Turkey: Share Transfers In Equity Companies

Last Updated: 23 September 2013
Article by Işıkal Law Office

As already known, "share transfers" may take place arbitrarily (due to increasing and developing needs) or compulsorily, and the essential point is through which procedures can Joint-Stock or Limited-Liability company shareholders can dispose of their shares and/or how they can achieve added value.

Although the essential principles of the Old Turkish Commercial Code are still preserved within the Law No.6102, it is apparent that the legislator aims to establish a dualist system regarding share transfers especially in Joint-Stock companies. While the uniqueness of the old structure can clearly be seen in the transfer of bearer shares, establishment of a dualist system for nominative shares is apparent in the New Commercial Code. The system, requiring company approval for especially the transfer of shares that are not fully paid for, undergoes a comprehensive revision regarding nominative shares that are and are not quoted in the stock exchange, introducing different regulations based on whether or not such shares quoted in the stock exchange. The essence of the system comprises of the partners' capability to disrupt enhancement of closed Joint-Stock Companies. For the transfer of non-quoted nominative shares, the "context provisions regarding the constitution of the shareholders network" are primarily placed under protection within the system, setting the rightful reasons that provide basis for the partners to sustain the closure property as an example. Moreover, based on the problems with the old law stemming from the anonymity of the transferee, the company is provided the opportunity to prevent interventions using "straw man" partners. The new system thereby places primary emphasis on the protection of competition. For share transfers subject to company approval, the new law provides for rejection periods in order to eliminate losses of rights and related unjust treatments. The competition rules in conflict with negotiability of quoted nominative shares are primarily preserved, granting the company the right to approve, and the system assumes a dualist structure again, introducing us the "acquisition in the stock exchange" and "acquisition out of the stock exchange" concepts. The principle adopted by the New Commercial Code No.6102, basically containing provisions that protect the existing shareholders, appears in the form of the theory of unity until company approval in Joint-Stock Companies, which is a useful regulation that eliminates unjust competition to a certain extent by providing legal protection.

On the other hand, for Limited-Liability Companies, for which issuance of share certificates was not possible under the old law, the provision of the new law allowing nominative certificates to be issued for shares can be regarded as an indication of efforts to establish a new system. It can be observed that, provisions of the Law No.6102 regarding the transfer of the capital stock presents a clear diversion from certain limitations of the old regulations. Such that, if a shareholder commits in-kind capital, the requirement to keep possession of such capital for three years following establishment no longer exists. Although the General Assembly approval requirement provided by the old law is maintained in the new system, the New Commercial Code leaves the 75% majority by means of capital and shares, and imposes the term "General Assembly approval". The system, abandoning the double quorum requirement, allows a partner to have multiple registered capital shares, and introduces the fact that the partners attending the General Assembly would be able to prevent a share transfer if they have the majority of shares. The principle requiring written and notarized transactions for procedures that result in transfer receivables is also preserved in the new law; whereas, it is also provided that provisions related to additional payment and auxiliary acts, if any, issues regarding aggravated non-competition or non-competition extended to cover all shareholders, and contractual penalties should be added to the transfer agreement. Limited-Liability Partnerships are also converged to Joint-Stock Companies, introducing definite rejection periods, and the partners' right to resign from the company is preserved in cases where unjust transfers are not approved. The share transfers subject to registration may be performed by company managing directors, and the partners resigning within the thirty-day legal period are granted the opportunity to apply for their names to be removed from the trade registry regarding the shares they have transferred.

Originally published May, 2013.

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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