Turkey: Draft Bill On Swiss Corporate Law Reform

The process for revision of the Swiss corporate law was initiated in 2007, and the process continued for some time1. During this process, the reform on accounting law and excessive compensation of managers, separately, entered into force, and the corporate law reform was delayed. On 28 November 2014, the Federal Council published a new draft bill on the Swiss corporate law reform, and the Draft Bill on Corporate Law Reform2 ("Draft") was submitted for consultation on 15 March 2015.

The draft makes provisions in different areas. In general, the Draft covers revision on capital structure, shareholders' rights, excessive compensation of managers, and other provisions that are not directly relating to corporate law. This newsletter addresses the substantial revisions proposed by the Draft, and comparison of these revisions with the Turkish Commercial Code ("TCC").

Provisions on Capital Structure

Art. 621 of the Draft allows for share capital to be in foreign currency. Accordingly, actions concerned with the share capital, such as the formation of legal reserves, distribution of dividends, and determination of over-indebtedness, may be determined in foreign currency. The purpose of these provisions is to eliminate the inconsistencies between corporate law and accounting rules that already allow for accounting in foreign currency. In accordance with Art. 332/1 of the TCC, the minimum amount of share capital is stipulated in Turkish Liras. Additionally, Art. 70/1 of the TCC provides that financial statements shall be prepared in Turkish, and using Turkish Lira. The Tax Procedural Law ("TPL") provides an exemption regarding bookkeeping in foreign currency for certain companies (Art. 251/1 and 2 of TPL). Except for those as stated, there are no provisions in Turkish Law that allow accounting and capital denomination in foreign currency.

Another provision proposing an amendment of capital structures is Art. 632 of the Draft that sets forth an obligation to pay the total share price at the time of the capital increase and the foundation. The relevant provision aims to prevent the issuance of bearer share certificates before payment of the total amount of the share price, and to comply with the practice to pay the total share price prior to registration. Pursuant to Art. 344/1 of the TCC, 25% of the price of the shares subscribed in cash shall be paid prior to registration, and the remaining amount shall be paid within 24 months. Considering the provisions on protection of the capital provided by the TCC (for example Art.(s) 349, 358, 480/3, 482, 483, 484 etc. of TCC) and the special provisions regarding certain types of companies (provided by the Capital Markets Law ("CML"), the Banking Law, etc.), adoption of such amendment may deter shareholders from establishing joint stock companies due to the high amounts that must be paid prior to the registration.

Furthermore, the Draft abolishes the minimum nominal value of one centime (100 centime=1 Franc), and provides that the shares may have any value greater than zero centime (Art. 622/4 of Draft). The relevant provisions aim to liquidate the shares by splitting them when necessary. However, the Draft does not abolish the system of the nominal value; therefore, all shares shall have a nominal value. The TCC also adopts the system of a nominal value, but it provides that a minimum nominal value of the shares shall be 1 kuruş (100 kuruş=1 TRY) and its multiples (Art. 476/1 of TCC). Moreover, it is not permitted to issue shares under this minimum nominal value even if that the company's economic conditions require such issuance (Art. 476/3). Exceptionally, public companies may issue shares at the price determined on the stock exchange 30 days prior to the public disclosure of the resolution on a capital increase if such amount is below the nominal value (Art. 18/1 of the Communiqué on Shares VII-128.1).

In addition, the Draft abolishes the provisions on the acquisition of assets. It is stated that such provisions were incompatible with the principle of legal certainty, and similar consequences may be attained through the provisions on protection of capital, and responsibilities of the managers. Art. 356/1 of the TCC provides a detailed provision on the acquisition of assets. The fact that the provision of the TCC is restrictive and definite, as well as similar to the provision set forth by the European Union ("EU") Directives, renders this provision compatible with the principle of legal certainty. However, it should be noted that the scope of Art. 356/1 may be amended in such a way to limit the transaction with shareholders and related persons instead of all transactions in order to promote legal certainty.

Another significant reform provided by the Draft is the adoption of the system of capital band (fluctuation du capital). Accordingly, the general assembly may authorize the board of directors to increase or decrease the share capital for a maximum period of 5 years (Art. 653(s) of Draft). The purpose of this reform is to render the capital changes more flexible and overcome the procedures provided in order to protect the creditors. As the system of capital band is similar to the system of registered capital, the provisions regarding registered capital are abolished. Pursuant to Turkish law, the decrease of capital falls under the authority of the general assembly, and shall not be conferred to any other body (Art. 408/1/a of TCC). The provision setting forth that the provisions regarding the decrease of share capital shall apply to the decrease of registered capital (Art. 473/6 of TCC), triggered different opinions from amongst scholars. However, the prevailing opinion accepts that an explicit provision is required in order for the board of directors to be authorized to decrease the registered capital. Therefore, the relevant provision does not authorize the board of directors to decrease the capital3. As a result, including the registered capital system, the general assembly resolution is required in Turkish Law in order to decrease the capital.

Except for those stated, the Draft includes certain provisions on facilitating the distribution of legal reserves (Art. 671 of Draft) and allowing the distribution of interim dividends (Art. 675 of Draft).

Provisions on Shareholding

The draft includes provisions on the controversial issue of dispo shares (actions dispo) that signify the problem regarding the holders of the nominative shares which are not registered in the company's share register. The owners of the shares shall not be registered automatically to the company's share register unless they request to be registered, and shareholders who are not registered in the share register shall not exercise their right to vote. By reason of dispo shares, the quora may not be attained in the general assembly, a lower majority may control the company, or other similar problems may appear. In order to overcome such problems, certain solutions are already adopted, such as a presumption that the depositor is deemed to be the shareholder in terms of exercising the rights that arise from the shares; however, the solutions resulted in new discussions. The Draft also provides for the general assembly to resolve that shareholders who exercise their right to vote be entitled to benefit from up to 20% higher dividends (Art. 661 of Draft). In addition, the Draft obliges the listed companies to provide an electronic means for shareholders to request registration in the share register (Art. 686b of Draft). Pursuant to Turkish Law, the shareholders shall be registered in the company's share register upon their request, and only the holders of the nominative shares registered in the share register may exercise their right to vote in the general assembly (Art. 417/2 of TCC). However, the transfer of the shares registered to the Central Registry Agency ("CRA") shall be registered in the company's share register in accordance with the records of the CRA without any request (Art. 13/6 of CML). The interpretation of this provision is controversial among scholars, and various of them state that the relevant provision does not allow for automatic registration by the company in the share register.

Furthermore, the Draft provides a right to demand written information from the board of directors for the shareholders of the unlisted companies. The board of directors shall respond such requests at least twice a year. In addition, the information provided by the board of directors shall be disclosed at the first general assembly meeting and immediately at the electronic media (Art. 697/2 and 3 of Draft). Pursuant to Turkish Law, shareholders do not have any right to demand information apart from the one which can be exercised during the general assembly meeting. Additionally, contrary to the provisions of Swiss Law, Turkish Law does not require the exercise of the right to demand information to be necessary to exercise other rights arising from shareholding.

The Draft aims to eliminate difficulties caused by the procedures to exercise the shareholding rights and reduce the thresholds in order for the shareholders to exercise their rights without any hindrance. In this respect, the Draft reduces the thresholds regarding the right to request special audits, convene the general assembly, add items to the agenda, and propose motions on the items on the agenda. However, the TCC sets forth higher thresholds to exercise the above-stated rights of the minority shareholders. The most significant reform regarding the procedure is that shareholders may request from the court to rule for payment of expenses that arise from claims regarding the liability of, or restitution by, the company. Pursuant to the TCC, the court shall decide for the distribution of the litigation expenses and attorney's fee between the company and the shareholders in the event that the factual and legal causes, as well as equity principles, justify such distribution (Art. 555/2 of TCC). However, Turkish Law does not provide for any procedure whereby the company may be held liable for expenses incurred prior to the initiation of the relevant lawsuits.

Except for as stated above, Art. 701c of the Draft allows for electronic general assembly meetings, which is also provided by Art. 1527 of the TCC.

Excessive Compensation of Managers

As above-mentioned, the process regarding corporate law reform was initiated in 2007; however, the reform concerning the excessive compensation of managers took priority. After the referendum, in January, 2014, the Ordonnance contre les rémunérations abusives dans les sociétés anonymes cotées en bourse4 (Ordinance Regarding the Excessive Compensation of the Managers in Listed Companies) ("ORAb") entered into force. The Draft legislates regulations introduced by the ORAb, and also adopts certain new provisions.

In this respect, the general assembly shall determine direct or indirect compensation paid to the board of directors' members and other managers. The general assembly shall adopt a resolution on compensation (indimnité) every year, and such resolutions shall be binding upon the company. In addition, the Draft determines certain types of compensation that are prohibited, per se, or under certain circumstances (Art. 735c of Draft). Sign-on bonuses and non-compete covenants are accepted by the Draft, provided that they fulfill certain conditions provided by the Draft. Furthermore, the Draft and the ORAb provide that compensation of managers in listed companies shall be presented in the compensation report.

Pursuant to the TCC, financial benefits of the boards of directors' members, such as attendance fees, remuneration, and premiums shall be determined by the articles of association or General Assembly (Art. 394/1 of TCC), and the authority to determine such financial benefits shall not be transferred (Art. 408/2/b of TCC). However, if such decision endangers the financial situation of the company, the minority shareholders have only a small chance to prevent such decision from being adopted. In addition, pursuant to the corporate governance principles, compensation policies of the company shall be presented on the website of the company (4.6.2 of Annex-1 of the Communiqué on Corporate Governance). It is also provided that the remuneration and all other financial benefits granted to the board of directors' members and executive managers shall be publicly disclosed via annual activity report (4.6.5 of Annex-1 of the Communiqué on Corporate Governance). However, beyond those stated, there are no other provisions in Turkish Law stipulating any obligation to disclose the compensation of managers, or to control excessive compensation. It should be noted that financial benefits granted to managers that may affect the financial stability of the company shall be controlled more strictly.

Other Provisions

The Draft also includes certain reforms on arrangement with creditors and over-indebtedness. Accordingly, liquidity shortage of the company, the fact that company's assets do not cover two-thirds of the aggregate of capital and legal reserves, the fact that losses of the previous activity year exceed one-half of the capital pursuant to the balance sheet of the relevant activity year, the company's loss in three consecutive years, and serious concerns with respect to over-indebtedness of the company, are considered to be signals of over-indebtedness (Art. 725a and 725b of Draft). Art. 376 of the TCC is an adaptation of the relevant provision of the Swiss Code of Obligations; however, because of the changes at the phase of adoption of the relevant provision, Art. 376 causes certain issues amongst scholars.

In addition, the Draft includes provisions regarding limitations of the companies that are subject to the obligation of consolidated accounting, gender quota of 30% in management, and the obligation of disclosure by companies exploiting natural resources.


The reform on Swiss corporate law was reconsidered on 29 November 2014 with the Draft. The Draft includes various reforms in different fields. The reform on the capital structure of companies aims to harmonize the provisions on capital structure with other rules, and to harmonize such provisions with current necessities. Additionally, the reform on shareholding facilitates the exercise of the rights of shareholders. The Draft also includes several provisions on excessive compensation of managers, which offers a legislative base to the ORAb. The Draft reinforces financial stability of companies by proposing a more effective system of notice of over-indebtedness. Furthermore, provisions on gender quotas, as well as companies that exploit natural resources are also included in the Draft. Due to the scope of the Draft, it is not expected for these amendments to enter into force prior to 2017.


1. For detailed information, please see: Rapport explicatif relatif à la modification du code des obligations (droit de la société anonyme).

Please see: https://www.bj.admin.ch/dam/data/bj/wirtschaft/gesetzgebung/aktienrechtsrevision14/vn-ber-f.pdf

2. Please see: https://www.bj.admin.ch/dam/data/bj/wirtschaft/gesetzgebung/aktienrechtsrevision14/vorentw-f.pdf

3. Please see: Tekinalp Ü., Sermaye Ortaklıklarının Yeni Hukuku, İstanbul 201, p.119; Tanrıverdi A., Sermaye Azaltılmasına İlişkin Güncel Sorunlar, TBB Dergisi, Ocak-Şubat 2015, Year: 27, No: 116, p. 312; Manavgat Ç. (Kırca/Şehirali Çelik): Anonim Şirketler Hukuku, Cilt I, Ankara 2013, p. 337-338.

4. For the text in German, please see: https://www.admin.ch/opc/de/classified-compilation/20132519/index.html

For the text in French, please see https://www.admin.ch/opc/fr/classified-compilation/20132519/index.html

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions