Turkey: Issuance Of Shares In Registered Capital System

Last Updated: 20 March 2019
Article by Verda Toy

Introduction

Since the Capital Markets Law No. 6362 ("CML") does not include certain provisions of the former Capital Markets Law No. 2499 ("fCML") regarding the issuance of shares of public joint stock companies with the registered capital system, the issue had been raised as to when the shares of these companies are deemed to be issued. Furthermore, even though secondary regulations entered into force after the CML came into force, certain provisions of the former foresee a structure that is parallel to the regulation of the fCML, which creates a contradiction regarding the issuance of shares of public joint stock companies with the registered capital system.

This article explains the contradictions between the fCML and the CML, as well as the provisions of the secondary regulations in this area of law.

Registered Capital System under Turkish Commercial Code

As opposed to the abolished Commercial Code No. 6762 ("fCC"), Articles 456 and 460 of the Turkish Commercial Code set forth that the registered capital system may be adopted by joint stock companies that are not subjected to the CML, as well as public joint stock companies. Pursuant to the related Article 456, the board of directors' resolution regarding capital increases shall be registered within three months of the date of the decision; otherwise, the resolution would be rendered invalid.

Further, in parallel with Articles 395 and 412 of the fCC, according to Article 486 of the TCC, the share certificates to be issued before the registration of the capital increase would be rendered invalid. Therefore, it is clear that under the TCC, the shares of joint stock companies with registered capital systems issue with registration, as well as the shares of the joint stock companies with a principle capital system.

Registered Capital System under Capital Markets Law

As mentioned, above, the provisions of the fCC do not include any regulation related with the registered capital system for non-public joint stock companies, and the principles of the registered capital system were established by the fCML. On the other hand, according to Article 7 of the fCML, in joint stock companies with the registered capital systems, the shareholding rights were gained by the delivery of share certificates at the completion of the sales transaction, and the abovementioned Articles 395 and 412 of the fCC were not applicable to public joint stock companies. Consequently, the fCML excluded the provisions of the fCC, which stipulated that the shares of joint stock companies would issue upon registration for public joint stock companies with the registered capital system, and it accepts that the shares shall be deemed to have issued with the sale and provide shareholder rights to the purchaser1.

Although there are certain provisions regarding the registered capital system under the TCC, Article 456 of the law states that the provisions of the CML are reserved for public joint stock companies. The principles regarding the registered capital systems of public joint stock companies are regulated under Article 18 of the CML. However, there is no provision equivalent, or similar, to Article 7 of the fCML regulating those new shares would issue, and shareholder rights would be obtained with the sale of the shares prior to the registration. Further, different from the provisions of the fCML, the CML does not include any provision excluding the relevant articles of the TCC on invalidity of the share certificates that are issued prior to the registration of shares.

Since the fCML did not require the companies to amend their articles of association in accordance with the increased capital and register the amended version of the articles of association, it is accepted by the legal scholars that the capital increase occurs partially as the shares are sold in accordance with the ratio of the sold shares2.

In addition, considering that Article 18 of the CML aims to comply with the TCC provisions3, requires revising the articles of association in accordance with the increased capital, it does not exclude the relevant TCC provisions stating that the shares are issued upon registration and does not include a provision similar to Article 7 of the fCML, it has been argued that the shares to be issued by public joint stock companies are also issued upon registration4. With respect to this view, different from Article 7 of the fCML, and provisions of Article 456 of the Turkish Commercial Code, stating that the provisions applicable to public joint stock companies are reserved, and Article 18 of the CML, which regulates that the TCC provisions regarding the principle capital system are not applicable to the companies with registered capital systems, are related to the method of the issuance of new shares, and do not provide an exception to the provisions of the TCC regarding the moment of issuance of the shares5.

On the other hand, in parallel with the related article of the fCML, Article 3 of the CML defines issued capital as the capital of joint stock companies with a registered capital system that represents the sold shares, and referred to the sale stage of the shares, rather than to their registration, with respect to the moment of issuance.

Secondary Regulations

In parallel with Article 12 of the CML, Article 31 of Communiqué on Shares No. VII-128.16 ("Communiqué on Shares") declares that without prejudice to the dematerialized system principles, the share certificates of public joint stock companies with registered capital systems shall be delivered to the buyer when the sale transaction is completed. As explained above, different from Article 7 of the fCML, the CML does not include any provision excluding the TCC provisions regarding invalidity of the share certificates issued prior to the registration of shares. However, the relevant Article of the Communique on Shares that was issued after the CML, accepts that share certificates may be validly issued prior to the registration, and it is mandatory to deliver these certificates to the purchaser at the time of sale.

With respect to the dematerialized shares, Communiqué on the Procedures and Principles for Dematerialized Capital Market Instruments No. II-13.17 ("Dematerialized Capital Market Instruments Communiqué") does not require registration of shares as a pre-requisite to record the newly issued shares to shareholders' or investors' accounts of the investors and to the shareholders in the Central Record System. On the other hand, according to Article 16 of the Dematerialized Capital Market Instruments Communiqué, the record of the newly issued shares made to the accounts of shareholders or investors prior to the registration of the shares are temporary for joint stock companies with principle capital systems, and these records will become definite with the registration of the shares. It is not clear whether this Article can be interpreted in a way to include the records for joint stock companies in the registered capital system, as well, or whether records made for these companies are certain before the registration of shares. It has been argued that the registered capital system excluded from the scope of this Article was in error, and due to the influence of Article 7 of the fCML8.

Conclusion

The fact that the CML does not include a specific provision regarding the time of issuance of shares, and the TCC foresees certain provisions regarding the registered capital system different from the fCC, renders a complexity in understanding which scope the TCC provisions are to apply as general rules in this area of law, to the cases not explicitly regulated within the CML, including the issuance of shares.

In this context, the CML and the secondary regulations can be interpreted in different ways on the question as to whether the shares of joint stock companies that are subject to the CML, and with a registered capital system, issue by registration, or at the completion of the sales transaction.

Footnotes

[1] Manavgat, Çağlar: Kayıtlı Sermaye Sistemindeki Halka Açık Anonim Ortaklıklarda Payın Doğumu ve Satış Sürecine Etkileri, Banka ve Ticaret Hukuku Dergisi, September 2015 - Cilt XXXI – No. 3, p. 7.

[2] Manavgat, p. 10.

[3] Türkiye Büyük Millet Meclisi Sermaye Piyasası Kanunu Tasarısı ile Plan ve Bütçe Komisyonu Raporu (1/638) (www.tbmm.gov.tr).

[4] Moroğlu, Erdoğan: Anonim Ortaklıklarda Sermaye Artırımı, 3rd ed., İstanbul 2015, p. 365; Kırca, İsmail/ Şehirali Çelik, Feyzan Hayal/ Manavgat, Çağlar: Anonim Şirketler Hukuku, V. 1, Ankara 2013, p. 321; Manavgat, p. 11 ff.

[5] Manavgat, p. 11.

[6] OG, 22.06.2013, No. 28685.

[7] OG, 07.08.2014, No. 29081.

[8] Manavgat, p. 15.

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
Similar Articles
Relevancy Powered by MondaqAI
 
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
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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