account of established. Competition Board TOTAL EURO EURO EURO The amount mentioned in Section 4 of this chart. 5. EVALUATION OF THE DRAFT LEGISLATION Cumhuriyet Caddesi Gezi Apartmanı No: 9 Kat: 5 D: 9-10 Taksim Istanbul - Turkey 8