Av. Dr. Umut Kolcuoğlu
30 November 2011, London
General Overview
I.
INTRODUCTION TO THE NEW COMMERCIAL CODE
II.
INCORPORATION
III.
BOARD OF DIRECTORS
IV.
AUDIT
V.
GENERAL ASSEMBLY
VI.
SHARE AND SHARE CAPITAL
VII.
SHAREHOLDERS
VIII.
STRUCTURAL CHANGES
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Introduction to the New Commercial Code
Main Objectives of the New Turkish Commercial Code
(“New TCC”)
Technological Developments
Transparency / Access to Information
Compliance with European Union Legislation
Introducing International Corporate Governance Standards
Introducing Internationally Accepted Auditing and Reporting
Standards
Increasing Shareholder Value
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I. Incorporation (i)
A. Minimum Capital
Minimum amount of share capital of a joint stock company (“JSC”) is
TRY 50,000, while this amount is TRY 100,000 for non-public JSCs
adopting the registered capital system (Start-up Capital).
B. Public Offering at the Incorporation
Public offering is available at the incorporation stage.
C. Renouncing the Principle of Ultra Vires
JSCs will be able to carry out any transactions that fall within the scope
of their business.
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I. Incorporation (iii)
D. Single Shareholder Companies
The New TCC launches JSC with single shareholder in line with the 12th
European Union Directive numbered 89/667. This reform also enables a
shareholder to buy other shareholders’ shares and convert the company
into a single shareholder company. In such case, the board of directors
(“BoD”) must register the single shareholder with the relevant trade
registry within seven days following the transfer date.
Limitations for JSCs having a Single Shareholder
Transactions between the single shareholder and the company
must be in writing except for the ordinary day-to-day
transactions.
JSC cannot acquire its shares and be converted into a single
shareholder JSC.
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I. Incorporation (iv)
E. Capital Contributions
Values that can be contributed as capital have been diversified.
Intellectual property rights and virtual environments including
electronic media, domain names and websites can be contributed as
capital.
I.
Contributions in cash
At least ¼ of the nominal share value must be paid at JSC’s
registration whereby the remaining portion must be paid within 24
months following the registration.
II. Contributions in kind
Assets that are not subject to any seizures, pledges or any similar
encumbrances may be contributed as capital in kind. Receivables that
are not due, service acts, personal works and commercial reputation
may not be contributed.
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II. Board of Directors (i)
A. Criteria of Membership
One member BoD is introduced.
BoD members are not required to be a shareholder.
At least one BoD member who is authorized to represent the company
must reside in Turkey and be a Turkish citizen.
At least one fourth of the BoD members must have a graduate degree.
This requirement is not applicable for BoDs consisting of one member.
Legal entities may become a BoD member (significant change in the
liability regime). Legal entity’s representative will be registered with the
trade registry and the registration will be announced on the company’s
web site.
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II. Board of Directors (ii)
B. Meetings of BoD
Meetings of BoD may be held through electronic media.
The meeting quorum for BoD of half-plus one of the directors, as
provided by the Turkish Commercial Code No. 6762 (“Existing TCC”),
is abolished. The presence of the majority of BoD members is
adequate.
C. Assignment of Duties
The BoD may delegate its management rights to certain BoD members
or third parties that are not BoD members. As a result, the BoD
members may be classified as executive and non-executive members.
The non-assignable duties of BoD are explicitly set.
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II. Board of Directors (iii)
D. Representation
As a result of abolishment of the ultra vires principle, transactions
concluded between JSCs’ authorized representatives and third parties
that are beyond the purpose and scope of the company are binding for
JSC unless the third party is aware or should be aware of the fact that
the transaction is beyond the purpose and scope of the company.
E. Prohibition to become Indebted to the Company
BoD members and their related parties specified in the New TCC cannot
borrow from the company. The company cannot provide surety,
guarantee or security for these persons and cannot take over their
liabilities.
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II. Board of Directors (iv)
F. Invalid Resolutions
The New TCC provides examples of invalid decisions of BoD, without
being exhaustive. According to Article 391 of the New TCC, the BoD
decisions;
violating the principle of equality,
conflicting with the essential character of the corporation and
principle of maintenance of capital,
violating the fundamental rights of the shareholders; or
violating non-assignable powers of other corporate bodies
are invalid.
Determination of the invalidity of the BoD decisions may be requested
from the court.
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III. Auditing (i)
A. Independent Auditor
Internal auditor that was among the mandatory organs of JSC is
replaced by external independent audit mechanism.
Audit is carried out by;
independent audit firms for big sized companies;
sworn financial advisors (Yeminli Mali Müşavir) or independent
accounting financial advisors (Serbest Muhasebeci Mali Müşavir) for
medium and small sized companies.
Audit is performed in accordance with the Turkish Auditing
Standards which are identical with IFRS.
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III. Auditing (ii)
B. Transaction Auditor
Transaction auditors audit certain transactions of JSC such as
incorporation, capital increase and decrease, merger, de-merger,
conversion and issuance of securities.
C. Special Auditor
Any shareholder may request appointment of a special auditor from the
general assembly (“GA”). A special auditor will be appointed by court if
GA accepts the request.
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IV. General Assembly (i)
A. General Overview
The non-assignable and exclusive authorities of GA are listed.
Nullity of GA decisions is regulated. The provisions of nullity stated in
the New TCC are not numerus clausus.
The shareholders may participate to GA, submit proposals and vote
through electronic media.
Executive BoD members, one BoD member, independent auditor and
transaction auditor must attend GA meeting.
The right to call GA meetings has also been granted to liquidators.
An internal regulation must be prepared by BoD in relation to the
conduct of GA meetings.
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IV. General Assembly (ii)
B. Capital Increase
Unless the share capital is completely paid up, GA cannot decide to
increase its capital, except for the capital increase through internal
funds.
The corporate body authorized to decide on the increase is the GA in
the issued capital system and the BoD in the registered capital
system.
BoD must prepare a report with respect to the type of the
capital increase. The transaction auditor appointed by BoD
must evaluate the BoD report and audit whether the capital
increase is in line with the law and the Turkish Accounting
Standards.
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IV. General Assembly (iii)
I.
Capital Increase through External Funds
• The first portion representing 25% of the capital must be paid at
the time of registration of the capital increase and the remaining
75% must be paid within 24 months following the registration.
• The provisions under the Capital Market Law regarding capital
increase in the registered capital system for public JSCs are
reserved.
II. Capital Increase through Internal Funds
• In a capital increase through internal funds, (i) statutory reserves
not allocated for a certain purpose, (ii) part of the statutory
reserves that may be freely utilized and (iii) funds that may be
included to the capital and the balance sheet are converted to
capital.
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IV. General Assembly (iv)
III. Conditional Capital Increase
• The New TCC introduces conditional capital increase mechanism.
• AoA may grant a right to receive new shares by exercising an option
or conversion right to;
employees;
owners of debt instruments of the company or its subsidiaries.
• The capital will be increased upon the exercise of the conversion or
option rights without further action.
• Conditional capital increase is an exception of the fixed capital
system.
The total nominal value of the capital which is
increased conditionally may not exceed 50% of
the share capital of the company.
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IV. General Assembly (v)
C. Restriction of Pre-Emption Rights
Each shareholder has the right to acquire newly issued shares on a prorata basis.
The pre-emption right may only be restricted or removed by a GA
resolution,
if there is a just cause (e.g., acquisition of a business or a part
thereof, participation of the employees in the company); and
upon the affirmative votes of the shareholders representing 60% of
the share capital.
This provision also applies to BoD resolutions in the registered capital
system.
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V. Share and Share Capital (i)
A. General Overview
Minimum nominal value per share is 1 Turkish kuruş.
Share without a nominal value is not recognized.
Distribution of advance profit is introduced also for non-public
companies.
Registered capital system for non-public JSCs is introduced.
Accordingly, capital increases of non-public JSCs can be effectuated up
to the registered capital limit through a BoD decision.
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V. Share and Share Capital (ii)
B. Privileged Shares
Privilege may be granted regarding (i) dividend, (ii) liquidation share,
(iii) pre-emption and voting rights or (v) another shareholding right
not specified by law.
I. Creation of Privileged Shares
• Privileges may be stipulated by the AoA.
Decision Quorum
GA resolutions for the amendment of AoA regarding the
“creation of privileged shares” require the affirmative
votes of shareholders representing at least 75% of the
share capital.
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VI. Share and Share Capital (ii)
II. Privilege on Voting Rights
• Privilege on voting rights may be provided by granting unequal
voting rights to shares of equal nominal value.
• Each share may entitle its owner maximum of 15 votes. This
limitation may not apply if the corporate governance principles
require to do so or in the presence of a valid reason, in any case
upon court decision.
Privileged voting right cannot be exercised for the following
resolutions:
amendment of AoA;
appointment of transaction auditors;
release and liability claims of BoD members.
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VI. Share and Share Capital (iii)
III. Representation of Share Groups in the BoD
• In principle privileges are granted to shares and not to
shareholders. However, Article 360 of the New TCC sets forth an
exception:
Certain share classes;
shareholders who
characteristics; and
form
a
group
in
terms
of
their
the minority shareholders
may be granted the right to be represented in the BoD.
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VI. Share and Share Capital (iv)
IV. Privileged Shareholders Special Committee (“PSSC”)
• The following resolutions of the GA that may infringe the rights of
privileged shareholders, require approval of the PSSC:
amending of the AoA;
authorizing BoD regarding the capital increase; and
BoD resolutions on the capital increase.
• The BoD may initiate an action for annulment against the resolution
of the PSSC within one month from the date of the resolution.
If the privileged shareholders approve the amendment of the AoA
in the GA meeting, no PSSC meeting is necessary.
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VI. Share and Share Capital (v)
C. Share Transfers
In principle, shares can be transferred without any restriction unless
otherwise provided by the New TCC or the AoA.
I. Restrictions arising from Law
• Registered shares, which have not been totally paid up, may
only be transferred with the approval of BoD.
• BoD may refuse to grant its approval, if the transferee’s ability
to pay raises doubts and the security requested by the company
is not provided.
The provision of the Existing TCC restricting the transfer of shares
corresponding to capital in-kind for a period of two years has been
abolished.
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VI. Share and Share Capital (vi)
II. Restrictions arising from AoA
• AoA may regulate that the registered shares may only be
transferred with the company’s approval.
• Transfer of the non-listed registered shares may only be
disapproved based on an important reason laid down in the
AoA.
• The disapproval grounds are stipulated in the New TCC.
• The transferability restrictions cannot be aggravated by the
AoA.
• If BoD disapproves transfer of shares, the ownership of the
shares and all the rights related thereto shall remain on the
transferor.
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VI. Share and Share Capital (viii)
D. JSC’s Acquisition of its own Shares
The New TCC allows JSCs to acquire up to 10% of their own shares
subject to the following conditions:
GA must authorize BoD for the acquisition.
Shares subject to the acquisition must be fully paid-up.
Net assets minus the price paid for the value of the acquired shares
cannot be less than the sum of issued capital and non-distributable
reserves.
If there is an imminent and serious loss, JSC may acquire its own
shares in the absence of a GA resolution authorizing the BoD.
JSC cannot subscribe for its own shares.
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VII. Shareholder (i)
A. General Overview
I. Equal Treatment
•
Every shareholder must be treated equally under equal
circumstances.
II. Prohibition to become Indebted to the Company
•
Shareholders may not become indebted to the company
excluding debts arising from their share subscriptions.
•
However, if the debt is related to a transaction with the
company within company’s scope of activity and business of a
shareholder and if such debt is on arm’s lenght terms, this
prohibition may not be applicable.
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VII. Shareholder (ii)
B. Shareholder Rights
I. Voting Rights
•
Voting right is determined in accordance with the nominal
value of the share.
•
Each shareholder has at least one vote and if a shareholder
holds more than one share, his/her voting rights may be
limited with the AoA.
•
The right to elect BoD members by way of cumulative voting is
introduced to non-public companies; the Ministry of Industry
and Trade is authorized to regulate cumulative voting with a
communiqué.
In order to have the voting right, the minimum share
capital determined by law or by AoA must be paid up.
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VII. Shareholder (iii)
II. Right to Information
• Shareholders’ right to information is expanded.
• Legal remedies are strengthened.
• Limitation of right to information of a shareholder is strictly
defined.
• Website Requirement  Every JSC has to create a website
The following and other similar information should be
announced on the website:
Documents and notices regarding GA meetings and the
means for electronic GA and BoD meetings and for
electronic voting
Year-end and interim financial statements and merger and
de-merger balance sheets, audit reports, valuation reports,
etc.
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VII. Shareholder (iii)
III. Right to request Special Audit
• Every shareholder has the right to request special audit from
GA.
• As a new minority right, if GA does not accept special audit
request of a shareholder, the minority shareholder may request
appointment of a special auditor from the court.
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VII. Shareholder (iv)
B. Minority Rights
The New TCC includes new minority rights for those owning
10% of the shares in private companies; and
5% of the shares in publicly held companies.
Accordingly minority shareholders may;
 apply to court for appointment of a new
auditor;
 request from BoD to print share certificates;
 demand company’s dissolution on just
cause; and
 nominate a BoD candidate.
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VII. Shareholder (v)
C. Squeeze-Out
I. Squeeze-Out by the Majority Shareholder
•
Shareholders who own directly or indirectly at least 90% of the
share capital and the voting rights can squeeze out the
minority shareholders if the minority shareholder(s) hinders
activities of the company, acts in bad faith, causes distress or
acts recklessly.
•
In this squeeze-out process, the purchase price of the minority
shareholder(s)'s shares will be the stock exchange or actual
value.
II. Squeeze-Out in Case of Merger
•
The dissolving company may squeeze out the minority
shareholders with at least 90% of the total votes.
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VIII. Structural Changes (i)
A. Group of Companies
New
concept
of
“group
of
shareholder/subsidiary) is introduced.
companies”
(controlling
Group of companies is formed when a company;
owns the majority of voting rights in another company;
can appoint the majority of the members of the BoD pursuant to
its bylaws;
has executed a control agreement with another company; or
holds control in any other way.
At least one controlling shareholder or the subsidiary must be in
Turkey for the New TCC to apply.
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VIII. Structural Changes (ii)
Reporting Obligations, Right to Information and Special Audit
• Reporting obligations and right to obtain information among the parent
and the subsidiary company are regulated.
• Subsidiary’s shareholders has the right to claim for appointment of a
special auditor before the court.
• Abuse of control by the parent company is regulated.
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VIII. Structural Changes (iii)
B. Merger
Merger of different types of capital companies is available.
Insolvent companies or companies in the process of liquidation can
merge.
Expedited merger procedures are available for group companies and
small sized companies.
The merger agreement may provide to the shareholder an option to
choose either to have shares in the surviving company or to exit and
receive compensation (ayrılma akçesi).
Compensation can be paid to shareholders in exchange for the
privileges that will not be preserved after the merger.
Unless the transactional auditor reports that there’s no risk for the
creditors resulting from the merger, creditors may request collaterals
during the three-month period following announcement of merger.
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VIII. Structural Changes (iv)
B. De-Merger
De-merger is currently regulated only by the Corporate Tax Code and
the Communiqué on Mergers of Commercial Companies.
New TCC regulates de-merger and partial de-merger.
Symmetric (ratios are preserved) and asymmetric (ratios are not
preserved) de-merger is introduced.
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Effective Dates
The New TCC was accepted by the Turkish Parliament.
The New TCC has been published in the Official Gazette.
The New TCC will be effective.
Deadline for the compliance of the AoA with the New TCC.
Deadline for appointment of independent auditors.
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Deadline for website requirement.