The Code on the Prevention of Financing of the Proliferation of Weapons of Mass Destruction No: 7262 published in the Official Gazette dated 31 December 2020 and numbered 31351 amended some provisions of the Turkish Commercial Code No: 6102 ("TCC") in a manner that introduced new regulations and requirements in relation to bearer shares in private joint stock companies ("Amendment"). The Amendment came into force on 1 April 2021. You can read Code No: 7262 here (available in Turkish only).
Following the effective date of the Amendment, the Turkish Ministry of Commerce ("Ministry") has published the secondary legislation, the Communique on Notification and Registration of Bearer Share Certificates to the Central Securities Depository ("Communique") in the Official Gazette dated 6 April 2021 and numbered 31446, which came into force on the date of issuance. You can read the Communique here (available in Turkish only).
The Communique, which only applies to bearer shares in private joint stock companies, provides clarification and stipulates further procedures for the requirements introduced by the Amendment. The important provisions of the Communique, with the references to the Amendment, are explained below.
1. Issuance and Delivery of Bearer Share Certificates in Private Joint Stock Companies
According to the TCC, in the case of bearer shares, the board of directors ("BoD") of joint stock companies must issue and distribute bearer share certificates to shareholders within three months of the date of full payment of the capital subscription through the adoption of a resolution on the matter.
That said, the Amendment and the Communique have introduced a new requirement obliging companies to notify the Central Securities Depository ("CSD") of the shareholders' identity and contact information, following the adoption of a BoD resolution and prior to issuance of share certificates. Notifications are made by submitting the information, together with the relevant BoD resolution, via the CSD online system.
Upon notification, the CSD will register the bearer share certificates in the name of the shareholder under a unique number. When issuing the share certificates, companies must include the unique number on each share certificate.
The BoD resolution on the issuance and delivery of the bearer share certificates must then be registered with the Commercial Registry and announced in the Commercial Registry Gazette.
2. Obligations for Shareholders Whose Bearer Share Certificates Have Already Been Issued
Shareholders whose bearer share certificates have been already issued and delivered as of the effective date of the Communique must apply to the company and submit their share certificates together with relevant forms. Once the authenticity of the share certificates and the accuracy of the information provided is confirmed, the company must notify the CSD of the bearer share certificates and identity and contact information of relevant shareholders.
Upon this notification, the CSD will register the bearer share certificates in the name of the shareholder under a unique number, the company will then add the number to the issued share certificates.
Prior to the Amendment, once possession of a bearer share certificate was transferred to a transferee, the transferee was able to exercise their shareholder rights towards a company and third parties by submitting their bearer share certificates.
That said, the Amendment has introduced a requirement for shareholders holding bearer share certificates in private joint stock companies to notify the CSD of a transfer.
A transferee may notify the CSD directly or apply to the company, whereupon the company must make the notification. Notification is made by submitting the identity and contact information of the new shareholder via the CSD online system.
4. The Legal Effect of Notification to and Registration by the CSD
Following the Amendment, shareholders of bearer shares will not be able to exercise their shareholder rights towards a company and third parties unless the necessary notifications are made to the CSD.
Accordingly, in terms of the transfer of bearer share certificates, a transfer will be valid and legally binding between the transferor and the transferee even prior to such notification. However, without notification to the CSD, the transferee will not be able to exercise shareholder rights towards a company and third parties.
5. The Shareholders Chart Provided by the CSD Will Be Taken as the Basis for the List of Shareholders Who May Attend General Assembly Meetings
The Amendment has introduced a new requirement regarding the issuance of the list of shareholders who may attend general assembly meetings in private joint stock companies. Accordingly, companies must prepare the aforementioned list based on shareholders charts obtained from the CSD in respect of bearer shares.
As set forth in the Communique, companies must apply to the CSD via its digital system at least two days before the date of a general assembly meeting to obtain the shareholders chart. The CSD will prepare the shareholders chart according to its records as of one day before the general assembly meeting. Companies can obtain the shareholders chart from the CSD online system on the date of the general assembly meeting.
6. Bearer Share Certificates Subject to Attachments or Interim Injunctions
In cases where bearer share certificates are subject to an attachment through enforcement proceedings or interim injunction orders from the courts, enforcement offices and courts will notify the relevant company by indicating the bearer shares' unique registration numbers. Upon this notification, the company must record such attachments or interim injunctions with the CSD.
The transfer of such share certificates cannot be registered with the CSD unless otherwise stipulated by the relevant enforcement office or court.
7. The Confidentiality of CSD Records
Records of bearer share certificates kept electronically by the CSD are confidential and can only be disclosed to competent authorities designated by law.
The Amendment has introduced strict requirements regarding bearer share certificates in private joint stock companies. The most important outcome of both the Amendment and the Communique is that shareholders of bearer shares cannot exercise their shareholder rights towards a company and third parties until the necessary notification is made to the CSD. In order to avoid any potential loss of rights, it is recommended that shareholders of bearer shares and respective companies take the necessary steps to notify the CSD at their earliest convenience.
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.