Share certificates in joint stock companies, one of the most preferred partnership types in Türkiye, are regulated under Articles 484-501 of the Turkish Commercial Code No. 6102 ("TCC"). The concept of shares refers to a portion of the company's total capital, which is divided among the shareholders, and it is established either by the incorporation of the company, with the articles of association or the increase in capital being registered with the trade registry. In other words, each share represents a fraction of the company's nominal capital, and it signifies the source of all rights and obligations independently of the other shares and shareholders.
Share certificates, on the other hand, are issued to represent ownership of shares in joint stock companies, to prove shareholder status, and to facilitate legal transactions involving the shares. The right to request the issuance of share certificates, along with the types of share certificates and the concept of minority shareholders, can be examined under the following headings.
I. TYPES OF SHARE CERTIFICATES
According to Article 484 of the TCC, share certificates in joint stock companies are issued in either registered or bearer form.
In accordance with the fundamental principles of joint stock companies, bearer share certificates provide anonymity as the shareholder is only identifiable by the possessor of the certificate, ensuring the anonymity of ownership while also facilitating the transfer of shares. On the other hand, registered share certificates are those that indicate the share is issued in the name of a specific individual.
Given that share certificates possess the status of valuable documents, their form is regulated in detail by the legislator. Article 487/1 of the TCC, titled "Form of Share Certificates" stipulates the necessary formal requirements for both bearer and registered share certificates. According to this provision, share certificates must include the following details: i) the company's name, ii) the amount of capital, iii) the date of incorporation, iv) the capital amount at the date of incorporation, v) the type and registration date of the issued share certificate, vi) the type and nominal value of the share certificate, and vii) the number of shares represented by the certificate. Finally, the certificate must be signed by at least two persons authorized to sign on behalf of the company.
With regard to registered share certificates, in addition to the formal requirements specified in Article 487/1 of the TCC, Article 487/2 stipulates that the following details must also be included on registered share certificates: i) the name and surname or trade name of the shareholder, ii) the shareholder's domicile, and iii) the amount of the paid portion of the share certificate's value.
II. THE CONCEPT OF MINORITY IN JOINT-STOCK COMPANIES
In joint-stock companies, the principle of majority based on capital is adopted. The majority principle is important in the general assembly meetings of joint-stock companies, as it governs the exercise of shareholders' rights related to corporate affairs. Under this principle, votes are cast in proportion to the amount of capital held, and decisions are made based on the votes cast. In other words, as a general rule, joint-stock companies are managed according to the majority principle, with decisions in general assembly meetings being made by the affirmative vote of the majority.
However, in order to prevent the potential drawbacks arising from the absolute application of the majority principle and to ensure that certain groups are granted rights and opportunities, the concepts of minority rights or minority interests have emerged in opposition to the majority. In various provisions of the TCC, the terms "minority" or "minority shareholders" are used. Since the terms "minority" and "minority shareholders" are used together in the TCC, a unified understanding of the concept cannot be established.
The TCC has introduced three distinct classifications for determining minority shareholders: proportional minority, nominal minority, and factual minority. The term "proportional minority" is defined in Article 411 of the TCC and applies to shareholders who hold at least one-tenth of the capital, or at least one-twentieth of the capital in the case of a publicly traded joint-stock company. The concept of proportional minority is also used in relation to the right to request the issuance of share certificates as provided under Article 486, paragraph 3 of the TCC. The term "nominal minority" appears solely in Article 439, paragraph 1 of the TCC, which governs the right to request a special audit. This term applies to shareholders who hold shares with a total nominal value that meets the amount specified by law. Finally, "factual minority" refers to shareholders whose minority status is not determined by the nominal value of their shares or the number of votes they hold. Instead, it is based on the actual number of votes cast or present at the general assembly. Factual minority may vary depending on the specific circumstances of each meeting and the votes cast during the assembly.
III. THE RIGHT OF THE MINORITY TO REQUEST THE ISSUANCE OF SHARE HOLDERS
The right to request the issuance of share certificates will be evaluated separately for bearer shares and registered shares. Under Article 486, paragraph 2 of the TCC, the legislator imposes an obligation on the board of directors to print and distribute share certificates to shareholders within three months from the date the full payment for the shares is made, in the case of bearer shares. In other words, this positive obligation has become one of the duties the board of directors must fulfill. Unlike the procedure for the issuance of registered share certificates, in this case, the board of directors is required to register and announce the decision to issue bearer shares. In addition, it is also stated in this regulation that the board of directors may issue temporary share certificates until the bearer share certificates are issued.Even if the board of directors issues temporary certificates, since it is possible to issue temporary bearer share certificates until the share certificate is printed, since the legislator has aimed to prevent the shareholders from incurring losses in this process due to the fact that the printing of bearer share certificates requires time, and finally, since their circulation is different, the board of directors cannot be released from the obligation to print bearer share certificates.
Article 486, paragraph 3 of the TCC provides that, upon the minority's request, the board of directors must issue and distribute registered share certificates. Although the statutory provision does not explicitly define the term "minority," the prevailing opinion in legal doctrine is that the term refers to shareholders holding at least one-tenth of the capital. When paragraphs 2 and 3 of Article 486 of the TCC are considered together, it is clear that while the issuance of bearer shares is the responsibility of the board of directors, the issuance of registered shares is left to the request of the minority. In this respect, it will be beneficial to address the problem of how the minority will protect its rights if the board of directors fails to issue share certificates within the three-month period following the full payment of the bearer share capital, or if the board does not issue registered share certificates despite a request from a minority shareholder holding registered shares,
In the reasoning of Article 486 of the TCC, it is explicitly stated that if the board of directors fails to issue and distribute registered share certificates despite a request from the minority, the shareholders may seek judicial remedy. Undoubtedly, in such a case, a shareholder may file a performance action requesting the issuance of registered share certificates. Furthermore, if the conditions are met, the shareholder may also file a liability action against the board of directors. However, the legislator has not provided a clear regulation on the time frame within which the board of directors must distribute the registered share certificates when the minority makes such a request. However, by analogy, it is our opinion that the three-month period specified in Article 486, paragraph 2 of the TCC for the issuance of bearer share certificates may also apply when the minority requests the issuance of registered shares.
The failure to issue bearer share certificates by the board of directors is not addressed in the reasoning of Article 486 of the TCC. While some legal scholars argue that it would not be correct for the court to intervene and decide in place of the board of directors, and thus, the holder of bearer shares cannot file a performance action, others contend that if the board fails to fulfill its obligation to issue bearer share certificates, the shareholder may file a performance action against the company. In our view, if the three-month period has elapsed from the full payment of the share capital and the board of directors has still not issued the bearer share certificates, this failure could undoubtedly cause the shareholder to suffer losses, particularly in family-owned companies. It could also serve as a form of pressure and would directly result in a violation of the obligation imposed on the board by law. There would be no obstacle to the shareholder filing a performance action against the company to protect this right. Even though performance actions generally involve compelling the performance of an obligation, the board of directors is expressly required to issue bearer share certificates under Article 486, paragraph 1 of the TCC, meaning there is no legal barrier to filing such an action. In fact, if the shareholder suffers damages as a result of the failure to issue the share certificates, it would directly constitute a claim for damages. If the shareholder suffers damages due to the failure to issue bearer share certificates, a liability action can also be filed against the board of directors under Article 553 of the TCC.
Finally, with regard to the performance action for the issuance of share certificates, it is possible that issues may arise during the enforcement stage if the court orders the issuance and delivery of the share certificates to the shareholder. Particularly, after a court order is issued regarding the printing of bearer share certificates, even if it is subject to enforcement proceedings, it would not be possible for the enforcement office to make decisions on behalf of the board of directors or register the decision. Therefore, it is our opinion that the court should issue an order appointing a receiver to carry out the procedures necessary for the issuance of bearer share certificates.
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.
