The capital structures in joint stock companies are divided into two types as ordinary capital and registered capital. The ordinary capital is the nominal capital, explicitly regulated in the articles of association of the company and has been fully committed by the founders/shareholders. The increase and decrease of the ordinary capital is realized by amending the articles of association with a general assembly resolution.
The registered capital, on the other hand, is a structure that includes a numerical amount specified in the articles of association and indicates the ceiling at which the capital can be increased by the board of directors. In this context, registered capital represents a limit of authority for the board of directors, however does not constitute subscribed or paid-in capital. The authority granted to the board of directors under the registered capital system (“RCS”) allows for a faster and less bureaucratic opportunity compared to the ordinary capital system.
RCS was initially regulated as an institution specific to publicly traded companies by the abrogated Capital Markets Law No. 2499 and is also included in the Capital Markets Law No. 6362 (“CML”). With the implementation of the Turkish Commercial Code No. 6102 (“TCC”), RCS has also become applicable to non-public joint stock companies.
II. PRINCIPAL RCS REGULATIONS IN NON-PUBLIC COMPANIES
The TCC and the Communiqué on the Principles Regarding the Authorised Capital System in Non-Public Joint Stock Companies (“RCS Communiqué”) regulate the principal rules regarding RCS in non-public joint stock companies. Within the scope of the TCC, non-public joint stock companies may adopt RCS at the time of their incorporation, or they may change to RCS after their incorporation in accordance with the ordinary capital system, provided that they fulfil certain obligations arising from the legislation. In any case, the adoption of RCS requires permission by the Ministry of Commerce (“Ministry”).
Although the minimum capital requirement for the establishment of companies that adopt the ordinary capital system is 50,000 Turkish liras, joint stock companies established in accordance with the RCS or that subsequently convert to this system must have a capital of at least 100,000 Turkish liras. According to RCS, the capital, which must be owned in the establishment or in the first transition to the system, is called “initial capital”. “Issued capital”, on the other hand, refers to the capital representing the sum of the nominal values of all issued shares. For companies that would subsequently adopt the RCS, all issued capital must have been fully paid up, and the capital must not have remained uncovered.
The RCS Communiqué sets forth the minimum content to be included in the articles of association of companies wishing to adopt or switch to the RCS system as (i) the initial capital, (ii) the duration of the authorisation granted to the board of directors to increase the capital up to the registered capital ceiling which can be a maximum period of 5 years, the start and end dates of the period, (iii) the registered capital ceiling, and (iv) the manner in which the board of directors' decision regarding the capital increase will be announced. The board of directors may also be authorised to issue privileged shares or shares above their nominal value, or to limit pre-emptive rights, provided that it is included in the articles of association.
The RCS Communiqué stipulates that the registered capital ceiling cannot be exceeding 5 times the initial capital. When the registered capital ceiling is reached by the board of directors, the general assembly must determine a new ceiling by amending the articles of association in accordance with the minimum quorum stipulated in Article 421 of the TCC. However, even if the authorised capital ceiling is not reached, this ceiling may be increased by the general assembly. In this case, it is regulated that the maximum registered capital ceiling can be determined as 5 times the issued capital. Except for companies whose incorporation and amendments to the articles of association are subject to the permission of the Ministry, the permission of the Ministry is not required for amendments to the articles of association regarding the increase of the registered capital ceiling and the extension of the authorisation period granted to the board of directors.
III. PRINCIPAL REGULATIONS REGARDING RCS IN PUBLICLY TRADED COMPANIES
The principal regulations regarding the authorised capital system for publicly traded companies are set out in Article 18 of the CML and the Communiqué on Registered Capital System numbered II-18.1 (“Communiqué No. II-18.1”) of the Capital Markets Board (“Board”). Pursuant to the aforementioned provision of the CML, publicly traded companies and companies that have applied to the Board to offer their shares to the public may adopt the RCS, provided that they obtain permission from the Board. It should be noted that it is not an obligation for publicly traded companies to adopt the RCS, but it is considered as an advantage. For the companies that have already adopted the RCS in accordance with the TCC, the Board's permission is not required.
The maximum authorisation period of 5 years for the board of directors set forth in the TCC is similarly regulated in the CML. Pursuant to Communiqué No. II-18.1, the minimum initial capital is set as 100,000 Turkish liras, and it is stated that the capital ceiling to be authorised by the Board for a period of 5 years cannot exceed 5 times the higher of the paid-in/issued capital or the equity of the companies. Unlike the TCC, the determination of a new ceiling without reaching the registered capital ceiling, and the determination of a new higher registered capital ceiling due to reaching the registered capital ceiling are subject to the Board's authorisation. In order to be able to issue new shares in the RCS in publicly traded companies, all issued shares must be fully sold and paid for, or the unsold shares must be cancelled.
The CML and Communiqué No. II-18.1 introduced different regulations than the TCC with respect to the exercise of pre-emptive rights within the scope of RCS, and stipulated that the decisions of the board of directors adopted within the framework of the powers granted to the board of directors by the articles of association shall be disclosed to the public as a material event disclosure and shall be registered with the trade registry within 10 business days following the date of the decision.
RCS is a system, which is regulated in Turkish law primarily for publicly traded companies, and which has also become applicable to non-publicly traded companies with the TCC, and which enables capital increase in a faster and less bureaucratic manner compared to the ordinary capital system. Unlike the ordinary capital system, the RCS system authorizes the board of directors to issue new shares by increasing the capital within the ceiling and authorisation period determined by the general assembly in accordance with the legislation. The adoption of RCS requires an amendment to the articles of association and the permission of the Ministry or the Board, and regulations regarding the exit from RCS are also included in our legislation. Although the adoption of RCS is voluntary as a rule, some institutions subject to the capital markets legislation, such as portfolio management companies, are obliged be established subject to this system.
Ünal Tekinalp, “Sermaye Ortaklıklarının Yeni Hukuku”, Vedat Kitapçılık, İstanbul 2020
Esra Cenkci, “Kayıtlı Sermaye Sistemi”, Akdeniz Üniversitesi, Sosyal Bilimler Enstitüsü, Özel Hukuk Anabilim Dalı, Antalya 2015.
İbrahim Bektaş, “Kayıtlı Sermaye Sisteminde Yönetim Kuruluna Sermaye Artırım Yetkisi ile Bağlantılı Olarak Tanınabilecek Yetkiler”, Yüksek Lisans Tezi, Ankara Üniversitesi, Sosyal Bilimler Enstitüsü, Özel Hukuk (Ticaret Hukuku) Anabilim Dalı, Ankara 2016.
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