Following is the procedure that must be followed in order to transfer shares in limited liability companies in Turkey:
1- SIGNING A SHARE TRANSFER CONTRACT:
The transferor of the shares and the transferee must first sign a standard share transfer agreement before a public notary. The notary certifies the contract after obtaining the signatures of the parties. Real persons must present their identification cards/passports and authorized signatories signing on behalf of legal entities must present their signature circulars along with their identification cards. Also, the details regarding the company in which the shares are being sold (tax number, trade registry number, etc.) and the Trade Registry Gazette showing the current capital of the said company must be presented to the notary.
Notaries in Turkey use a standard one-page share transfer contract whereby the transferor sells his/her shares and the transferee buys such shares with all assets and liabilities (other than those which are not indicated in official balance sheet). The transfer is deemed to be completed between and in respect of the transferor and the transferee upon signing. As an important issue that should be taken into consideration when signing the contract; according to the default wording of the contract, the transferor agrees that he/she has already received the consideration of the transfer in cash and in full.
Although the parties are allowed by law to make additions/revisions to the above-mentioned share transfer contract under the principle of freedom of contract, notaries usually do not allow so. Therefore, if parties wish to add certain clauses in the share transfer contract (such as representation and warranties), it is advised to sign a separate side agreement with such clauses and have it notarized (although not required). In the said side contract, a reference must be made to the main share transfer contract signed before the notary by clearly indicating that the side agreement will be construed and exercised together with the share transfer contract.
As a final note, most notaries in Turkey are not familiar with the concept of selling shares at a price higher than nominal value and often resist taking any action with regards to such share transfers. However, it is allowed under Turkish law to sell shares in a limited liability company at a price higher than their nominal value and thus to make profit from such sale.
2- ADOPTING A GENERAL ASSEMBLY RESOLUTION:
Subsequent to the conclusion of the share transfer contract, the General Assembly of the company (in which the shares are being sold) must convene and adopt a resolution to consent to the share transfer and have such share transfer recorded in the share ledger of the company. The transferring shareholder (even if he/she will no longer be a shareholder in the company after the share transfer) must also sign the resolution. This resolution can only be valid with the affirmative votes of the simple majority of the votes represented in the meeting. The resolution can be signed by proxies on behalf of the shareholders.
Once the resolution is obtained (and the signatures are affixed on the resolution), one original copy of the resolution must be attached to the resolution book of the company and notarized by a public notary.
The Trade Registry requires a certain format for the general assembly resolution; therefore it is advised to review the sample resolution published on the web site of Istanbul Chamber of Commerce.
3- APPLICATION TO THE TRADE REGISTRY:
The third stage is applying to the Trade Registry with the following documents:
- A single page petition (signed by the authorized representative(s) of the company in which the shares are being sold)
- Share transfer contract notarized by the public notary (private additional/side contracts will not be submitted)
- Two notarized copies of the general assembly decision (if signed based on a power of attorney, the power of attorney must also be submitted)
If the transferee is to become a manager in the Company, such decision must be indicated in the general assembly resolution and also the required documents for appointing a manager must be submitted together with the foregoing.
4- UPDATING THE SHARE LEDGER:
As a final step, once the share transfer is successfully registered by the Trade Registry, the share ledger of the company (in which the shares are sold) must be updated according to the new shareholding structure.
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.