Turkey: Jouissance Shares For The Founders In Turkish Commercial Code


Jouissance shares are the securities, different from the share certificates, which do not provide its holder with any shareholder right but which carry some financial rights. Art. 503 of the Turkish Commercial Code numbered 6102 ("TCC") clearly points that the holders of jouissance shares cannot be provided with shareholders rights.

The jouissance shares, in general, are regulated in art. 502 of the TCC. Pursuant to this article, the general assembly may decide to issue jouissance shares in accordance with the articles of association or by amending it, in favor of the creditors, the holders of the shares which value is legally paid off or similar relevant persons to the company. These jouissance shares may be issued to the order of someone specific or to the order of the bearer.

Art. 502 of the TCC stipulates that art. 348 of the TCC shall be applied to the jouissance shares. Art. 348 of the TCC regulates the interests of the founders and the limitations regarding the payments to holders of jouissance shares. Pursuant to this article, at most 10% of the distributable dividends can be paid to the founders holding jouissance shares after the legal reserves are made and 5% of the dividend is reserved for the shareholders.

The Issuance of Jouissance Shares for the Founders

Article 502 of the TCC regulates that jouissance shares may be issued in accordance with the articles of association or by amending it. Art. 402 of the Turkish Commercial Code numbered 6762 ("former TCC") which is abrogated on July 1, 2012, similarly regulated the jouissance shares. However, art. 402/2 of the former TCC set forth that the jouissance shares for the founders cannot be issued unless it has been stipulated in the first articles of association of the company.

On the other hand, the issuance of jouissance shares for the founders in the event of capital increase was accepted even it had not been stipulated in the first articles of association. This opinion was based on art. 392 of the former TCC regulating the capital increase. This article states that capital increase by means of issuance of new shares is subject to the provisions regarding incorporation. Accordingly, the issuance of jouissance shares for the founders in cases of capital increase was accepted both by the doctrine and the High Court of Appeal.

As seen, TCC contains certain differences with relation to the former TCC. Therefore, the cases where jouissance shares for the founders can be issued should be discussed with regards to TCC which entered into force on 1 July 2012.

While the TCC accepts the issuance of jouissance shares in accordance with the articles of association or by amending it, and removes the obligation to stipulate the jouissance shares for the founders in the first articles of association. Nevertheless, it is not possible to issue jouissance shares for the founders with any kind of amendment in the articles of association, because of the raison d'être of the jouissance shares for the founders, since the purpose of the jouissance shares for the founders is to reward the persons who contributed their efforts and to encourage the founders for incorporation.

Jouissance shares for the founders cannot be issued in the event of capital increase made in accordance with the TCC since art. 392 of the former TCC, which stated that the capital increase is subject to incorporation transactions, is not present in TCC. In the TCC, contrary to the former TCC, specific references are made to certain articles regarding incorporation instead of a general reference to incorporation. Within this scope, it is stated that the art. 353 (Lawsuit for Termination), art. 354 (Registration and Announcement of the Company), art. 355 (Incorporation), art. 342 and 343 (Subscription of Capital in kind), art. 344 and 345 (Payment of the Fees), art.346 (The Shares subject to Public Offering), art. 347(Shares with Premium) regarding information will be applied to the capital increase transactions by analogy. However, there is no article regarding the possibility to issue jouissance shares for the founders during the capital increase.

Rights Granted to the Holders of the Jouissance Shares for the Founders

Article 503 of the TCC stipulates that holders of jouissance shares cannot be provided with shareholding rights but they can be entitled to a percentage of net profit, the capital surplus (if any) upon liquidation of a company or to the right to purchase new shares to be issued by the company. This article repeats art. 403 of the former TCC. Therefore, the discussions for former TCC regarding the meaning of "net profit" or "capital surplus upon liquidation of a company" are still in force.

Art. 348/3 of the TCC stipulates that, in case the company has distributable profits, the holders of jouissance shares may be entitled to payments even the company did not adopt a resolution on payment of dividends to the shareholders.

The Position of Holders of Jouissance Shares in Mergers

The doctrine accepts that the holders of jouissance shares are not entitled to block the resolutions of the general assembly. The purpose of this opinion is to protect the company interests from blocking intentions of those who are not shareholders. However, it is also necessary to protect the holders of jouissance shares who have financial rights in the company. To that end, art. 140/5 regulates the position of holders of jouissance shares in merger of the company with another.

Pursuant to said article, the transferor company must provide the holders of jouissance shares of the transferee company with equal rights or to purchase the jouissance shares over the price at the date of the merger agreement. Accordingly, the current rights of the holders of jouissance shares available in the transferee company shall be protected exactly in the same way in the transferor company. In this situation, it is a legal obligation to provide jouissance shares to the current holders of jouissance shares in the transferee company.

Article 142 of the Turkish Commercial Code must be also taken into consideration in the course of a merger. The said article states that, for the protection of the shareholder's rights, it is necessary to make capital increase. Even though this article regulates the protection of the shareholder's rights, this article must be applicable for the protection of the holders of jouissance shares rights by analogy and the capital increase must be made by taking into account the holders of jouissance shares.

The Position of Holders of Jouissance Shares in Public Offering

In a merger transaction, if the transferor or transferee company is a publicly held joint-stock company, the resolutions of the general assembly cannot be executed unless the approval of the holders of jouissance shares is granted upon a resolution adopted by them in a special meeting. However, the procedure for adopting this resolution should be discussed. As known, pursuant to former TCC, general assembly of holders of jouissance shares was regulated with reference to the general assembly of bond holders. However, TCC does not regulate general assembly of bond holders and it does not have a specific regulation regarding the holders of jouissance shares' general assembly. Therefore, it may be opined that the approval of the holders of jouissance shares' general assembly stipulated under the capital market law is now without a legal basis.

On the other hand, art. 348/2 of the TCC also should be mentioned for public offering. The aforesaid article states that the joint stock companies incorporated following the entry into force of the TCC will invalidate the jouissance shares for the founders without paying any fee before the public offering; otherwise the jouissance shares for the founders will be deemed invalid ipso facto. This article was accepted and entered into force even though it has been criticized in the doctrine for the reason that it will discourage the founders of the company. Consequently, the joint-stock companies incorporated after July 1, 2012 and which issue jouissance shares for its founders shall invalidate the jouissance shares for founders in case the company decides on public offering; otherwise these shares will be deemed invalid ipso facto.

The Termination of the Shares

As explained above, the jouissance shares do not grant shareholding rights to its holders. It is accepted that there is a contractual relation between the holders of jouissance shares and the company. As a consequence, the jouissance shares may be terminated with the consent of the holders which are a party to the contract. Along with this, a jouissance share issued for a definite period of time will expire at the end of this period. However jouissance shares do not expire in cases of merger or conversion, unless they have been purchased by the company over their real prices on the date of the merger (art. 140/5 of TCC). Accordingly, the jouissance shares may expire in case of a public offering pursuant to article 348/2 of the TCC mentioned above.


The amendments made through the TCC in the provisions of the former TCC regarding the jouissance shares for founders result in restriction of the cases where jouissance shares for founders can be issued and in non-issuance of jouissance shares in the course of capital increase. It is uncertain whether these results are preferred by the legislator. However, the legal provisions in force require the acceptance of these results.

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.

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