The Difference Between a Joint-Stock Company and a Limited Company

In short

A joint-stock company and a limited company are separated as regards their organs, the transfer of the share and the liability of the partnership. The founder, the existing partner and the investor read the same table for a different question. The minimum capital is not frozen in this article; the articles of association and the trade-registry record are the basis. The steps of incorporation are left to the article on the limited company. The dispute between the partners is in a separate cluster.

What does the difference between a joint-stock company and a limited company mean?

The difference between a joint-stock company and a limited company is not only a matter of the title, or of looking more institutional. Both types are capital companies; the partners' liability is as a rule limited to the capital they put in. The separation appears in the changing of hands of the share, in the organs, in openness to the public, in some conditions of form and in the construction of a long-term investment. The wrong type may not be noticed at once at incorporation. It locks when the transfer of a share, the exit of a partner or the entry of an investor comes onto the agenda.

This article is not a copy of the article points to watch in the incorporation of a limited company. That text focuses on the clauses of the share, of the manager and of the exit in the limited-company agreement. The aim here is to put the two types side by side and to give a criterion of choice.

The text is for general information. Variable figures such as the minimum capital are not fixed from memory; they should be checked according to the current legislation.

Who makes this comparison?

• Entrepreneurs who incorporate a company for the first time and who stay between a limited company and a joint-stock company
• Partners who want to institutionalise a family company
• Those who want to keep the transfer of the share tight, or, the other way, to open it to an investor
• Businesses that meet the expectation of the tender, the bank or the supplier side that it should be a joint-stock company
• Structures that want to strengthen the trademark and the corporate identity with registration

The choice of type is the comparison article of the cluster of company law on the commercial law page. The registration of a trademark is a separate process; the type of the company does not provide the registration automatically. For the protection of the business name, how a trademark is registered is assessed separately.

A comparison

The following is a general frame. The articles of association, or the company agreement, and the current legislation change the concrete result.

• Legal character. Limited: a capital company; the personal element can be more pronounced. Joint-stock: a capital company; the construction of the share and of the organs comes to the front.
• Partner or shareholder. Limited: a single partner is possible; the statutory upper limit should be checked. Joint-stock: a single shareholder is possible; openness to the public is a separate regime.
• Management. Limited: the manager or the managers. Joint-stock: the board of directors, a compulsory organ.
• Transfer of the share. Limited: written form, a notary, and often the approval of the general assembly. Joint-stock: it changes according to the kind of share and the restriction in the articles of association.
• Openness to the public. Limited: a public offering is not the natural path of this type. Joint-stock: the public-offering and capital-markets dimension can be opened.
• Minimum capital. Both: a check according to the current legislation.
• Audit. Limited: according to the scale and the thresholds. Joint-stock: the scale, the threshold and the dimension of the Capital Markets Board are looked at separately.
• Typical use. Limited: a closed partnership, an SME, a family company. Joint-stock: investment, scale, a privileged share, an aim of a public offering.

The comparison does not mean a joint-stock company is always superior. In a closed structure with few partners, a limited company makes the transfer of the share more foreseeable. As the need for an investor and for a class of share grows, the tools of the joint-stock company come to the front.

Capital, organs and the share

The amount of capital is not written from memory

The amounts of minimum capital have been updated over the years and can be updated again. Presenting a certain figure in this article as an eternal truth misleads the reader. Before incorporation, an increase of capital or a conversion of type, the Official Gazette, the Turkish Commercial Code and the text of the relevant decision should be checked. The registry directorate looks for the floor at the moment of registration.

The minimum amount is separate from the real cash need of the business. Meeting the statutory floor does not finance, by itself, the commitment to the supplier and to the staff. If capital in kind will be put in, the valuation and the documentation matter separately.

The difference of the organs

In a limited company the general assembly and the managership are the basic backbone. In a joint-stock company the general assembly and the board of directors are separated by statute. This separation affects the discipline of the decision book, of representation and of the internal directive. Because the effect of internal restrictions on third persons can be limited, the signature circular determines the outward appearance.

An independent audit and some duties of informing the public are tied to the scale of the company and to the relevant thresholds. The generalisation that there is the same burden of audit in every joint-stock company is not accurate. The current threshold should be looked at from the relevant communiqué.

The transfer of the share, and control

The transfer of a limited-company share runs, in most files, with a notary's approval and a decision of the general assembly. The aim is to control the circle of the partners. In a joint-stock company a registered share, the records of restriction in the articles of association and, if there is one, pre-emption can still limit the transfer. Bearer writing and the instruments of the capital market are a separate regime; they should not be assumed without the current restrictions being checked.

How is the type chosen?

The decision is built with the business plan, and not with an advertising slogan:

1. The number of partners, and the investor who will enter later, are clarified.
2. How freely the share will change hands is spoken; a family company and an investment round do not give the same answer.
3. The model of management is chosen: a single manager, or a board, and how will the authority to sign be divided?
4. The minimum capital and the payment calendar are checked according to the current legislation.
5. Tax, stamp duty and the cost of the transaction are compared at a high level; the rate is not memorised, and the frame of tax law is looked at separately.
6. The trademark, the title and the domain name are protected independently of the type of company; the registration is planned separately.
7. The articles, or the company agreement, are written with the clauses of exit, of deadlock and of competition.
8. The list of MERSIS and trade-registry papers is completed according to the type that was chosen.

The risks of the papers and of the clauses of a limited-company incorporation are treated in the relevant article on the limited company. The aim in this list is to choose the type; it is not to copy the registration form line by line.

The same statutory frame applies in Ankara too. The tempo of the trade registry depends on the completeness of the papers; a local custom does not change the elements of the type.

Where the record of the type of company is read from

The articles of association, the record of the share and the document of the organs are read side by side. A lawyer in the commercial field does not write into this text an amount of minimum capital that does not stand in the file. The office address does not choose the competent authority. A lawyer in the commercial field does not put the steps of a limited-company incorporation in the place of this comparison. A lawyer in the commercial field reads the record of the share from the articles of association. The frame is read with the agreement in the file, the Turkish Commercial Code No. 6102.

Liability being limited does not mean that the manager, or the member of the board of directors, will not be liable in any case. A transaction contrary to the statute, a public debt or an undocumented simulated relation is debated separately. The approach that the shield of legal personality covers everything is misleading.

The title is not a trademark. The trade name written on the registry does not automatically give the same protection as the registration of a trademark. If there is a risk of confusion in the market, the two processes are planned together.

Choosing the type with a promise of a tax advantage is a weak ground both ethically and legally. Liability to corporate tax is the rule in both types. The difference is sought in the documentation and in the form of some transactions.

A privileged share, openness to the public, and scale

The set of tools of a joint-stock company is open to a wider construction of shares than that of a limited company. Headings such as a privileged share, a privilege in the vote, a privilege in the profit or a privilege in the liquidation share can be debated with the articles of association. This possibility does not mean that every joint-stock company is in fact open to the public. A public offering and the capital-markets dimension are tied to a separate threshold, to a prospectus and to a regime of informing the public. The assumption that an investor comes when joint-stock is written stays empty without the discipline of the agreement and of the share register.

In a limited company the share is essentially a share of the principal capital. Different rights can be constructed in a measured way with the company agreement; it is not, however, the same set, one for one, as the securities and the capital-market instruments in a joint-stock company. In a closed family company this simplicity can be an advantage. As a multi-round investment, a share option or an aim of openness to the public grows, the debate on the joint-stock company naturally comes to the front.

Scale also affects the audit and the order of the books. The thresholds of an independent audit can be updated with the relevant communiqués. A threshold figure is not given in this article as an eternal truth. It should be checked according to the current legislation. The certification of the books, the decision book and the share register are the backbone of proof in both types. A book that is not kept gives birth to a weak stance both in an internal dispute and in the relation with a third person.

The bank, the tender and the supplier side sometimes ask that it be a joint-stock company. This request can be a commercial preference; the statutory obligation is not the same in every tender. Changing the type without the text of the conditions being read gives birth to a cost and to time. The reverse is also valid: a limited structure is sufficient for many commercial relations.

Conversion of type, the title, and the daily operation

A conversion from a limited company to a joint-stock company, or the reverse, is not a copy of incorporation from zero. An interim balance sheet, the protection of the creditors, the new articles of association and the election of the organs are treated separately. The minimum capital and the conditions of the organs at the moment of the conversion are checked according to the legislation of that day. If the clauses of exit and of competition in the old company agreement are not carried to the new text, a gap is born.

A change of title does not carry the trademark automatically. Writing joint-stock on the signboard does not change the class and the regime of similarity in the file of the registration of a trademark. The domain name, the title on the e-invoice and the signature circular should also be updated according to the change of type. Otherwise the document of representation and the actual title contradict.

In the daily operation the difference between the manager and the board of directors appears in the bank signature and in the authority to contract. In a limited company with a single manager the speed of the decision can be high; the audit and the collective mind can stay weak. The structure of a board slows it; it gives a sense of internal control in large commitments, however. The internal directive and the signature circular make this balance concrete against third persons. An internal restriction cannot always be put forward outwardly.

In the practice of the Ankara Trade Registry, the completeness of the papers determines the tempo. The choice of type of a business centred in Çankaya does not change the elements of the national Turkish Commercial Code. The notification to the tax office, to the social-security institution and the certification of the books should be planned together with the incorporation or the conversion. These items intersect with tax law and with the discipline of accounting; the memorising of a rate is not the subject of this article.

How the clauses of a limited-company incorporation will be written stands in the relevant article on incorporation. This comparison does not repeat that guide; it shows which type answers which question.

Conclusion

The difference between a joint-stock company and a limited company gathers in the transfer of the share, in the organs, in openness to the public and in the need for flexibility. The figure of the minimum capital is not given in this article as an eternal truth; it is checked according to the current legislation. The guide to the incorporation of a limited company is a separate article; this text meets the intention of a comparison.

This article is for general information. The concrete aim of the partnership, the financial statement and the current rules of the registry should be read together.

For the general frame, the commercial law page can be looked at.