Certain amendments to the provisions of the to the Turkish Commercial Code numbered 6102 (“TCC”), mostly relating to the provisions regarding bearer share certificates, are expected to enter into force on 1 April 2021, if not extended to a further date at the last minute.
What will be changed?
The changes to be brought may be outlined as follows:
For all companies having bearer share certificates, the holders of the bearer share certificates will be required to notify their shareholding to the Central Registry Agency (“CRA” - Merkezi Kayıt Kuruluşu) in order to be able to exercise their shareholding rights.
Article 486 of TCC already requires that the board resolution regarding issuance of bearer share certificates shall be registered before the trade registry and announced at the trade registry gazette. An additional requirement relating to the issuance procedure of the bearer share certificates will be introduced and, accordingly, companies will be required to notify their shareholders and the information on the bearer shares to the CRA prior to the delivery of the share certificates to the shareholders.
The procedure for the transfer of bearer share certificates will change. Article 489 of TCC was stipulated that the bearer share certificates would be transferred by way of transfer of possession prior to the amendments. Pursuant to the amended article, the transferee would be required to notify the CRA following the transfer of the possession of the bearer share certificates. The notification to the CRA will be necessary for the share transfer to become effective before the company and third parties, and for the transferee to exercise the shareholding rights arising from the TCC.
The Ministry of Trade will be entitled to oblige the companies to keep their share ledgers, board resolution books and general assembly resolution books electronically.
As for the holders of the bearer share certificates, the list of attendees for general assembly meetings will be prepared on the basis of the CRA records.
Provisional Article 14 of TCC requires holders of bearer share certificates to apply to the company until 31 December 2021 for the purpose of notification of their shareholding to the CRA. Then the board of directors of companies will be required to notify the CRA of the shareholders and the information on the shares within five business days following the application of the respective shareholder. In case the shareholders do not apply to the company on time, they would not be able to exercise their shareholding rights.
On a separate note; Article 485 of the TCC will remain in force, according to which the companies may change the type of their shares unless their articles of association stipulate otherwise and subject to other applicable provisions of the legislation.
Uncertainties and what to expect?
The procedure of notification and registration for the transfer of bearer share certificates to the CRA will be regulated by the Ministry of Trade. Considering that the notification to the CRA will be made by the transferee, it is not clear as to how Article 489 of the TCC will be implemented and how the rights of the bearer share certificate holders or transferors would be protected. Therefore, the secondary legislation to be introduced by the Ministry of Trade is worth being monitored.
Additionally, it is not clear from the wording of the Article 489 as to whether the notification to the CRA is constitutive from the perspective of transfer of the ownership of bearer share certificates.
The principles for issuance of the list of attendees by the CRA will also be determined by the Ministry of Trade. It is possible to expect a mechanism similar to that applied for the publicly held companies. The Ministry will also be entitled to restrict the transfer of the bearer share certificates on the date of the general assembly, if deemed required.
Moreover, it is not clear either as to how the shareholding rights of the bearer share certificate holders will be protected in the case that the company does not comply with the procedure envisaged under Provisional Article 14 of TCC and fails to notify the CRA within five business days following the application of the shareholder. Such failure may result that the shareholders might not attend the general assembly among other possible implications that may deprive the shareholders from exercising their rights arising from their shares.