Due to the insistence and objections raised by several role players in the Turkish economy, the Turkish Customs and Trade Ministry (the "Ministry") has spent the last few weeks finalizing the draft amendment (the "Draft Amendment") on the New Turkish Commercial Code (number 6102) (the "New TCC") and the Code on the Effectiveness and Implementation Procedure of the Turkish Commercial Code (number 6103) before New TCC goes into force at the beginning of next month. The Draft Amendment will affect 84 provisions of the New TCC, which has been acknowledged by the Turkish Parliament Justice Commission (the "Commission") last Friday and is expected to be enacted "as it is".

In the justification of the Draft Amendment, it is noted that Turkish business will be affected negatively and problems would arise in its implementation if the New TCC would be entered into force with its current text.

In this newsletter, we will try to emphasize the most important amendments envisaged by the Commission:

1. The provision of the New TCC with the heading "Commercial Cases and Evidences" including rules related to the commercial cases is expected to be changed as "Commercial Cases, Ex- Parte Proceedings, and Evidences". Thus, the relationship between Commercial Courts of the First Degree and Civil Courts of the First Degree will be a matter of competence and in handling the commercial cases "procedural rules on the competence" will apply among such courts. In a commercial case being handled within a jurisdiction without any commercial court, non-reliance on the competence rule would not require giving of a "non-competency decree" by the court. As a result, the civil court will continue to handle the commercial case.

2. The Draft Amendment stipulates compulsory protection in relation with the personal data included among the records of which storage by commercial registries is mandatory. For this purpose, the Draft Amendment adopts the rule that is already included in the current Turkish Commercial Code (number 6762) (the "Current TCC") to the New TCC. Thus, "personal data of which collection and processing is required for the maintenance of trade registry records in an electronic environment will be protected in accordance with the legislation on the personal data protection and protection of data security". Consequently, protection of personal data submitted within the documentation to trade registries and nondisclosure thereof could be maintained.

3. The Proportional monetary fine that is envisaged by the Current TCC for non application to the registry within the given term, and failure to not notify reasons for refraining from the registry, has been converted to a fixed fine. Save for the mandatory circumstances given by law, matters that are requiring registration with the commercial registry are conducted upon the request of the relevant persons. Those who do not apply to the registry within the given term by the commercial registry officer and who do not notify the reasons for refraining from such registry were supposed to be punished by the Current TCC with a proportional administrative fine starting from TL 200 up to TL 4,000. The Draft Amendment, however, has converted such fine to a fixed fine of TL 1,000 of which implementation has been left to the governor upon the proposal of the trade registry officer.

4. Misstatements about trade registry records. The New TCC had provided an imprisonment of 3 months up to 2 years or a judicial fine for those who would submit misstatements to any trade registry for their registry and record where also claim for compensation of the sufferers had been reserved. The Draft Amendment revoked such imprisonment and opportunity for claiming damages and stipulated an administrative monetary fine of TL 2,000 against such misstatements. The Commission faced criticisms regarding such change because many believe that "Billboard Companies" will breed again. Damages caused had recently been removed as a result of the huge efforts made by the Turkish Savings Deposit and Insurance Fund as a result of the Uzan family case. Uzan Holding (ex-owners of Vodafone's predecessor Telsim) used to establish companies of which directors / officers have been their office boys, housekeepers or tea ladies.

5. Information required being included within the commercial papers and documents have been clarified. The New TCC had envisaged that certain information required being included within every type of paper and document used by the merchants in relation to their enterprise. However, implementation of such rule has been postponed until January 1st, 2014 by the Draft Amendment, where the type of papers and documents have been limited to commercial letters and documents underlying accounting records. The Draft Amendment justifies such change by the compliance requirement with the provision of the related European Directive. Moreover, information required being included within such papers and documents are determined as merchant's "trade registry number", "trade name", "headquarters of the enterprise" and "web site address, if the merchant is required to have a web site." Additionally, the Draft Amendment stipulates that the names and surnames of the chairman and members of the board along with the subscribed and paid-in capital amount in joint stock companies; the names and surnames of the officers along with the subscribed and paid-in capital amount in limited companies; and the names and surnames of the directors along with the subscribed and paid-in capital in the limited partnership divided into shares are required to be indicated on the web sites of such companies. Thus, the provision of the New TCC ruling the inclusion of the aforementioned information on every type of paper and document of the merchants has been revoked.

6. Use of the Trade Name. The New TCC had envisaged prison sentence for the breach of the requirement in using a trade name and the rules in relation with the form of the trade name which has been converted by the Draft Amendment into administrative monetary fine. Only those who give a false impression about their enterprise by adding extensions to its trade name, those who give impression about running a company although they are trading on their own, those who use the names "Turk", "Turkey", "Republic" and "National" without the decision of the Council of Ministers and those who transfer, assign and use a trade name by breaching the law will be sentenced to a prison sentence.

7. Definition of the merchant's property has been clarified. "Opening" and "closure" of certain commercial books have been re-organized. The New TCC received a lot of reaction as a result of its requirement for merchants to publish their properties. The Draft Amendment seems to have removed such reactions by clarifying the definition of the mentioned property. The Draft Amendment determined the elements of the merchant's properties as "economic and financial condition of the merchant's commercial activities and commercial enterprise", "debt and credit relations" and "results gained following each accounting year." Another debate emerged in relation with the New TCC's provision about the "opening" and "closure" of the merchant's commercial books. In case, such books would be kept in an electronic environment and no approval of the Notary will be needed.

Certain new procedures had been brought by the New TCC in related to the keeping of the merchant's commercial books, which were adjusted by the Draft Amendment in accordance with the request of the role players.


a. Only day book and decision book of the Board of Directors will be subject to closure approval;

b. If there remained sufficient pages within the share book, general assembly meeting and discussion book, they could be used within the following activity period or periods without the requirement for obtaining opening approval;

c. If the commercial books have been kept in an electronic environment, no Notary approval will be sought during their openings and during the closure of the day book and the decision book of the Board of Directors;

d. Procedure for keeping commercial books in a physical and electronic environment term for entering records therein, a form for approval renewal along with the form and terms and conditions will be determined by a joint communiqué to be published by the Turkish Ministries of Customs and Trade and Finance.

Additionally, individuals and real entities subject to the New TCC will also be required to comply with the rules and regulations promulgated the Turkish Ministry of Finance while keeping their commercial books and preparing their financial tables.

1. Compliance with IFRS in keeping commercial books and preparing financial tables. The New TCC had stipulated that the merchants had to comply with Turkish Accounting Standards while keeping their commercial books and preparing their solo and consolidated financial tables. The Draft Amendment revoked such responsibility with respect to the commercial books. Moreover, the New TCC had permitted the implementation of specific and exceptional standards to the enterprises of different scales and sectors as long as International Financial Reporting Standards does not grant otherwise. The Draft Amendment, however, authorizes the implementation of such standards considering the enterprise scale, sectors, and even non-profit organizations without considering whether the International Financial Reporting Standards permits that.

2. Shareholders' Indebtedness to the Company. After the publication of the New TCC, another debate emerged with respect to its prohibition against the shareholders' indebtedness against the company. The New TCC had stipulated that shareholders were strictly banned from becoming indebted to the company provided that such indebtedness would emerge from a transaction made between the shareholder and the company in relation with the scope of the company and as a result of the enterprise's requirements. Moreover, such indebtedness had to be made on the same or similar terms of other equal transactions. The Draft Amendment does not envisage the complete revocation of such prohibition but softens it by prohibiting the indebtedness in long term and large amounts. Moreover, according to the Draft Amendment the indebtedness should not constitute an embezzlement or fraudulent bankruptcy in terms of the Turkish Criminal Code. According to the Draft Amendment the shareholders are not banned from becoming indebted to the company as long as they have paid their due subscription amounts and the company's profit in addition to its free reserve funds is sufficient to meet the previous years' losses.

The Draft Amendment justifies such adjustment by meeting the emergency needs of the shareholders and directors of the company within due time without causing damage to the company. On the other hand, the Draft Amendment strictly prohibits to "siphoning off" the company. As mentioned above, such indebtedness should not constitute any of the crimes provided for in the Turkish Criminal Code.

3. Companies subject to auditing will be determined by Turkish Council of Ministers. Upon a change in the related provision of the New TCC envisaged by the Draft Amendment, auditing of the financial tables of the joint stock companies subject to audit will be realized by the auditor according to Turkish Auditing Standards published by Public Supervision, Accounting, and Auditing Standards Authority in compliance with International Financial Reporting Standards. The Turkish Council of Ministers will determine which companies will be subject to auditing.

4. Those who can be auditors. The New TCC had clearly determined who can be auditors of companies, who had been named as independent audit companies whose shareholders are certified public accountants or independent accountant and financial advisors where small and medium size enterprises were free to assign one or more certified public accountants or independent accountant and financial advisors. According to the New TCC a separate regulation was to be published by the Ministry to determine the establishment and working rules along with the qualifications of audit personnel of independent audit companies. The Draft Amendment, however, left such assignment to the discretion of the Public Supervision, Accounting, and Auditing Standards Authority, which will determine who will be such auditors.

5. The timing of limited companies and the fulfilment of the share capital subscription by the shareholders have been aligned with the procedure determined for joint stock companies.

6. The timing for Companies who are obliged to establish a website, for the web site's launch, contents that are required to be uploaded in the web site and their timing have been adjusted. A special bulletin will be published for the web site requirements brought by the New TCC.

7. The Public Supervision, Accounting, and Auditing Standards Authority will determine which companies shall apply Turkish Accounting Standards. The requirement stipulated by the New TCC for the adjustment of financial tables in relation with the accounting period ending on 31/12/2012 or on a later date due to a special accounting period has been revoked. The implementation of Turkish Accounting Standards is limited to the accounting period beginning on 1/1/2013 or on a later date due to a special accounting period and only with respect to the preparation of the solo and consolidated financial tables. The Draft Amendment provided that such standards will be applied to the financial tables prepared in the interim period, which is actually not defined.

8. Effective from 1/07/2012, a special liquidation procedure has been determined for certain joint stock and limited companies to be initiated by the trade registries or upon application of the interested persons by submitting the required evidence.


a. joint stock companies and limited companies which have not increased their share capitals up to the mandatory amounts;

b. joint stock companies and limited companies which have been already subject to termination before the publication of the New TCC or those which will be subject to termination within two years following 1/7/2012;

c. Cooperatives which have been wound up according to their laws for whatever reason;

d. Joint stock companies and cooperatives which have not convened their shareholders for the last consecutive five years for whatever reason;

e. Companies and cooperatives of which liquidation has been initiated before the effective date of the New TCC, however, could not been de-registered because the interim balance sheet or final balance sheet of the companies could not be submitted due to non-convention of the general assembly.

9. Revoked Provisions.

The Draft Amendment revoked many provisions of the New TCC among which we consider that the followings are essential because they had been disclosed publicly.

a. Requirement for companies to be audited for the merging agreement, merging report and balance sheet underlying the merger by a special transaction auditor being an expert in her/his field;

b. Requirement to be audited for the de-merger agreement or de-merger plan and demerger report by a special transaction auditor being an expert in her/his field;

c. Requirement to be audited for the conversion plan, conversion report and conversion balance sheet by a special transaction auditor being an expert in her/his field;

d. Requirement for the Notary approval to be affixed under the articles of association certifying that the shares constituting the share capital in joint stock companies have been subscribed by the founders completely within the articles of association;

e. Requirement for submitting a report by one or more special transaction auditor with respect to the incorporation of the company;

f. Requirement for the publication of the financial tables, annual activity report of the Board of Directors, general assembly decision in relation to the distribution of the profit, auditor's opinion and the general assembly decision related thereto by the Board of Directors responsible for the preparation of the joint stock companies within six months following the balance sheet date in the Turkish Trade Registry Gazette and placement thereof on the company's web site;

g. Requirement for at least one of the company's directors to be resident in Turkey and requirement for granting sole authority to such director which should have been fulfilled within the term given by the trade registry of which omission would require the liquidation of the company by the court upon notification of the trade registry officer;

h. Requirement for ¼ of the members of the Board being university graduates where in a sole member board such requirement would not be sought.

Last but not least, the joint stock companies and limited companies had to adjust their articles of association in accordance with the New TCC as of August 1st of this year. However, the Draft Amendment postponed such requirement by granting a term until 1/7/2013.

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.