Social Cooperatives in Turkish Law

In Turkey, social cooperatives are subject tot he Law on Cooperatives No. 1163. The establishment of social cooperatives is completed upon its registration before the trade registry following the Ministry of Trade and Customs’ legal authorization.

How many partners are required to establish a cooperative and who can be partners?

Cooperatives should be established with at least 7 partners.

These founding partners may be Turkish/non-Turkish natural and legal persons (associations, foundations, capital companies, etc.).
However, non-Turkish partners cannot be elected as members of the board of directors. In other words, only Turkish nationals can sit at the board of directors of social cooperatives.

What is the total share capital of cooperatives?

Unlike corporations, the total amount of capital held by a cooperative is kept very low. The share price has been set at TRY 100 (approx. USD 16), with each partner being able to hold a maximum of 5,000 shares. Therefore, the total amount of capital of a cooperative with a minimum of 7 partners should be at least TRY 700 (approx. USD 113).

Individuals may become a partner of a cooperative by paying their share of capital in cash or in kind. However, in kind capital contributions should be clearly stated in the charter.

What are the organs of a cooperative?

Cooperatives consist of three organs.

General Assembly: A general assembly refers to the entire group of partners of a cooperative. Each partner has one right to vote. The decisions taken at the general assembly should be registered before the trade registry and publicly announced.

Board of Directors: The board of directors is the executive body with the authority to represent the cooperative. It consists of at least three members. The members of the board of directors and reserve members to be elected must be partners of the cooperative.
The legal entity partners may also be elected as members of the board of directors. Members of the board of directors can be elected for a maximum of four years. It is possible for members of the board of directors to be re-elected.

Board of Auditors: The purpose of the board of auditors in the cooperative is to protect the interests of the partners and to ensure transparency and accountability within the organization. In this regard, the board of auditors is responsible for controlling the structure, activities and accounts of the cooperative.

Members of the board of auditors should be appointed by the general assembly. Auditors may be elected from non-partner entities and/or individuals; however, they must be Turkish nationals. Furthermore, it should be noted that individuals appointed as board members cannot serve as auditors.

Are profits distributed in cooperatives?

Cooperatives do not aim to make a profit. Accordingly, excessive income and expenses are referred to as surplus (risturn) rather than profits or losses. The amount of surplus shall be distributed according to the provisions of the charter after setting aside legal reserves and special funds (if any).

How can partners exit from a cooperative?

In accordance with the open door policy of cooperatives, each partner has the right to leave the cooperative. A person/entity who wishes to quit, shall apply to the board of directors with a petition. However, the board of directors may request a certain amount of compensation from the partner who wishes to exit provided that this is explicitly regulated under the charter. In addition, a lock-in period (max. 5 years) can be regulated in the charter.

The transfer of a cooperative partnership is possible. After the transfer of a partnership is completed in the presence of a notary public, both seller and purchaser are required to submit a joint application (by attaching the deed of transfer) to the board of directors.

What is the responsibility of the cooperative against its creditors?

Unless otherwise stated in the charter, the cooperative is solely responsible for its assets. The cooperative will also be responsible for the damages due to torts caused by the person(s) authorized for the management and representation of the cooperative.