Turkish Labor Law
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A foreign company may desire to enter the Turkish market without establishing a branch or a subsidiary respectively. For that purpose the foreign company may make use of:
• an independent sales agent,
• an independent distributor.
Even if the foreign company wants to set up its own branch or subsidiary in Turkey it is always worthwhile considering whether the marketing and sales functions should be done by employed personnel or by independent sales agents/distributors.
In the latter case the company does not need to maintain an “own-sales” force, which could become very expensive. In various industry segments, especially in the field of information technology, chemicals and medical equipment, it has become common practice that finding customers is exercised by independent distributors.
Independent sales agent
Although respective provisions of the Turkish Commercial Code govern the rights and
obligations of a sales agent, it is advisable to specify the essential elements of the
sales agency agreement in a written contract.
Pursuant to Section 133 and 134 of the Commercial Code, each of the parties may,
with reasonable causes and three months’ notice terminate the agency contract. The
party terminating the contract shall compensate the losses of the other party resulting
from non-completion of business commenced.
Distribution Agreement
Under a distribution agreement, the distributor purchases the goods from the principal
(foreign company or the Turkish subsidiary of a foreign company) and sells the goods
in the markets allocated to him. The distributor absorbs the risk of the obsolescence
of goods purchased and the non-collection of accounts receivable due from the
customers. The parties are therefore free to structure the agreement as they see fit.
The distributorship agreements can cover a wide range of subject matters like:
• determination of prices charged by the principal to the distributor,
• annual turnover targets,
• after sales services,
• sharing of advertising costs, etc.
An excerpt from KMPG
