THE CONCEPT OF FOUNDATIONS, ESTABLISHMENT REGIME, AND THE PROCESS OF ACQUIRING LEGAL PERSONALITY
In Turkish law, while associations, one of the two fundamental pillars of civil society, are considered groups of individuals, foundations are independent collections of assets dedicated to a specific and permanent purpose. Foundations established by investors, families, or companies for the purpose of protecting assets, transferring them between generations, or providing social benefit are subject to a strict legal regime under Articles 101 to 117 of the Turkish Civil Code and Law No. 5737 on Foundations.
The establishment of a foundation on a legal basis and the security of its assets depend on the flawless execution of procedural steps during the establishment phase.
1.1. The Concept of Foundations and the Condition of a Valid Purpose (Turkish Civil Code Article 101)
According to Article 101 of the Turkish Civil Code, a foundation is; Foundations are legal entities formed by real or legal persons dedicating sufficient assets and rights to a specific and continuous purpose.
Asset Requirement: For a foundation to be established, it is a requirement that sufficient cash, real estate, shares, or intellectual property rights—an asset with economic value—be transferred to the foundation to fulfill its purpose. The General Assembly of Foundations determines a minimum founding capital (assets) each year for establishing a foundation.
Purpose Limitation: The purpose of a foundation cannot be contrary to laws, public order, national interests, and general morality.
Prohibited Purposes: According to Article 101/4 of the Turkish Civil Code, a foundation cannot be established to support members of a particular race or community. Furthermore, establishing a foundation for purposes contrary to the constitutional characteristics of the Republic and the indivisible integrity of the state is strictly prohibited.
1.2. Form of Intention to Establish a Foundation (Turkish Civil Code Article 102)
The intention to establish a foundation cannot be realized through a simple written notification, as is the case with associations. The law prescribes stricter formal requirements due to the transfer of assets. A foundation can be established in two different ways:
1.2.1. Through Inter Vivos Transaction (Official Deed)
The founder, while alive, has a Foundation Deed drawn up through a notary. It is a legal requirement that this transaction at the notary be an “official deed in the form of a drawing”; a simple signature verification is not sufficient.
1.2.2. Through Testamentary Disposition (Will)
The founder, through a will, may request that a portion or all of their assets be allocated to a foundation after their death and that a foundation be established in their name. In this case, the foundation establishment process is carried out through the court after the founder’s death.
1.3. Registration in the Court Registry and Legal Personality (Turkish Civil Code Articles 102-104)
A foundation does not acquire legal personality through a unilateral declaration of intent by the founder or by signing a deed at a notary public. Registration in the central registry at the Civil Court of First Instance is a prerequisite for the creation of legal personality.
Foundation Establishment and Registration Process:
[Drafting of Official Deed (Notary)] ───> [Application to the Civil Court of First Instance (Registration Request)]
… ───> (ACQUISITION OF LEGAL PERSONALITY)
Role of the General Directorate of Foundations (VGM): When the court receives the registration request, it sends a copy of the file to the General Directorate of Foundations (VGM) without holding a hearing. The VGM examines the foundation deed in terms of its legality and the sufficiency of its assets and provides a written opinion to the court.
Rejection of Registration and Legal Remedies: If the court finds an illegality in the purpose or insufficiency in the assets, it rejects the registration request. The founder may appeal this rejection decision to the Regional Court of Appeals within 2 weeks from the date of notification.
1.4. The Moment of Transfer of Assets to the Foundation and Their Irrevocability (Turkish Civil Code Article 105)
The assets and rights allocated in the foundation deed become the property of the foundation automatically and retroactively from the moment of its establishment, upon its registration.
Registration Procedure: The registration of immovable properties (real estate) in the land registry in the name of the foundation, and the transfer of funds from bank accounts to the foundation’s account, are directly triggered by the court’s registration decision. Non-Revocation Rule: The founder who applies to establish a foundation through an inter vivos transaction cannot unilaterally revoke their intention to establish the foundation or reclaim the assets after submitting the registration petition to the court. If the founder dies while the registration case is ongoing, their heirs cannot cancel the case; the court will continue the registration process ex officio. How much capital is required to establish a foundation?
The minimum amount of cash or assets required to establish a foundation is updated and announced annually by the General Assembly of Foundations. Registration applications made with assets below this limit will be rejected by the court.
Is signing at a notary sufficient for establishing a foundation?
No, it is not sufficient. Following the official foundation deed drawn up at the notary public, it is mandatory to file a registration lawsuit in the competent Civil Court of First Instance and have it registered in the court registry. The foundation only acquires legal personality upon court registration.
Can a foundation be established with the aim of defrauding heirs?
Applications made to the foundation…If the allocation of assets infringes upon the reserved shares of the heirs, the heirs can file a Reduction Lawsuit against the foundation after the founder’s death, demanding the return of their reserved shares. Establishing a foundation does not completely eliminate the legal rights of the heirs.
CONTENT OF THE FOUNDATION DEED, AMENDMENT OF THE DEED AND CORRECTION OF DEFICIENCIES
The foundation deed is the constitution of the foundation’s legal entity. The organizational structure, financial policies, how the assets will be managed, and how the purpose will be achieved are outlined in this document.
An erroneous or incomplete provision written in the deed during the establishment phase may cause the foundation to become paralyzed in the later stages. Therefore, Articles 106, 107, and 108 of the Turkish Civil Code have established strict rules regarding the mandatory content of the deed, how to complete identified deficiencies, and how to revise the deed (amendment) according to changing circumstances over time.
2.1. Mandatory Content of a Foundation Deed (Turkish Civil Code Article 106)
For a foundation deed to be registered by the court, it must contain the minimum elements legally required. According to Turkish Civil Code Article 106, the following must be clearly stated in a foundation deed:
Name of the Foundation: The commercial or social title of the foundation (Generally bearing the name of the founder or a name appropriate to the purpose is chosen).
Purpose of the Foundation: The social, cultural, or economic purpose that the foundation will serve must be clearly stated.
Assets and Rights of the Foundation: A complete list and values of cash, real estate, or securities allocated to the purpose.
Organization and Management Structure of the Foundation: Which organs (Board of Directors, Board of Trustees, etc.) will manage the foundation, how these organs will be elected, and their terms of office.
Place of Residence (Headquarters): The address or city where the administrative headquarters of the foundation will be located.
2.2. Correction of Deficiencies in the Foundation Deed (Turkish Civil Code Article 107)
The omission or omission of some of the mandatory elements listed above when establishing a foundation through a notarized official deed or a will does not render the foundation invalid. The legislator has foreseen a protective mechanism to uphold the founder’s “intention to establish a foundation.”
Procedure for Completing Deficiencies in the Deed:
[Missing Element is Identified (e.g., Form of Organization Forgotten)]
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▼
[If the Founder is Alive] ──────────────> [Goes to a Notary Public and Corrects/Completes the Deed Ex Officio]
│
▼
[If the Founder has Passed Away] ───────────> [Opinion of the General Directorate of Religious Affairs is Obtained -> The Court Corrects the Deficiency Ex Officio] [Completions]
Court’s Authority to Complete Ex Officio: If the founder has passed away and the foundation deed lacks the name, headquarters, or organizational structure of the foundation, the Civil Court of First Instance handling the registration case, after obtaining the positive opinion of the General Directorate of Foundations (VGM), will complete these deficiencies ex officio (automatically) and register the foundation. Exception for Insufficient Purpose: However, if the deficiency relates to the “purpose” or “dedicated assets” of the foundation, and this makes the establishment of the foundation impossible, the court cannot complete the deficiency and will reject the registration request.
2.3. Regime for Amending the Foundation Deed (Turkish Civil Code Article 108)
Years after the foundation is established, the rules in place when the deed was first written may no longer meet the needs of the day. For example, the number of members on the board of directors may be insufficient, or quorum requirements may lead to deadlocks.
Amending the foundation deed is not as easy as amending the bylaws of an association. While a general assembly vote is sufficient for associations, a court decision is mandatory for foundations.
Conditions for Amendment: According to Article 108 of the Turkish Civil Code, in order to amend the foundation deed, the authorized body of the foundation (generally the Board of Trustees) must make a decision to that effect, and then, after obtaining the opinion of the General Directorate of Foundations, an application must be made to the court. Authorized Court: The amendment decision comes into effect as soon as it is approved (registered) by the Civil Court of First Instance in the location of the foundation’s headquarters. Without court approval, the board of directors cannot change even a single article of the foundation deed by its own decision.
If the foundation deed does not state the form of management, will the foundation be annulled?
No, it will not be annulled. According to Article 107 of the Turkish Civil Code, if the founder is alive, the deed can be amended at a notary; if the founder has passed away, the court handling the registration case, after obtaining the opinion of the General Directorate of Foundations, will add the form of management to the deed ex officio and keep the foundation alive.
Can the foundation deed be directly amended by a decision of the board of trustees?
No, it cannot. A decision to amend the deed by the board of trustees alone is not legally binding. This decision must be reviewed by the General Directorate of Foundations and registered by the Civil Court of First Instance.
Can the purpose of the foundation also be changed when the foundation deed is amended?
Changing the purpose of the foundation is subject to very exceptional and strict conditions. Only articles relating to management or operation can be changed relatively more easily under Article 108; as we will see in later sections, a change of purpose is governed by Article 113 of the Turkish Civil Code.It is subject to a special “Change of Purpose” regime.
FOUNDATION’S ORGANS, MANAGEMENT, AND ORGANIZATIONAL STRUCTURE
Foundations, being collections of assets dedicated by a founder to a specific purpose, require an organizational structure to manage, represent, and oversee these assets in accordance with the founder’s will. Unlike associations, foundations do not have a “membership” mechanism; therefore, their management structure is entirely shaped through the organs and boards stipulated in the foundation deed.
Articles 109, 110, and 111 of the Turkish Civil Code regulate the mandatory management body of the foundation, the procedure for removing these organs from office, and the legal responsibility regime of the managers.
3.1. Mandatory Organ of the Foundation: Board of Directors (Turkish Civil Code Article 109)
Turkish Civil Code Article… According to Article 109, it is a legal requirement for a foundation to have at least one governing body (Board of Directors) in order to be established and operate.
Typical Foundation Organizational Chart:
[BOARD OF TRUSTEES] ──(Supreme Decision-Making / Audit / Election Body)
│
▼
[BOARD OF DIRECTORS] ──(Mandatory Administrative and Representative Body – At Least 1 Person or Board)
│
▼
[AUDIT COMMITTEE] ──(Financial and Administrative Internal Audit Body)
Structure of the Board of Directors: The foundation’s board of directors can consist of a single person or a committee composed of more than one person. In practice, and in large-scale foundations, boards of directors consisting of at least 3 or 5 people are generally preferred.
Other Bodies (Board of Trustees and Supervisory Board): Although the law only mandates a management body, optional bodies such as the Board of Trustees (the highest decision-making body representing the founder’s will) and the Supervisory Board can also be established by the foundation deed. If these bodies are included in the foundation deed, they also become part of the foundation’s official structure.
3.2. Procedure for Removing and Dismissing Foundation Administrators
Foundation administrators are trustees responsible for fulfilling the founder’s purpose. If an administrator abuses their position, causes damage to the foundation, or acts contrary to the foundation deed, they may be removed from office. Article 110 of the Turkish Civil Code has subjected this process to strict conditions in order to protect the internal balance of the foundation and public order.
Removal from Office by Court Order: Unless there is an internal removal mechanism to the contrary in the foundation deed (e.g., the power of the Board of Trustees to remove them), foundation administrators can only be removed from office by a decision of the competent Civil Court of First Instance upon the application of the General Directorate of Foundations (VGM) or the interested parties. Reasons for Removal from Office:
Engaging in activities that are clearly contrary to the foundation deed, the law, or public order.
Using the foundation’s assets for personal gain or causing serious damage to the foundation.
Abusing administrative authority or showing gross negligence.
Temporary Suspension from Office: To prevent further damage to the foundation during the dismissal proceedings, the court may temporarily suspend the administrators from office until the end of the trial and appoint a trustee to the foundation.
3.3. Legal and Criminal Responsibility of Administrators
Foundation administrators are obliged to act as “agents” and behave as prudent administrators while conducting the foundation’s affairs.
Personal Liability: If the foundation’s legal entity suffers damage as a result of the faulty, negligent, or intentional actions of its administrators, this damage will be compensated from the administrators’ personal assets. The foundation may file a compensation lawsuit against the administrator who caused the damage.
Liability for Public Debts: As with associations, the members of the board of directors at the time the debt arose are jointly and severally liable for public debts such as unpaid taxes and social security contributions.
Can a foundation’s board of directors consist of only one person?
Yes. According to Article 109 of the Turkish Civil Code, it is not a requirement for the governing body of foundations to be a board; provided it is explicitly stipulated in the foundation deed, a single natural person can be designated as the governing body of the foundation and can represent the foundation alone.
Can the General Directorate of Foundations (VGM) directly dismiss a foundation president?
No, the VGM cannot directly dismiss a foundation administrator by an administrative decision. The General Directorate of Foundations (VGM) can only file a lawsuit in the Civil Court of First Instance to remove a manager from office if it detects irregularities as a result of its audits. The final decision on dismissal rests with the court.
Can foundation managers receive salaries or attendance fees from the foundation budget?
Whether or not attendance fees or salaries are paid to foundation board members, and if so, the upper limits of these payments, are subject to the provisions in the foundation deed and the legislation of Law No. 5737 on Foundations. Salaries cannot be paid to managers who are public officials or whose deed does not contain a provision for this.
AUDIT, PUBLIC OVERSIGHT, AND ADMINISTRATIVE SUPERVISION OF FOUNDATIONS
Since foundations are structures established for purposes beneficial to society and can be supported by the state with various privileges such as tax exemptions, a strict public oversight mechanism is foreseen for their expenditures and activities. While internal auditing is the norm and administrative supervision is exceptional in associations, in foundations, the state…There is a continuous and direct external audit authority (administrative oversight).
Articles 111 and 112 of the Turkish Civil Code define the public oversight powers and limits of the General Directorate of Foundations (VGM), which is the superior organization and supervisory authority of foundations.
4.1. The Audit Authority of the General Directorate of Foundations (VGM) (Turkish Civil Code Article 111)
According to Article 111 of the Turkish Civil Code, foundations are audited by the General Directorate of Foundations. This audit aims to ensure the protection of the foundation’s assets and that expenditures are made in accordance with the purpose stated in the foundation deed.
Financial Audit: Foundations are obliged to submit their financial statements, declarations, and independent audit reports (for those exceeding a certain budget size) for the previous year to the VGM within the first six months of each year. Inspectors may audit the foundation’s books and records on-site or through written documents. Compliance with Purpose: It is examined whether the foundation’s income is spent on luxury expenditures contrary to the charter, the personal interests of the administrators, or political/commercial activities outside the foundation’s purpose.
4.2. Administrative Supervision and Authority to Appeal to the Court (Turkish Civil Code Article 112)
The General Directorate of Foundations (VGM), as the supervisory authority, can directly take criminal or administrative decisions when it detects an illegality in the foundation’s operation, or it can appeal to the courts in accordance with Article 112.
VGM Audit and Intervention Process:
[VGM Inspectors Conduct Audits] ───> [Detection of Irregularities / Violations of Legislation]
… ┌────────────────────────────┴──────────────────────────────┐
▼ ▼
[Administrative Measure and [Warning] [Judicial Intervention]
(A period of time is given to the board of directors to correct the deficiency) (Court is taken for the dismissal of the directors or the dissolution of the foundation)
Authority to Issue Regulations and Circulars: The General Directorate of Foundations determines the administrative procedures that foundations must comply with, the nature of the books to be kept, and the declaration models through regulations. Foundation administrations are obliged to comply with these public rules. Legal Capacity to Sue: If the supervisory authority determines that the foundation’s assets are endangered or that the realization of the purpose has become impossible; it has the authority to file a lawsuit in the Civil Court of First Instance for the dismissal of the directors, the appointment of a new administration (trustee) to the foundation, or the dissolution of the foundation. 4.3. International Activities and Funding Audits of Foundations
Foundations receiving donations or funds from abroad, or transferring resources to projects abroad, are subject to law enforcement and financial intelligence filters.
Reporting Obligation: Foundations are obligated to report any cash assistance received from abroad to the relevant local authority and the General Directorate of Foundations (VGM). Funds received without notification can lead to heavy administrative fines for the foundation and the prosecution of administrators for “abuse of office.”
Can inspectors from the General Directorate of Foundations seize a foundation’s funds?
No, VGM inspectors cannot directly seize a foundation’s assets or bank accounts with an administrative decision. However, if there is suspicion of corruption or abuse in expenditures, they can request a precautionary measure from the court upon confirmation of the situation.
Are foundations required to submit a declaration to the state every year?
Yes. All foundations, newly established or existing, are required to submit an annual declaration containing their activities, financial status, and changes in their governing bodies for the previous year through the General Directorate of Foundations’ electronic system by the end of June each year.
Can the state still conduct an audit even if the foundation has an internal auditor?
Yes. Even if an internal audit board or independent auditor is stipulated in the foundation deed and such an audit has been conducted, this does not eliminate or limit the General Directorate of Foundations’ public audit authority arising from the law.
CHANGES TO THE FOUNDATION’S PURPOSE, ORGANIZATION, OR ASSETS
Foundations are structures bequeathed to the future by the will of their founders. However, economic balances may change over time, the foundation’s real estate may lose its function, or the initial purpose stated in the deed may become completely obsolete.
The legislator, while preserving the memory of the founder, has provided flexibility mechanisms in Articles 113, 114, and 115 of the Turkish Civil Code to prevent the complete loss of social benefit. Thanks to these mechanisms, the foundation’s purpose, organizational structure, or assets can be revised by court order.
5.1. Regime for Changing the Foundation’s Purpose (Turkish Civil Code Article 113)
The “purpose” stated in a foundation’s charter is the reason for its existence and, as a rule, cannot be changed. However, Article 113 of the Turkish Civil Code introduces a very exceptional and strict exception to this rule.
Conditions for Changing the Purpose: A change may be considered if the purpose stipulated in the foundation’s charter has become absolutely impossible to achieve, or if the purpose has become meaningless, useless, or harmful over time.
Procedure: The authorized body of the foundation…Upon the request of the Board of Trustees and the written opinion of the General Directorate of Foundations (VGM), the competent court may change the purpose of the foundation to a new purpose that best aligns with the presumed will of the founder. Example: The purpose of a foundation established in past centuries solely for the purpose of “lighting lamps and lighting oil lamps” may be updated by court order to “contribution to education or scholarships for lighting technologies” as this would become impossible and meaningless with the arrival of electricity.
5.2. Changes to the Foundation’s Organization and Management Plan (Turkish Civil Code Article 114)
The administrative structure, membership numbers, decision quorums, or branching rules stipulated in the foundation deed may, over time, paralyze or slow down the foundation’s operation.
Management/Organizational Change Flow:
[Administrative Impasse or Need Identification] ───> [Board of Directors / Board of Trustees Decision]
… This change also gains legal validity through a court decision (registration), after obtaining the opinion of the General Directorate of Foundations (VGM).
5.3. Change of Foundation Assets and Rights (Turkish Civil Code Article 115)
Real estate or rights (e.g., shares in a company) allocated to the foundation at its establishment or subsequently donated may lose value or become idle over time.
Exchange of Assets: The foundation cannot directly sell a real estate allocated for its purpose and spend the money. However, it can dispose of its existing assets on the condition that another asset that will generate more income or better serve its purpose is put in its place (exchange). Existence of Justifiable Reason: According to Article 115 of the Turkish Civil Code, if there are justifiable reasons, the assets and rights owned by the foundation can be exchanged for more beneficial ones or sold and converted into money. For this transaction, the permission of the General Directorate of Foundations (VGM), which is the supervisory authority, or the approval of the court is absolutely necessary. Can the foundation’s board of directors sell a building belonging to the foundation on its own initiative?
No, they cannot. The sale or exchange (transfer) of foundation real estate is subject to strict rules under Law No. 5737 on Foundations and Article 115 of the Turkish Civil Code. Real estate sales made without permission from the General Directorate of Foundations or court approval are invalid and cannot be registered in the land registry.
Can the purpose clause in the foundation deed be changed by a vote of the Board of Trustees?
No. A decision by the Board of Trustees to change the purpose is only a preliminary step. The final change of purpose only comes into effect after a positive opinion from the General Directorate of Foundations and a final decision by the Civil Court of First Instance.
Can a completely new purpose be given to the foundation, completely disregarding the founder’s will?
No. When deciding on a change of purpose, the court is obliged to choose the alternative purpose that is closest and most appropriate to the founder’s original will, worldview, and the fundamental philosophy they pursued when establishing the foundation. A completely irrelevant purpose, to the point of causing the founder’s bones to ache, cannot be set.
TERMINATION OF FOUNDATIONS, CLOSURE BY COURT DECISION AND LIQUIDATION REGIME
Foundations are, as a rule, designed as perpetual and permanent legal entities. However, certain legal, financial, or factual impossibilities or legal irregularities may bring about the termination of a foundation’s legal personality. While associations can dissolve themselves by a general assembly decision, foundations do not have a “self-dissolution” mechanism. The termination of a foundation depends either on the purpose becoming impossibly impossible or on a court decision to close it.
Articles 116 and 117 of the Turkish Civil Code regulate the circumstances under which foundations terminate, the closure regime, and the liquidation process following dissolution.
6.1. Automatic Termination of a Foundation (Turkish Civil Code, Article 116)
According to Article 116 of the Turkish Civil Code, the situations in which a foundation is deemed legally terminated without the need for a court decision are listed in a limited manner:
Fulfillment or Impossibility of the Purpose: The foundation is automatically terminated if the purpose stated in the foundation deed has been fully achieved (for example, if a foundation established solely for the restoration of a single historical artifact has completed the work) or if the fulfillment of the purpose has become absolutely impossible.
Inability to Change the Purpose: If a new purpose cannot be given to the foundation through amendment of the deed (Turkish Civil Code, Article 113), or if an alternative purpose consistent with the founder’s will cannot be found, the reason for the foundation’s existence ceases.
Method of Determination: When the situation of automatic termination arises, the court, upon the application of the General Directorate of Foundations (VGM) or the interested parties, decides on the determination of the situation and deletes the foundation’s registration from the registry (cancellation).
6.2. Closure of the Foundation by Court Order and Prohibited Activities
If the foundation acts contrary to its purpose or the law, its closure through state intervention may be considered.
CourtClosure Process by Court Decision:
[Detection of Prohibited Activity or Illegality] ───> [Application to the General Directorate of Foundations or Public Prosecutor’s Office]
│
▼
[Removal of the Foundation from the Registry (Closure)] <─── [Court’s Dissolution Decision (Civil Court of First Instance)]
Illegal and Unconstitutional Purposes: Foundations cannot operate with purposes that are contrary to the characteristics of the Republic as defined by the Constitution, the indivisible integrity of the state with its territory and nation, law, morality, and public order. Closure Case: If the foundation becomes the focus of such prohibited activities, the Civil Court of First Instance will decide to close the foundation upon a lawsuit filed by the General Directorate of Foundations or the Public Prosecutor’s Office.
6.3. Liquidation Process and Fate of Remaining Assets (Turkish Civil Code Article 117)
The remaining assets of a foundation that has ceased to exist or been closed cannot be left unattended after its debts have been paid. Article 117 of the Turkish Civil Code and the Foundations Law have determined with definite rules where the liquidated assets will be transferred.
Settlement of Debts: First, all debts of the foundation to the market, its employees, or the state are paid from its existing assets (through cash and real estate sales).
Transfer of Remaining Assets: After the debts are paid, the remaining net assets and rights are transferred to the purpose or organization specified in the foundation deed, if there is an explicit provision to this effect. If No Provision in the Deed: If the foundation deed does not contain a rule regarding the liquidation of the remaining assets, or if the intended transfer location is contrary to public order, the remaining assets are transferred by court order to a similar foundation pursuing a purpose closest to that of the foundation. The assets of closed foundations can under no circumstances be returned to their founders or heirs. Can the board of trustees convene and make a “decision to close the foundation”?
No, they cannot. Since foundations are collections of assets, the boards cannot make liquidation decisions on their own accord. A foundation either terminates automatically because its purpose becomes impossible, or it is closed by court order due to illegality.
I am the founder of a closed foundation; can I get back the building I donated to the foundation?
No, you cannot. According to the Turkish Civil Code and the Foundations Law, donated assets are definitively removed from private ownership and become public property and the property of the foundation’s purpose. Even if the foundation is closed, the remaining assets do not revert to the founder or their heirs. According to the liquidation provision in its charter, it is transferred to another foundation with similar purposes.
Does a foundation automatically close if its funds run out?
The complete and permanent loss of the financial capacity to achieve its purpose is considered “impossibility of achieving the purpose.” In this case, the board of directors or the General Directorate of Foundations applies to the court to determine the termination of the foundation and its liquidation.
DISPUTES IN FOUNDATION LAW AND THE REGIME FOR ESTABLISHING FOUNDATIONS FOR FOREIGNERS
Foundation law, beyond theoretical rules, is an area frequently brought before the courts in practice due to both conflicts of interest between founders and heirs and the administrative oversight of the state. Furthermore, the regime applicable to foreign natural and legal persons wishing to establish foundations or participate in foundation management in Türkiye, whether for humanitarian aid or investment purposes, contains additional legal barriers and special conditions compared to Turkish citizens.
7.1. Most Frequently Encountered Disputes in Foundation Law Practice
Foundation cases brought before the courts generally fall under three main axes:
- Cases of Reduction of Inheritance Shares and Fraudulent Concealment of Assets by Heirs (Deceased’s Fraud)
The allocation of a significant portion of their assets to the foundation by its founders during their lifetime may violate the reserved shares (legal inheritance rights) of the surviving heirs.
Dispute: After the founder’s death, heirs may file a reduction lawsuit to annul the allocation of assets to the foundation or to have their reserved shares returned to them. The court may decide to make a monetary or in-kind return to the heirs from the foundation by calculating the value of the asset allocated to the foundation and the reserved share ratios of the heirs. 2. Dismissal and Administrative Penalty Disputes Between the General Directorate of Foundations (VGM) and Foundation Administrations
These are lawsuits filed based on allegations that foundation resources were spent contrary to their intended purpose, following audits conducted by inspectors from the General Directorate of Foundations (VGM).
Dispute: Dismissal lawsuits filed on the grounds of alleged personal misconduct of board members, compensation (recourse) lawsuits based on allegations of irregular expenditures, and lawsuits for the annulment of administrative fines constitute a significant subject of dispute in civil and administrative courts.
- Interpretation of Foundation Deed Articles and Organ Selection Crises
Especially in family foundations or older foundations where board membership has passed from father to son/daughter, deadlocks arise between boards regarding who the new members will be or how decisions will be made. In these situations, courts are requested to interpret the deed or appoint a trustee to prevent the foundation’s operations from ceasing.
7.2. Regime for Establishing and Managing Foundations in Türkiye by Foreigners
Foreign natural persons (foreign nationals)The establishment of foundations in Türkiye by foreign legal entities (companies or associations based abroad) is subject to a special status within the framework of Article 101/4 of the Turkish Civil Code and Article 5 of the Foundations Law No. 5737.
Conditions for Foreigners to Establish Foundations:
[Legal and Factual Reciprocity Condition] ───> (Turks must be able to establish foundations in the founder’s country)
│
▼
[Opinion and Approval of the Ministry of Interior] ───> (Public order and national security filter)
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[Suitability of Assets and Purpose (General Regime of the Turkish Civil Code)] ───> (Registration lawsuit in the Civil Court of First Instance)
- Reciprocity Condition
Law on Foundations, Article… According to Article 5, the establishment of foundations in Türkiye by foreigners is subject to the principle of legal and factual reciprocity. That is, it is mandatory for a foreign national wishing to establish a foundation to have the legal and factual right to establish foundations granted to Turkish citizens in their own country. The Republic of Turkey directly rejects the foundation establishment request of citizens of countries where reciprocity does not exist.
- Permission and Public Opinion Procedure
While Turkish citizens can directly apply to the court to request foundation registration, the security and foreign policy organs of the state are involved in the process for foreigners:
Before the foundation deed is submitted to the court or during the trial phase, the court and the General Directorate of Foundations request the opinion of the Ministry of Interior and the Ministry of Foreign Affairs. The background of the foundation’s founders, the source of the funds, and the foundation’s purpose (e.g., activities to be carried out in strategic or sensitive areas) are subjected to a public order and national security filter. 3. Participation of Foreigners in Foundation Bodies
The election of a foreigner to the management or supervisory board of an existing foundation established in Türkiye is also subject to special rules. Foreigners without a residence permit in Türkiye may face administrative obstacles in becoming managers in a foundation based in Turkey. Furthermore, the majority of the foundation’s management board must consist of Turkish citizens; this is one of the flexibility and ease of supervision criteria sought by the General Directorate of Foundations in practice.
- Political and Regional Restrictions
It is strictly prohibited for foundations established by foreigners to pursue aims that are contrary to Türkiye’s unitary state structure, national security, and general morality. In particular, covert aims that support specific ethnic, sectarian, or political groups will lead to the direct rejection of the foundation during the registration process, or even if registered, to the initiation of a closure case by the Public Prosecutor’s Office in accordance with Article 116 of the Turkish Civil Code.
Can a foreigner purchase real estate in Türkiye and use it as capital for a foundation?
Yes, subject to the reciprocity requirement and compliance with legal restrictions on foreigners acquiring real estate (military restricted areas, strategic areas, and general quota limits at the district level), foreigners can dedicate the real estate they purchase to the foundation as founding capital.
Is it possible for a foreign company to establish a foundation in Türkiye?
Yes. Foreign legal entities (companies, foundations, or associations) can establish foundations in Türkiye if they operate legally in their own country and there is a reciprocity agreement/implementation between Turkey and that country. The positive opinion of the relevant ministries is still required in this process.
Can heirs definitively reclaim the assets donated to the foundation?
They cannot definitively reclaim them, but they can claim their reserved shares through a “reduction lawsuit.” If the founder, with malicious intent, transferred all their assets to the foundation to defraud the heirs, the court will order the foundation to pay the heirs the portion corresponding to their legal rights. The entire foundation will not be cancelled.
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