Turkey: The New Turkish Commercial Code Has Been Accepted In The New Year

The Draft Turkish Commercial Code (hereinafter referred to as the "New TCC") replacing the current Turkish Commercial Code (herein after referred to as the "TCC"), which went into force in 1957 and which has been in use for more than fifty years without a structural change, was accepted by Grand National Assembly of Turkey on January 14, 2011. The New TCC will enter into force on July 1, 2012. Therefore, a transition period of approximately one year and a half has been granted to enterprises and merchants in order to become familiar with the important amendments made to the TCC.

Why was a new Turkish Commercial Code needed? The reasons may be gathered under some main headings:

  • Necessity of integration with the European Union, with which we continue membership talks and the need to transfer acquis communitaire into Turkish Law;
  • Insufficiency of the present TCC with regard to the transparency, institutionalization, auditing, and accountability of companies, the provisions regarding maritime commerce, which do not reflect international conventions and which do not satisfy current requirements, deficiencies and defects of the provisions regarding insurance law, which have been observed since the effective date of the TCC;
  • Necessity to reflect the changes which are observed in the IT industry and company structures during the last fifty years (participation in general meetings through the internet, publication of company information on the internet, corporation sole, professional boards of directors, group companies, consolidated and uniform accounting, external audits, etc.);
  • Necessity of harmonization with new laws (Turkish Civil Code, Turkish Penal Code, certain clauses of Execution and Bankruptcy Law, Misdemeanors Code, etc.);

Needless to say, the preparation of a new Turkish Commercial Code was a controversial process. Some people objected to scrapping the existing code for practical reasons, others out of doctrinal concerns. They suggested amending the present code. However the Commission nominated by the Ministry of Justice took a more radical course of action and decided to prepare a reformed code, just as in 1957.

The Science Commission which prepared the New TCC was organized by the Ministry of Justice and consisted of university academics, judges of appeal courts, representatives of non-governmental organizations, and members from several public institutions. The Commission, which held its first meeting on February 10, 2000, selected Prof. Ünal Tekinalp as its president. A total of 631 meetings were held during its working period of more than five years. The Draft was shared with the public in February 2005, and opinions from all relevant institutions and organizations were taken and discussed.

The Draft has submitted to the Prime Ministry in 2005 and conveyed from there to the Presidency of the Turkish Grand National Assembly. After being discussed by the Commission of Justice of the Assembly and after some minor amendments were made, the Draft was accepted by Grand National Assembly of Turkey on January 14, 2011.

The TCC consists of five sections, titled Commercial Enterprise, Commercial Companies, Negotiable Instruments, Maritime Commerce, and Insurance Law. The New TCC brings fundamental changes and innovations to all of these sections. Here are some of these changes and innovations:

Commercial Enterprise

The term commercial enterprise is defined and concretized. The term continues to be the center of the Commercial Enterprise Section.

Commercial Registration became more transparent and central; the establishment of a data bank is foreseen. The responsibility of the State for the registers is accepted, and the positive function of the register is regulated in a more detailed way.

The provisions with regard to unfair competition have been fundamentally modified by using Swiss Law. The list of the acts which constitute unfair competition was expanded, and standardized terms of contract were covered. The responsibility stemming from unfair competition was aligned with intellectual property law.

Goodwill compensation was regulated for the first time.

The use of commercial books as proof, which is common under Turkish Law but which is incompatible with general practice in the world, was removed. However, their use as discretionary evidence continues.

Out-of-date commercial brokerage, which had lost its relevance, was entirely removed from the Code since it is already regulated in the Draft Code of Obligations which was accepted by Grand National Assembly of Turkey on January 11, 2011.

Commercial Companies

The most fundamental changes were made in this area of law. Regarding general provisions, the principle of "ultra vires" (the invalidity of transactions that companies perform which are out of their scope of activities) was abandoned by taking into account the directive of the European Economic Community (EEC). New assets (electronic forms, domains, names, brands) were adopted as capital to be invested for commercial companies.

Merger and the change of form of companies were regulated in a detailed way in accordance with the directives of the European Community (EC). The procedures were rendered more transparent and secure by way of simplification, and creditors and other rightful persons were protected.

The law of subsidiary enterprises was regulated under the caption of multicorporate enterprises. The relations between the subsidiary company and parent company were based upon the transparency, accountability, and balance of interests for the first time.

No fundamental changes were made with regard to general partnerships and limited partnerships.

The provisions regarding joint stock companies were drastically changed. Changes with regard to procedure, institutions, and the contents of the clauses have been made. The main innovations pertaining to the system and the institutions are as follows:

  • Incorporation of joint stock companies was realigned, and gradual incorporation was removed. An effective and transparent auditing requirement was adopted, and actions for annulment were realigned.
  • Corporation sole for joint stock companies (and for limited liability companies) was adopted. In this way, an important need in practice was fulfilled.
  • Certain basic principles adopted by the doctrine with regard to joint stock companies (to be subject to equal treatment, prohibition against shareholders' becoming indebted to the company) were covered by the Code for the first time.
  • The buy-back of its own shares by a company itself was based upon a more flexible, liberal system which gives to publicly-traded companies the possibility to be "market makers",
  • A more transparent system was regulated for boards of directors, a distinction between executive and non-executive members was adopted, an organization regulation and partial or entire abandonment of management to professionals in accordance with the regulation was foreseen.
  • The committee of early determination and management of risks was foreseen for the first time in accordance with the principles of corporate governance and made obligatory for publicly-traded companies.
  • A more transparent and effective auditing system was established. Internal auditors were removed. The auditing of companies has been delegated to independent auditing companies, to chartered accountants, or to independent accountants for small joint stock companies. Furthermore, a transaction auditor system was foreseen for certain transactions (Increase / reduction of capital, spin-offs, mergers, changes of form, issuing securities, etc.).
  • With regard to financial reporting, compliance with the Turkish Financial Reporting Standards, which are identical to the International Financial Reporting Standards (IFRS) was adopted.
  • The position of shareholders was strengthened (shareholder rights were expanded, new rights of action were recognized, the use of rights was rendered easier and more effective, importance was given to transparency, privilege of vote was limited, the restriction on the transferability of registered shares was released from arbitrariness, notification obligations were foreseen, an obligation to give reports to boards of directors regarding certain matters was adopted, etc.).
  • Minority rights were developed (exceptions for the principle of preservation of order of business were adopted, special auditor system was strengthened, new minority rights - for instance, to demand the annulment of a company - were regulated).
  • Squeeze-outs were given a legal basis for the first time.

Innovations made with regard to the limited liability companies, which are common in Turkish practice, are more limited, but no less important:

  • One shareholder is allowed to have more than one share, and attaching shares to registered stocks was adopted.
  • System regarding share transfers was simplified and rendered more effective.
  • To be out or to squeeze out from a company was regulated on the basis of the ability of the company to survive.
  • Difference between general assemblies and boards of directors with respect to functions and powers was sharpened, and the principal of chosen management was adopted.
  • Regulations foreseen for joint stock companies with respect to auditing were adopted.

Negotiable Instruments

No fundamental modifications were made with the exception of the correction of simple mistakes in translation and contradictions. However, the prohibition against payment of checks, which was frequently abused, was removed.

Carriage Business

Clauses regarding carriage, which were previously regulated under Negotiable Instruments in the TCC, were regulated in a separate section in the New TCC. The provisions regarding carriage were drafted by taking CMR into account.

Maritime Commerce

Maritime commerce law is the other domain which was fundamentally modified like Company Law. In this context, the present institutions and provisions were innovated, some new institutions and provisions were added, and out-of-date provisions were removed. Basic principles may be summarized as follows:

  • In order to reach a harmonization with a lot of international conventions to which Turkey is a party, the provisions of these conventions were reflected in the New TCC.
  • Deficiencies in the system in the current regulations were corrected, and the new provisions were attached to a scientific systematic.
  • Quite a few superannuated and out-of-date provisions were removed. Provisions regarding overseas sales, which had been inspired by the Incoterms of the 1940s and which do not meet current needs, were also removed.

Insurance Law

The other section subjected to fundamental changes is Insurance Law because the present provisions of insurance law are far from meeting the needs of international practice and doctrine.

  • All provisions were attached to a scientific system.
  • General provisions regarding insurance agreements were expanded in a manner that covers all sorts of insurance, and the terms were defined.
  • An obligation to inform and enlighten insurance holders before the execution of and during the agreement was imposed upon insurers and their agencies.
  • Certain kinds of insurance, such as fire, agriculture, or burglary insurance were not separately regulated by taking into account the dynamic and developing structure of insurance law, and general clauses suitable for each sort of insurance were adopted.
  • Liability insurance, which does not exist in the current code, is quite common in practice, and is of great importance for today's insurance business, was regulated.
  • Life insurance was realigned in accordance with the new products developed in the area and with the needs in practice.

Conclusion

It is certain that the New TCC makes fundamental differences in Turkish commercial law. The knowledge of company law, maritime law, and insurance law that experts know by heart, is essentially amended and renewed. As in any law, the New TCC may have its own deficiencies and parts that need to be developed. These must be tolerated; eventually, the deficiencies will be removed by taking into consideration the future needs in practice. Furthermore, the adoption and implementation of the new provisions, which are designed to be in effect for at least the next 50 years, will take some time. It is not easy to change old habits. However, the lengthy period of transition provides those active in commerce with the opportunity to make the necessary preparations. Consequently, I believe that we must persistently and insistently defend and follow the New TCC.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions