The Turkish Commercial Code No. 61021 ("TCC") includes general provisions on the trade registry and registration. Article 26 of the TCC, as promulgated, stipulates that the trade registry directorate, registry ledgers, realization of the registration and similar matters shall be regulated under by-laws. This provision, however, was amended by the Law on the Amendment of the Turkish Commercial Code and the Law on the Entry into Force and Application of the Turkish Commercial Code No. 63352 ("Law No. 6335") which was promulgated prior to the entry into force of the TCC. Pursuant to the amended Article 26, the principles and procedures governing trade registries and registration shall be regulated by a regulation prepared by the Ministry of Customs and Trade ("Ministry") and issued by the Council of Ministers.
Principles and procedures of the trade registry and registration compliant with the abrogated Turkish Commercial Code No. 6762 ("Abrogated TCC") was regulated under the Trade Registry By-Laws ("By-Laws"). As per Article 42 of the Law regarding the Entry into Force and Implementation of the Turkish Commercial Code3 ("Implementation Law"), until the secondary legislation to be issued pursuant to the TCC is effective, the provisions of the secondary legislation prepared in line with the Abrogated TCC, which do not contravene with the TCC, shall be applicable. The Trade Registry Regulation foreseen under both the TCC and the Implementation Law ("Regulation") entered into force through publication in the Official Gazette dated 27 January 2013 and numbered 28541. From a methodological perspective, the abrogation of by-laws by a regulation, which ranks lower than by-laws in the hierarchy of norms, is unacceptable. Nonetheless, bearing Article 42 of the Implementation Law in mind, it should be accepted that the By-Laws were abrogated with the entry into force of the Regulation. This article assesses the significant provisions of the Regulation.
Trade Registry Directorate
Pursuant to Article 24 of the TCC, the trade registry shall be kept by the trade registry directorate under the supervision and inspection of the Ministry. The establishment, management and organization of trade registry directorate, qualifications of directors, vice directors and other directorate personnel, personnel affairs and legislation applicable to personnel are regulated in detail under the Regulation. The By-Laws stipulated that the officers, vice officers and other personnel of the trade registry would be sanctioned as state officers with respect to crimes related to their duties. The Regulation, however, specifically regulates the sanctions to be imposed upon personnel and actions and situations triggering such sanctions.
The provision regulating the responsibility of the state for all damages incurred resulting from the keeping of the trade registry, which was deleted from the Abrogated TCC with the Statutory Decree No. 559, was reintroduced with the TCC. The Regulation similarly foresees that the state and the relevant chamber shall be jointly responsible for all losses incurred from the keeping of the trade registry.
MERSIS and Electronic Transactions
The TCC stipulates that the trade registry records will be kept
electronically. In compliance with this provision, the Regulation
introduces the Central Registry Record System (Merkezi Sicil
Kayıt Sistemi, "MERSIS"), established with the
Ministry and the Union of Chambers and Commodity Exchanges of
Turkey, where all registration actions will be carried out and the
records, as well as the content of registration and publications
will be stored. The detailed provisions of the By-Laws governing
the registry ledgers to be kept in trade registry offices are not
included under the Regulation. The Regulation states that all
ledgers shall be kept under MERSIS. All commercial enterprises,
equity companies and their branch offices shall be given a specific
MERSIS number upon registration, which is not subject to change.
All documentation and gazette extracts of announcements, which are
required to be provided for registration, shall be kept for an
undetermined term in the registry file to be opened under a MERSIS
number and a file number.
The Regulation enables transactions to be conducted via electronic means with secure electronic signatures. The registry, and all bonds and documentation kept with the directorate, are accessible by everyone for examination both via electronic means and at the directorate. Thereby, a public information center is established with MERSIS.
Other matters, such as transactions made with electronic signatures, the time stamp and data protection, are regulated separately.
Pursuant to the Regulation, which has similar provisions to
those of the By-Laws, in principle registration shall be made upon
request. All records and documentation that require registration
may be submitted via electronic means. The Regulation outlines in
more detail the matters which may be registered and persons which
may request registration, based on the type of the commercial
enterprise, equity company or the matter to be registered, which
were regulated under general provisions of the By-Laws.
The Regulation further stipulates that persons requesting the registration of any enterprise or trade name, and legal entities as well as their signatories, shall provide a letter of undertaking. The signatories of the undertaking which must include information such as the enterprise name, the capital and center of the enterprise, warrant that such information is true and that otherwise they shall be held liable.
The Regulation includes detailed provisions regarding all acts subject to registration, all necessary information and documentation related to such acts, the registry directorate which shall make the registration and the matters to be registered.
Informative (Positive) Function of the Registry
Both the TCC and the Regulation address the informative effects that registration and announcement shall have on third persons. Accordingly, the registry records shall bear effect on third persons as of the date of publication of the registration in the registry gazette. Third persons may not allege lack of knowledge of the registry records. However, the Regulation states that specific provisions are reserved under the law, such that certain matters registered shall commence bearing effect on third persons as of their registration, even prior to publication. It should be noted, however, that various articles of the TCC state that the registration and announcement of certain matters shall not suffice to prove the knowledge of third persons regarding the relevant matter.
Duty of Examination
Similar to the provisions of the By-Laws, pursuant to the Regulation the directors and vice directors are obliged to examine whether statutory requirements for registration are fulfilled. The scope of this duty is regulated in detail. Contrary to the provisions of the By-Laws, pursuant to the Regulation the directorate may grant a maximum thirty day cure period in the event a discrepancy is noticed, and may extend this period twice at most.
Provisions governing trade names are similar to the conditions stipulated under the TCC regarding trade names. The provision of the Abrogated TCC and the By-Laws specifying that the trade names of real persons shall only be protected within the same registry office has been abandoned. In compliance with the relevant provision introduced under the TCC, the Regulation states that a registered trade name, regardless of the registry office, shall be protected all across Turkey. In the event a trade name needs to be distinguished from a previously registered trade name, affixes will be added to the trade name to be registered.
Provisions on Group Companies
The TCC regulates in detail group companies for the first time,
as well as the term "dominance", which is the main
determining factor in provisions related to group companies. The
Regulation readdresses the definitions of control and group
companies. Moreover, the definition of the dominance agreement is
made for the first time with the Regulation. The TCC only regulates
the validity conditions of dominance agreements without providing
any definition. The Regulation introduces specific provisions on
whether loan or shareholder agreements constitute dominance
agreements or not, issues much debated among scholars. A dominance
agreement is an agreement which grants a party the authority to
unconditionally control the managing organ of an equity company,
also party to the agreement. For a dominance agreement to be valid,
it must be registered with the trade registry in the region where
the controlled company is headquartered.
Article 198 of the TCC lays down the obligation to notify to the registry all share acquisitions exceeding certain thresholds in equity companies. The Regulation stipulates how this notification shall be made. However, the Regulation narrows the scope of this obligation as put forth under the TCC. Pursuant to the Regulation, the relevant notification need only be made if the purchaser or the seller of the relevant shares is a member of a group company.
The Regulation further includes provisions governing the calculation methods for voting and shareholder equity, and cross shareholding. The term "undertaking" is not defined under the Regulation.
Merger, Spin-off and Conversion
The By-Laws only regulated mergers with regards to company restructuring transactions. In parallel with the new provisions introduced by the TCC, the Regulation includes more detailed provisions on mergers and regulates spin-off and conversion transactions. All necessary documentation, the duties of the parties involved in the relevant transaction and the consequences of the transaction for each party is specifically regulated.
Other Material Novelties for Equity Companies
The TCC introduces novelties for equity companies not regulated
under the Abrogated TCC. Consequently, the Regulation covers new
transactions to be registered, which were not regulated under the
By-Laws. The Regulation provides detailed provisions on the
possibilities of joint stock and limited liability companies to
consist of a unique shareholder, conditional capital increases, a
registered capital system, additional liquidation and renouncing
liquidation. Similarly, the election of the auditor and the
election of the auditor by the parent company for group companies
are subject to detailed regulations.
The Regulation clarifies certain matters whose practical application under the Abrogated TCC caused confusion. For instance, simultaneous capital decrease and increase is regulated for the first time.
Similar to the new provisions of the TCC, the documentation necessary for registration requests to be made to the registry directorates is increased. For instance, new documents for company incorporation such as the founders' declaration and agreements related to incorporation are required. Similarly, the persons applying for registration are required to submit a document specifying that assets allocated as capital in rem in a company are duly annotated at their relevant registries. The Regulation also provides that the directorate shall notify the relevant registries simultaneously with the registration to the trade registry so that the goods and rights subscribed as capital to a company are registered in the name of the company.
Significant Novelties for Commercial Enterprises
The TCC introduces important novelties regarding commercial enterprises. Most significantly, the TCC regulates the possibility of the transfer of a commercial enterprise as a whole with a unique transaction, the merger and conversion of commercial enterprises and the conversion of a commercial company into a commercial enterprise. The Regulation introduces detailed provisions regulating these innovations. The Regulation expressly lays down that the transfer of a commercial enterprise shall bear effect as of its registration.
Assessment and Conclusion
The Regulation clarifies the registry transactions required
under the TCC and the structure and organization of registry
directorates. The positive aspects of the Regulation include: clear
provisions regarding matters which were unclearly regulated under
various provisions of the By-Laws, and which therefore resulted in
problems in practice; and determination of how the novelties
introduced by the TCC shall be applied.
The Regulation includes detailed provisions to serve its purpose. However, it should be noted that certain matters whose registration is requested under the TCC are overlooked in the detailed provisions. For example, while the representatives of a joint stock company shall be registered pursuant to Article 373 of the TCC, Article 22 of the Regulation, which lists the persons who may request registration and matters to be registered, do not comprise of the said obligation.
Furthermore, certain provisions of the Regulation include repetitive regulations and definitions that are already present under the TCC. This approach results in conflicts between the Regulation and the TCC, and at times provisions of the Regulation are not compliant with the statutory provisions.
From a legal methodology perspective, the lack of an explicit provision stating that the provisions of the By-Laws are abrogated and accepting that the entry into force of the Regulation automatically abrogates the By-Laws, despite ranking lower in the hierarchy of norms, is inconvenient.
1. Official Gazette ("OG"), 14 February 2011, no. 27846. The TCC entered into force on 1 July 2012.
2. OG, 30 June 2012, no. 28339
3. OG, 14 February 2011, no. 27846.
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.