Turkey: Coming Soon: Selected Sections Of The Draft Commercial Code

Last Updated: 16 November 2008

Certain sections of the draft Turkish Commercial Code1 (the "Draft TCC") that are still pending before the Turkish National Assembly were summarized in one of our previous Mondaq articles2 dated 10 June 2008. This article discusses some of the other sections of the Draft TCC which represent a significant departure from the old approach adopted by the Turkish Commercial Code (the "TCC").

The scope of Joint Stock Corporations' Articles of Associations – Compulsory Shareholders Agreements?

One of the major changes introduced by the Draft TCC is the limitation of the provisions that may be included under a Joint Stock Corporation's (a "JSC") articles of association ("AoA"). While the TCC only lists the provisions that are obligatory for the AoA, the Draft TCC contains a provision that an AoA may not list any provisions other than those that are obligatory and listed in the Draft TCC, unless the Draft TCC specifically authorizes to the contrary. Accordingly, a JSC may not register an AoA with the trade registries that is not in line with this provision. Even if a unique provision in the AoA is permitted by trade registries in practice, the concerned parties will have no recourse to the legal remedies available under the Draft TCC.

When the mandatory AoA provisions3 and the voluntary AoA provisions authorized by the Draft TCC are reviewed together, the Draft TCC no longer authorizes the shareholders of a JSC to include provisions in their AoA that set forth the obligations of the shareholders towards each other. Provisions concerning tag/drag-along and pre-emptive rights granted to shareholders, if a JSC's shares are transferred to a third party, give an ideal example of what cannot be reflected in the AoA according to the Draft TCC. We believe that the strict approach adopted in the Draft TCC will increase the necessity for shareholders of JSCs to execute shareholders' agreements concerning their obligations towards each other. However, such obligations will only be enforceable vis a vis the shareholders under the scope of the law of contracts.

As noted above, there are circumstances where the Draft TCC authorizes JCSs to extend the scope of their AoA beyond the mandatory provisions listed in the Draft TCC. For example, Article 482 of the Draft TCC enables JCSs to adopt a penalty provision to apply if shareholders do not comply with their share capital undertakings.

The Draft TCC provides that any breach of other laws, despite possible relation to issues covered by the TCC, will be subject only to the remedies set forth pursuant to such laws. In other words, the Draft TCC explicitly states that the remedies included in the TCC may not be used if the breached requirement is based on another law. Accordingly, if an AoA provision reflecting a requirement arising from the capital markets legislation is breached by a resolution of a company's general assembly, this will not cause the cancellation of such resolution, i.e. a remedy set forth in the Draft TCC. However, it will trigger the remedies provided for in the capital markets legislation.4 Obligations imposed by the Electricity Market Regulatory Authority are other examples of AoA provisions that if breached, are not subject to any remedy under the Draft TCC.

According to the Draft Law on the Implementation of the Turkish Commercial Code, AoAs of JSCs are required to conform with the Draft Law within one year of its coming into force.5

JSC Administrative Bodies

The Draft TCC includes significant changes concerning the administrative and governing bodies of JSCs. Set out below are newly adopted concepts concerning the statutory bodies of JSCs:

Board of Directors

The Draft TCC includes a provision pursuant to which minority shareholders, or shareholders who form, or belong to, a class, may be granted the privilege of nominating members of the board of directors if such right is explicitly set forth in the AoA. A description of these shareholder groups (e.g. based on a profession or scope of activity), or minority shareholders who are entitled to appoint a member of the board of directors, is at the discretion of the JSC. A general assembly cannot refrain from appointing the members who are nominated by such shareholder groups, unless the rejection is based on a justifiable reason. The number of members of a board of directors appointed pursuant to this provision may not exceed one-half of the number of members of boards of directors of publicly held JSCs.

General Assembly

In order to improve the efficiency of, and modernize general assembly meetings, the Draft TCC includes a fully new concept of "institutional proxy". Institutional proxies will declare the management policy that they will be supporting, identify the candidates they support to be elected to the board of directors, or publicize the dividend distribution policy they are in favor of, and invite the shareholders to authorize them to act as their proxies. The intention of this new provision is to provide a mechanism whereby the minority shareholders have more input into the management of the JSCs as a potential voting block, as opposed to the current, more fragmented practice.


The Draft TCC introduces a radical change concerning the JSCs' auditors. The auditing function will have to be performed by a sworn independent auditing firm pursuant to a contract between the JSC and such auditing firm, as opposed to the current practice where real persons, who are not sworn independent auditors, are appointed as statutory auditors.

JSCs may now acquire their own shares up to 1/10th of the entire share capital

The Draft TCC is more liberal concerning a JSC's acquisition of its own shares. It sets a threshold of 10% of the share capital for the shares that are not subject to the acquisition or pledge prohibition currently existing in the TCC. This strict approach adopted by the TCC has been highly criticized by scholars and has finally been softened in the Draft TCC. It now more closely resembles the established American practice, and as well, follows new developments in the European Union legislation.

According to the Draft TCC, JSCs may acquire the ownership of, or pledge a right over, up to 10% of its shares, provided that (i) the board of directors is authorized by the general assembly,6 (ii) the value of the JSC's assets must be at least equal to the total of the JSC's share capital and the statutory reserves of the JSC, after the amount paid by the JSC to acquire its own shares has been deducted, and (iii) the value of the acquired shares has been fully accounted for as paid in capital.

Certain exceptions to the prohibition to acquire or pledge the remainder of the share capital, (i.e. 90%) are also reflected in the Draft TCC. Some of those exceptions concern circumstances where the acquisition is based on the necessity of a statutory purchase obligation and the acquisition of another entity, together with all of its debts and receivables. However, even in such circumstances, the Draft TCC requires the JSC to re-sell the shares acquired as soon as the sale is executed, or at the latest, within three years from the acquisition of such shares. The maximum term of three years is a new requirement adopted in the Draft TCC.

Hergüner Bilgen Özeke will report on other new developments in the TCC as they arise.


1. The Turkish Commercial Code was originally enacted on 9 July 1956 and, having been through several minor amendments, is still in force.

2. http://www.mondaq.com/article.asp?articleid=61720

3. Commercial title and headquarters, the scope of activity, share capital and the nominal value of each share, type of share certificates, privileges attached to shares, share transfer restrictions, number of members of the board of directors, issues concerning general assembly meetings, financial year, benefits granted to members of the board of directors and third parties in respect of profit, share capital contributions other than capital in cash, and the terms of the JSC are among the mandatory AoA provisions listed in the Draft TCC.

4. Such as the requirements concerning dividend distribution policies imposed by the Capital Market Board on publicly held companies.

5. The one year term may be extended for another year by the Ministry of Industry and Commerce.

6. If the JSC is facing a major and imminent risk, the board of directors may even proceed with the acquisition of the JSC's shares on its own initiative without being authorized by the general assembly.

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 Topics
Related Articles
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
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.


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.


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