One of the novelties that the Turkish Commercial Code No. 6102 ("TCC") brings is the adoption of the registered capital system for the non-public joint stock companies. The Communiqué Pertaining to the Principals related to the Registered Capital System for the Non-Public Joint Stock Companies ("Communiqué ") was published in the Official Gazette dated 19.10.2012 and numbered 28446, and entered into force by being published.
Registered capital system may be defined as the system where it is possible by a board of directors' resolution to increase the capital of the company until the capital cap determined and stipulated in the articles of association. Therefore, the legal dispositions related to the capital increase in the principal capital system while increasing the capital, shall not be applied.
The outline of the registered capital system for the non-public joint stocks companies is regulated under the article 460 of the TCC while detailed provisions and rules are set forth with the relevant Communiqué .
Scope and Purpose of the Communiqué
The relevant Communiqué shall be applied to the non-public joint stocks companies which have been adopted the registered capital system.
The purpose of the Communiqué is set forth in the first article as follows: "this Communiqué aims to establish procedure and principles pertaining to the adoption of the registered capital system, capital increase in this system, increase of the registered capital cap, leaving the system, issuance of preferential shares and shares with premium, limitation of the pre-emptive rights and pertaining to the other issues".
Adoption of the Registered Capital System
Conditions for the adoption of the registered capital system are set forth under the article 5 of the Communiqué . In this framework, minimum initial capital at the establishment of the company should be at least 100.000 Turkish Liras. Moreover, for the acceptance of the registered capital system at the establishment, the initial capital should be fully paid. However, for the joint stock companies of which the initial capital for the establishment is higher than 100.000 Turkish Liras, if the entire initial capital should be fully paid or if the payment of 100.000 Turkish Liras should be sufficient, is not clear.
The companies which shall adopt the registered capital system not during the establishment but by way of amendment of the articles of association at a later stage should be fully paid the issued capital and no capital loss should be in question.
These companies should set forth the following matters under their articles of association:
- initial capital,
- term (this term should be maximum five years), beginning and ending dates of this term related to the power granted to the board of directors for the capital increase until registered capital cap,
- registered capital cap, and
- publication procedure of the board of directors resolution pertaining to the capital increase.
The relevant registered capital cap may not exceed fivefold of the initial capital.
Moreover, in case authorities such as issuance of preferential shares or shares with premium, limitation of the pre-emptive rights shall be granted to the board of directors, provisions on these authorities should be also stipulated under the articles of association.
Authorization of the Ministry of Customs and Trade
Pursuant to the article 6 of the Communiqué , the joint stock companies which shall adopt or accept the registered capital system should apply to the General Directorate of Domestic Trade and should obtain authorization from the Ministry of Customs and Trade.
The General Directorate of Domestic Trade shall be take into consideration the criteria such as "general purpose and principles of the TCC, dispositions of the Communiqué , requirements of the market, purpose of the registered capital system, rights and benefits of the shareholders, compliance with the legal obligations" for the evaluation of the applications.
Capital Increase in the Registered Capital System
Pursuant to the article 9 of the Communiqué , the board of directors should mention the amount of the increased capital, nominal value of the new shares to be issued, their number, types, whether these shares are preferential and with premium or not, whether the pre-emptive rights are limited or not, conditions and term for the use of these rights and other necessary issues if any, in the resolution pertaining to the capital increase.
The board of directors is also obliged to publish the resolution pertaining to the capital increase, new disposition of the articles of association which states the issued capital, nominal value of the new shares, their numbers, types, whether these shares are preferential and with premium or not, limitations pertaining to the preferential shares and pre-emptive rights, conditions for use of these rights, and their term, any records pertaining to the premium and principles for the application of the premium pursuant to the publication procedure set forth under the articles of association.
In principle, the capital may be increased until the registered capital cap by the board of directors' resolutions. This cap may not be exceeded. However, while the capital increase is realized by the internal resources, the registered capital cap may be exceeded.
The Communiqué also regulates that it is not possible to increase the capital by the board of directors' resolutions in case the registered capital cap have been reached and no further new determination is realized for the registered capital cap.
Exit from the Registered Capital System
Pursuant to the article 5/6 of the Communiqué , joint stock companies which have not amended the articles of association with regard to the authorization period of the board of directors with a general assembly resolution during the year where this period is expired, shall be considered as out of the registered capital system.
Additionally, article 8 of the Communiqué regulates the situations where the companies may exit or removed from the registered capital system.
The companies which use the registered capital system contrary to the purpose of this system, which use this system by abusing their shareholders and other relevant third parties holders of rights, the companies which are able to increase their capital with ease due to their corporate structure and without need to registered capital system and the companies which have lost other qualifications for the adoption of the relevant system may be removed from the registered capital system.
The companies may exit from the registered capital system by their own decision before the expiration of the determined period by the articles of association. In this case, a draft for the amendment of the articles of association shall be prepared and an application shall be made to the General Directorate of Domestic Trade. Authorization of the Ministry of Customs and Trade and a resolution of the general assembly are also required.
Adoption of the registered capital system for the non-public joint stock companies created a more compatible structure between these companies and public companies. In this framework, it is possible to mention that Capital Market legislation shall be applied to the public joint stock companies while related provisions of the TCC and this Communiqué shall be applied to the non-public joint stock companies.
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.