Turkey: Capital Decrease Under Turkish Law

1- GENERAL

Capital decrease is regulated under Articles 473 - 475 of the Turkish Commercial Code numbered 6102 ("TCC") The main reasons for companies to reduce capital in Turkey are i) returning some of the capital to the shareholders as new shares or ii) recovering the company's loss indicated in the balance sheet (i.e. deciding to operate with less capital as a precaution for capital protection in case of capital inadequacy/technical bankruptcy under Article 376 of the TCC).

2- PROCEDURE

2.1. Step 1: Report of the Board of Directors

As the first step, the Board of Directors must prepare a report stating the purpose and scope of the capital decrease and the procedures which will be carried out within the context of the capital decrease. The Board of Directors will submit this report to the attention and approval of the General Assembly (as mentioned below).

2.2. Step 2: Report of the Accountant/Auditor (can be carried out simultaneously with step 1)

A sworn-in certified public accountant (YMM)/independent accountant and financial advisor (SMMM) or the company auditor (if the company is subject to independent audit under the TCC) must also prepare a report certifying that there are enough assets to cover the rights and receivables of the creditors despite the capital decrease.

This report will also be submitted to the attention and approval of the General Assembly (as mentioned below).

2.3. Step 3: General Assembly Resolution for Capital Decrease

2.3.1. Invitation to the Shareholders and Announcement in the Trade Registry Gazette for Holding the General Assembly Meeting

The requirements set forth under the TCC for holding a General Assembly meeting such as notification to the shareholders (via registered letter) and announcement in the Trade Registry Gazette (by applying to the relevant Trade Registry) must be followed prior to holding the General Assembly meeting for capital decrease. Announcement in Trade Registry must be made at least 14 days prior to the date of the meeting (excluding the announcement and meeting dates) Also, a separate announcement must also be made on the website of the company if the company is required under Article 1524 of the TCC to open a web site.

As a specific requirement for capital decrease, in all above-mentioned announcements, the purpose and scope of the capital decrease and the procedures which will be carried out within the context of the capital decrease, must be clearly stated.

That said, according to Article 416 of the TCC, if all shareholders are to be present at the General Assembly meeting, the above-mentioned notification and announcement procedures (except for the announcement on the company website) will NOT be required.

2.3.2. Appointment of a Ministry Representative

A representative of the Ministry of Customs and Commerce is required to attend the General Assembly meeting to be held for capital decrease. In order to request appointment of the representative, an application must be made to the Provisional Directorate of Commerce located in the relevant jurisdiction with the following documents:

  • Board of Directors resolution inviting the General Assembly - This resolution will NOT be registered with the Trade Registry and announced in The Trade Registry Gazette if all shareholders are to be present at the upcoming General Assembly meeting (as per Article 416 of the TCC)
  • The Trade Registry Gazette showing the current Board of Directors
  • Meeting agenda of the General Assembly meeting
  • A simple one page petition to be stamped and signed by the authorized signatories of the company
  • Signature circular indicating the signatory powers of the persons signing the above-mentioned petition
  • A bank receipt showing the fee for the appointment of the Ministry Representative is paid

2.3.3. Holding the General Assembly Meeting

Once the reports of the Board of Directors and the accountant/auditor are prepared (and the invitation/announcements procedures are followed if necessary), the shareholders of the company must convene the General Assembly and adopt a General Assembly resolution approving the capital decrease.

The General Assembly resolution must clearly indicate the purpose of the capital decrease, what type of capital decrease will be carried out and which procedures will be followed. In said the resolution, the above-mentioned reports of the Board of Directors and accountant/auditor must be reviewed and approved.

Unless the articles of association requires a higher quorum (cannot be lower), capital decrease decision can only be taken with the consent of shareholders (or their proxies) owning shares which represent at least 75% of the capital of the company (required in all meetings).

2.4. Step 4: Invitation to the Creditors

Following the adoption of the above-mentioned General Assembly resolution for capital decrease, the Board of Directors of the company will make an application to the relevant Trade Registry to make an announcement to the creditors1. The creditors will be invited three times at intervals of 7 days in the Trade Registry Gazette. The Board of Directors is also required to send registered letters to the creditors of the company whose addresses are already known. Also, a separate announcement must also be made on the website of the company if the company is required under the Article 1524 of TCC to open a web site.

With the above-mentioned announcements, the creditors will be invited to notify their receivables and request to have their receivables paid or secured, within 2 months following the last (third) announcement published in the Trade Registry Gazette.

It is very crucial to note that in order to implement the resolution for capital decrease, the receivables which are due and payable must either be paid or secured. If the claims of the creditors are not paid or secured, the creditors can apply to the relevant court for the cancellation of the General Assembly resolution adopted for the capital decrease within 2 years subsequent to the publication of the resolution in the Trade Registry Gazette.

Having said that, according to Article 474/2, in case the purpose of the capital decrease is to recover the company's loss indicated in the balance sheet of the company and the capital is decreased in the amount of such loss; the Board of Directors, in its own discretion, may decide not to follow the procedures of notifying the creditors and paying or securing their receivables. In such case, however, the Board of Directors must obtain a decision to that end accordingly.

2.5. Step 5: Preparation of the Board of Directors Report Regarding the Status of the Creditors and Their Receivables - (2 months after the last announcement made to the creditors in the Trade Registry Gazette)

After 2 months following the last (third) announcement made to the creditors in the Trade Registry Gazette, a report must be prepared and signed by the Board of Directors showing the list of the creditors who applied to the company to have their receivables paid or secured.

If no creditor has applied to the company within the aforesaid 2-months period, the said report of the Board of Directors will declare that no creditor has applied to the company.

2.6. Step 6: Application to the Trade Registry

As the final step (after all above steps are completed), the Board of Directors of the company must make an application to the relevant Trade Registry with the following documents:

  • A simple one page petition to be stamped and signed by the authorized signatories of the company (1 copy)
  • The letter obtained from the Provisional Directorate of Commerce regarding the appointment of the Ministry Representative (1 copy)
  • Copies of the three Trade Registry Gazettes in which the announcements made to the creditors, (1 copy for each)
  • List of Attendants of the General Assembly meeting (1 copy)
  • Notarized General Assembly meeting minute (2 copies)
  • Copies of the notarized/appostilled proxy(ies) if shareholder(s) is/are represented through are proxy at the meeting (1 copy)
  • Amendment text indicating the revised version of the provision in the Articles of Association regarding the capital of the company (1 copy)
  • The above-mentioned (in paragraph 2.1.) report of the Board of Directors (2 copies, one original)
  • The above-mentioned (in paragraph 2.2.) report of the accountant/auditor (2 copies, one original) together with the activity certificate (good standing certificate) of the accountant
  • A report prepared and signed by the Board of Directors showing the list of the creditors applied to have their receivables paid or secured, with the documents evidencing that their receivables are either paid or secured or a report obtained from a sworn-in certified public accountant (YMM)/independent accountant and financial advisor (SMMM) attesting to the fact that the receivables of the creditors are actually paid or secured. If a report is obtained from an accountant, the activity certificate (good standing certificate) of the accountant must accompany the said report. OR The Board of Directors resolution stating that procedure for notifying the creditors is not followed as the capital is decreased to cover the losses in the balance sheet.

Footnote

1. Application to the Trade Registry at this stage will only be made for the announcement to the creditors with a one page announcement letter, not for the registration of the General Assembly meeting yet. Application for announcements to the creditors will only be made one time with one letter (and then the Trade Registry will announce the said letter three times as mentioned above.)

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.

Authors
 
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 Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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