In Turkey, investors are prone to form or participate in joint
stock corporations rather than limited liability partnerships
("LLP"s), because joint stock
corporations generally enable them to establish their investments
on a solid corporate governance structure. On the other hand, since
the newly enacted Turkish Commercial Code (the
"TCC") offers a more flexible corporate
governance structure in LLPs compared to joint stock corporations,
interest in LLPs has relatively increased in recent years. This
bulletin aims to provide a summary of share transfer mechanics in
Execution of Share Transfer Agreement
Under the TCC, shares in an LLP can be transferred only by
executing a written agreement before the notary public.
Accordingly, the transferor and the transferee must execute a share
transfer agreement before the notary public, to perform the share
transfer. This would trigger notarization costs for the transaction
parties, in addition to other costs including stamp tax.
Approval of the Share Transfer
Following execution of the share transfer agreement, the
LLP's general assembly of partners must approve the share
transfer. On the other hand, the partners may include a provision
into the articles of association, and eliminate such requirement.
The articles of association may also restrict any share transfer in
If the articles of association is silent on the share transfer,
the share transfer becomes valid and effective only upon the
approval of the general assembly of partners. At the meeting, the
share transfer must be approved by the partners representing the
majority of the votes represented at the meeting. The transferor
must also attend such meeting, and cast its votes in the share
Unless otherwise provided in the articles of association, the
general assembly can reject the share transfer without any reason.
In this case, the share transfer becomes invalid, and the
transferor remains as the LLP's partner. However, the
transferor may file a lawsuit at the competent commercial court and
request to exit the company if there is a just cause. On the other
hand, if the general assembly does not reject the share transfer
within three months of the application of the transaction parties,
it is deemed to have approved the share transfer.
Registration of Share Transfer
Upon the general assembly's approval, the LLP's board of
managers must register the transferee in the share ledger of the
company. Failure to register the transferee in the share ledger
does not affect the validity of the share transfer. However, under
the TCC, persons that are duly registered in the share ledger can
benefit from the partnerships' rights. Therefore, the
transferee must request such registration from the board of
managers, in order to benefit from the rights associated with the
The LLP's board of managers must submit an application to
the relevant trade registry and request the registration of the
share transfer. If the board of managers fails to submit an
application within thirty days of the transfer, the transferor may
also apply to the trade registry and ask for the cancellation of
its registration from the trade registry records. Failure to
register the share transfer with the trade registry does not have
any adverse effect on the validity of the share transfer, but any
transactions of third parties relying on the inaccurate trade
registry records remain valid.
Share transfers in LLPs are relatively more complicated than
share transfers in joint stock corporations. For this reason, the
transaction parties must be fully aware of these requisite actions
in order to duly consummate the share transfer.
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