Introduction

Shareholders in joint stock companies may transfer their shares. The principles to be followed in share transfers are different in public joint stock companies and non-public joint stock companies. The Turkish legislation stipulates the principles to be complied with during share transfers.

The transfer of shares in public joint stock companies is carried out in accordance with the provisions of the Capital Markets Law ("CMB"). Pursuant to the CMB, shares in publicly held joint stock companies are uncertificated and are issued electronically. The status of these shares is monitored by the Central Registry Agency ("CRA") through accounts opened in the name of individuals. Since the transfer of shares of public joint stock companies involves detailed regulations, this article focuses only on the transfer of shares of non-public joint stock companies.

A. Transfer of Uncertificated Shares

The provisions regarding the transfer of shares in the Turkish Commercial Code ("TCC") are only related to the transfer of certificated shares and do not regulate the transfer of uncertificated shares. However, in joint stock companies, it is also possible for shares to be uncertificated. Uncertificated shares are also referred to as naked shares. The method of transfer of such shares has developed within the framework of the opinions in the doctrine and the decisions of the Court of Cassation. In the decision of the 11th Civil Chamber of the Court of Cassation numbered E. 2006/8112, K. 2007/10405, it is stated that the transfer of naked shares in joint stock companies should be made in accordance with the provisions on assignment of receivables. The doctrinal opinions are mostly in this direction.

Assignment of receivables is regulated under Articles 183 -194 of the Turkish Code of Obligations. Pursuant to these provisions, a written agreement should be prepared to transfer the shares. After the share transfer agreement is signed by the purchaser and seller of the shares, these share transfers should be recorded in the share ledger of the company.

B. Transfer of Certificated Shares

Pursuant to the TCC, the certificated shares of joint stock companies may be either registered or bearer share. Different principles are stipulated for the transfer of registered and bearer share certificates.

1. Transfer of Bearer Share Certificates

First of all, it should be noted that in order to issue bearer share certificates or to convert registered share certificates into bearer share certificates, there should be a provision in the articles of association. In order to be considered a valid bearer share certificate, the price of the bearer share certificates should be paid in full. Furthermore, it is not possible to restrict the transfer of bearer share certificates, and any contrary provisions in the articles of association will be deemed invalid.

The transfer of bearer share certificates in joint stock companies is regulated under Article 489 of the TCC. A written share transfer agreement is not required for the transfer of bearer share certificates. The transfer of these share certificates may be made by transferring the possession of the said share certificates. As a rule, for a bearer share certificate to be valid, the transferee should be authorized to transfer ownership. However, pursuant to Article 990 of the TCC, a valid bearer share certificate may be acquired in good faith, even if it has left the holder's possession without his consent. Additionally, this transfer of shares should be recorded in the share ledger of the company.

The transfer of bearer share shall be effective as regards the company and third parties only upon notification to the CRA by the transferee, and in the event that the CRA is not notified, the holders of bearer share certificates may not exercise their rights arising from the law until the required notification is made. The date of notification to the CRA shall be taken as basis for the assertion of the rights attached to bearer share certificates against the company and third parties. The records kept by CRA in relation to bearer share certificates shall be shared with the authorities authorized pursuant to the relevant laws. Additionally, the procedures and principles regarding the notification and registration of bearer share certificates to CRA and the fees to be charged in this context are determined by a communiqué issued by the Ministry of Trade.

2. Transfer of Registered Share Certificates

The transfer of registered shares in joint stock companies is regulated under Article 490 of the TCC. A written share transfer agreement is not required for the transfer of registered share certificates. Pursuant to Article 490 of the TCC, transfer by legal transaction may be made by transferring the possession of the endorsed registered share certificate to the transferee. With the endorsement, the registered shareholder authorizes the company to assert the rights arising from the promissory note against the company and to fulfill the rights against the transferee.

Pursuant to Article 490 of the TCC, unless otherwise stipulated by law or the articles of association, registered share certificates may be transferred without any restriction. Following the transfer of share certificates, this situation should be recorded in the share ledger. The record in the share ledger shall be of an explanatory nature in accordance the Turkish law. It should be noted that, pursuant to the TCC, the share ledger is kept under the responsibility of the board of directors and is among the non-transferable powers of the board of directors.

In order for the transfer of a share certificate to be effective against third parties and the company, the following transactions should be completed:

  • Submission of the share certificate, the possession of which is transferred by endorsement or assignment, to the company,
  • Reviewing by the company's board of directors,
  • Recording on the share ledger, if the Board of Directors approves the transfer,
  • Making the necessary record on the promissory note.

There are opinions in the doctrine that the transfer of registered shares need not be made by full endorsement and may also be made by white endorsement. However, according to the decision of the General Assembly of the Court of Cassation numbered E. 1977/11, K. 1978/922, such transfers should be made by full endorsement.

Conclusion

Shareholders in joint stock companies may transfer their shares. The principles to be followed in share transfers are different for public joint stock companies and non-public joint stock companies. The TCC stipulates regulations regarding the matters to be complied with during share transfers. For share transfers in public joint stock companies, the provisions of the CMB should also be taken into consideration.

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.