- in Turkey
- within Criminal Law and Energy and Natural Resources topic(s)
Joint stock companies are a type of capital company regulated under Article 329 and the following articles of the Turkish Commercial Code numbered 6102 ("TCC"). Joint stock companies are companies whose capital is divided into shares and whose shareholders' liability is limited solely to the amount of capital they have undertaken to contribute (Article 124 of TCC). Pursuant to Article 329 of TCC, a joint stock company is defined as a company with a fixed capital divided into shares, which is liable for its debts only with its own assets, while the shareholders are liable only to the company and only up to the amount of their subscribed capital shares. Within the systematic structure of the TCC, joint stock companies are classified among capital companies, where the essential element of the corporate structure is the capital contributed by the shareholders and the rights attached to those shares.
In joint stock companies, shareholders' liability is owed exclusively to the company; they bear no direct liability towards the company's creditors. Therefore, creditors cannot directly claim against shareholders for the company's debts. The liability of shareholders is limited to their subscribed capital commitments. However, it should also be noted that if shareholders also act as members of the board of directors, their liabilities arising from their duties as board members will be distinct and assessed separately.
What is the "Single Obligation Principle" in Joint Stock Companies?
Article 480 and following articles of TCC regulate the obligation of shareholders to pay the nominal value of their shares and the consequences of failure to do so. Pursuant to Article 480, except for cases explicitly provided by law, shareholders cannot be imposed with any obligation other than payment of the nominal or premium value of their shares. However, in joint stock companies adopting the registered capital system, the Articles of Association may authorize the board of directors to issue shares with a premium. Shareholders cannot demand the return of their capital contributions; their rights concerning liquidation proceeds remain reserved. This provision essentially codifies the "single obligation principle", meaning that shareholders cannot be burdened with any obligation beyond their capital subscription.
According to Article 335 of the TCC, upon incorporation, shareholders are unconditionally required to subscribe to the entire capital stated in the Articles of Association. This reflects the capital-based structure of joint stock companies and their nature as capital companies. Since shareholders' liability is limited to the capital they have undertaken, they cannot be pursued for the company's debts. These provisions, in essence, demonstrate that a shareholder's liability and capital commitment cannot be increased without their explicit consent, and no additional financial obligations may be imposed.
What May Be Contributed as Capital by Shareholders?
The TCC specifies the types of assets that may be contributed as capital in joint stock companies. Under Article 127, unless otherwise provided by law, the following may be contributed to a company as capital:
- Cash, receivables, negotiable instruments, and shares in other capital companies,
- Intellectual property rights,
- Movable and immovable property,
- Usufruct or usage rights over movable or immovable assets,
- Commercial enterprises,
- Transferable and monetarily assessable assets,
- Transferable rights such as licenses, domains, or digital platforms lawfully used,
- Mining licenses and similar rights with economic value, and
- Any transferable and monetarily assessable value.
Within this framework, shareholders may contribute either cash or in-kind assets, provided that such assets are free from encumbrance, attachable, transferable, and capable of monetary valuation, including intellectual property rights and digital assets. Conversely, services, personal labor, commercial reputation (goodwill), and unmatured receivables cannot constitute valid capital contributions.
Is There a Regulation Regarding the Payment Deadline for Cash Capital Contributions?
TCC also provides explicit rules on the timing of cash capital payments. Under Article 344, at least twenty-five percent (25%) of the nominal value of shares subscribed in cash must be paid before registration of the company, and the remaining amount must be paid within twenty-four (24) months following registration. Share premiums, if any, must be fully paid prior to registration.
Are There Any Exceptions to the Single Obligation Principle?
According to Article 480(4) of TCC, if the transfer of shares is subject to the company's approval, the Articles of Association may impose on shareholders, in addition to their capital commitment, certain non-monetary recurring obligations, provided that these are explicitly defined and recorded. The nature and scope of these secondary obligations may be indicated on the reverse of share certificates or interim certificates.
For such secondary obligations to be valid, obligations shall be expressly stipulated in the Articles of Association at the time of incorporation or through a later amendment thereto. In cases of amendment, however, the introduction of such obligations requires unanimous approval of all shareholders.
How Are Shareholders Required to Pay Their Subscribed Capital?
Under Article 481 of TCC, unless otherwise provided in the Articles of Association, the Board of Directors shall call upon shareholders to pay the amounts due on their shares through public announcement. The notice shall specify the portion or amount of capital called, the due date of payment, and the place of payment. The procedure for publication of this notice shall be determined according to the company's Articles of Association.
What Happens If Shareholders Fail to Pay Their Capital Contributions?
Pursuant to Article 482 of the TCC, a shareholder who fails to fulfill their capital contribution obligation within the prescribed period shall, without the need for formal notice, be liable to pay default interest. The Board of Directors may also deprive the defaulting shareholder of rights arising from their participation and partial payments, sell the unpaid shares to third parties, and cancel the corresponding share certificates, if any. If such certificates cannot be retrieved, the cancellation decision shall be published in the Turkish Trade Registry Gazette and announced as prescribed in the Articles of Association. The Articles of Association may also stipulate a contractual penalty in the event of default, without prejudice to the company's right to claim damages.
For the above measures to be implemented, the Board of Directors shall first issue a formal call for payment to the defaulting shareholder via publication in the Turkish Trade Registry Gazette and on the company's website, in accordance with the Articles of Association. This notice shall grant the shareholder a period of one month to pay the outstanding amount, warning that failure to do so will result in loss of shareholder rights and imposition of contractual penalties. For registered shares, such notice shall also be sent by registered mail with return receipt in addition to publication on the company's website. The one-month period begins on the date the shareholder receives the notice. A defaulting shareholder remains liable to the company for any shortfall that may arise after the resale of their shares.
Moreover, failure to pay the subscribed capital may also raise concerns under transfer pricing and disguised profit distribution principles, where the shareholder effectively derives benefit by retaining and using funds that should have been contributed to the company. In such cases, the unremitted amount may be deemed as income not transferred to the company, giving rise to potential tax implications.
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.
