On 1 July 2012 the New Turkish Commercial Code (TCCN) will
replace the current one, which has been in force for more than 50
years. In particular the corporate law is going to face many
structural changes. Even if a transition period of about one and a
half years is foreseen, companies should familiarise themselves
with the TCCN and start to prepare themselves for the changes to
After lengthy work on the TCCN by a commission of academics,
lawyers, judges, accountants, politicians, members of
non-governmental organisations, and other experts, the Grand
National Assembly of Turkey adopted the TCCN on 14 January 2011.
The TCCN comprises structural amendments, in particular with
respect to corporate law. The following is a brief overview of
important amendments to the corporate law.
The TCCN will abolish the ultra vires principle, according to
which companies are only allowed to perform transactions within
their scope of activity. Thus, the scope of activity stated in the
company's Articles of Association (AoA) will not limit the
capacity of the company, so it will also be bound by and liable for
transactions outside its scope of activity.
While the current legislation requires joint stock companies
(JSC) to have at least five shareholders and limited liability
companies (LLC) at least two, the TCCN sets forth that a JSC or LLC
may have a sole shareholder. With this important amendment the TCCN
meets the needs of the commercial practice. It enables shareholders
to buy other shareholders' shares and turn the corporation into
a company with a sole shareholder without compulsorily dissolving
Board of Directors
The TCCN sets forth that the Board of Directors (BoD) of a JSC
may consist of one person instead of three, as is currently the
case. Further, BoD members need not be a shareholder of the JSC and
can even be a legal entity.
Another practical change is that BoD meetings may be held via
the internet and BoD resolutions may be signed with electronical
signatures, so BoD members can attend meetings regardless of their
location. Further, the clear differentiation between executive and
non-executive BoD members enables a JSC to establish a single- or
dual-structured management organisation.
According to the TCCN, the BoD must prepare by-laws about the
mechanisms and conduct of general assembly meetings and register
the by-laws with the trade registry. The by-laws are in addition to
the AoA and establish a transparent and efficient corporate
The current TCC frequently leads to confusions about the
allocation of powers between the general assembly (GA) and the BoD.
The TCCN clearly enumerates inalienable powers of the GA and the
BoD respectively and sets the relative position of each. The BoD is
responsible for matters not expressly allocated by the TCCN or the
With the TCCN, also GA meetings may be held online. For listed
JSC, online GA meetings are compulsory.
For transparency, the TCCN requires that all companies have a
website. The company website must contain certain mandatory
information, such as meeting minutes, invitations to meetings,
annual reports, financial statements, and more.
The current legal framework lack provisions on local
restructurings of companies. The TCCN, on the other hand, contains
detailed rules on national mergers, spinoffs, and conversions of
companies. Cross-border mergers are still not possible,
Turkish financial reporting standards and auditing
To ensure that the financial statements of Turkish companies are
comparable to those prepared according to IFRS, the TCCN requires
that the financial statements of all Turkish companies be prepared
in accordance with the Turkish Accounting Standards (TAS). The TAS
are the Turkish translation of the IFRS and completely in line with
them. Hence, concepts like materiality, comparability, substance
over form, and true and fair view that had no significant role in
Turkey will be implemented.
The TCCN foresees a more transparent and effective auditing
system. The auditing will be performed by independent auditing
companies instead of internal auditors, who will be removed.
This article was originally published in the schoenherr
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