Ercüment Erdem Att. Melisa Sevinc Atilganer

Transfer of Pledged Joint Stock Company Shares

March 2020


The matters on the transfer of pledged shares are frequently discussed in both financings, and mergers and acquisitions, and may cause certain conflicts between the parties of the pledges. In this study, as transfer without interrupting the possession of the pledgee is often discussed, the transfer of pledged shares, of which representing certificates are issued is examined.

Consequences of Share Pledges

Share pledges are subject to the provisions of pledges on receivables. Pledges on registered share certificates may be established through written pledge agreements, and delivery of the share certificates to the pledgees, in pursuance of provisions of Article 955 of Turkish Civil Code No. 4721 (“Civil Law”), or through the endorsement and transfer of possession in pursuance of provisions of Article 689 of Turkish Commercial Code No. 6102 (“TCC”).

Notification of pledges to joint stock companies to which the shares belong, and registration of the same to the share ledgers do not have a constitutional effect[1].

In principle, the share pledges entitle the pledgees solely with respect to foreclosure of the pledged rights or receivables, as the case may be, and management rights of the subjects of the pledges belong to the pledgors.[2] In this respect, pursuant to Article 960 of the Civil Law, the representation rights pertaining to the pledged share certificates at the general assembly meetings belong to the pledgors, not the pledgees.  In this respect, pursuant to Article 942 of the Civil Law, the pledgors are not entitled to establish a pledge over the pledged share certificates without the consent of the pledgors. 

The requirement of Approval for Transfer

The disposal rights on the pledged share certificates, in principle, also belong to the pledgor. Having said this, the undertakings regarding not to subject the pledged shares to a transfer or another pledge are often foreseen under pledge agreements. Especially, in the event that the pledgee is a financial institution, such restriction on dispositional acts is often drafted in a broad manner, and forbids the establishment of any right to the benefit of a third party. The provision under Article 869 of the Civil Law stating that the undertakings are not to establish a third party over a pledged immovable, is not repeated for the pledged movables. In this context, provided that such a restriction limiting the dispositional rights of the pledgor are not constituted under the agreement, the dispositional rights remain with the pledgor.

Transfer Procedure

Pursuant to Article 490/2 of the TCC, “Transfer through a legal transaction, may be conducted by way of transfer of possession of the registered share certificate to the transferee.” The dispositional act with respect to the transfer of shares is mainly comprised of two processes. These two processes are significant for the shares upon which a pledge or another right to a third party is granted.

Pursuant to Article 943 of the Civil Law, the pledge terminates in the event that the possession of the pledgee concludes and the pledgee loses its capability to retrieve the certificate from the third party possessor. Such a termination event is referred to as “absolute loss of the possession.[3]” In this context, in order to procure the continuance of the rights on the pledge, the possession of the certificate must be maintained. Therefore, the matter on the transfer of share certificates that are held in the possession of the pledgee arises certains concerns. 

The “absolute” loss of possession means loss of possession on the pledge subject in a manner that may not be retrieved. In this respect, it is evident that the transfer of possession cannot be conducted through delivery. However, the transfer of possession referred to under Article 490/2 of the TCC may be conducted in manners other than delivery. Consequently, the transfer of possession with respect to the transfer of a share subjected to a pledge may be conducted through constitutum possessorium.

Uninterrupted maintenance of the pledgee’s possession also has significance on registration of the endorsement to the share pledge. 

Article 647 of the TCC regarding the transfer of registered securities, states that “…Additionally, if promissory notes require an endorsement, and in the case of a registered security, a statement of transfer is required. Such a statement may be written on the security or on a separate paper.” As it is explicitly foreseen under the TCC that the registered share certificates shall be transferred through an endorsement, the matter as to whether these may be transferred through a transfer statement is controversial.[4] The Court of Appeal opines that such a transfer may be conducted through a transfer statement.

The registry of the share pledge does not have a constitutional effect, and only has an impact on claiming the shareholding rights of the company. As above explained, the registry of the share pledge also does not have a constitutional effect. However, in practice, depending on the request of the pledgee and the provisions of the pledge agreement, the pledge is often registered in the share ledger. The registry on the pledge does not interfere with the registry with respect to the share transfer.


The transfer of pledged shares is frequently discussed in various transactions and may cause certain conflicts between the parties of pledges. There is no explicit provision forbidding the transfer of pledged shares. In the event that the pledgee has concerns as to the transfer of the pledged share, the dispositional rights pertaining to the pledgor should be restricted under the share pledge agreement.

[1] Tekinalp, Ünal / Poroy, Reha / Çamoğlu, Ersin: Ortaklıklar Hukuku II, Rewritten 13. ed., Istanbul, 2017, p. 162.

[2] Tekinalp/Poroy/Çamoğlu, p.120, as referred to on p. 162; Oğuzman, Kemal / Seliçi, Özer /Oktay Özdemir, Saibe: Eşya Hukuku, 15. ed., Filiz Kitabevi, Istanbul, 2012, p. 1032.

[3] Oğuzman/Seliçi/Özdemir, p. 1011; Göksoy, Can: Anonim Ortaklıkta Payın Rehni, 1. ed., Seçkin Yayıncılık, Izmir, 2001, p. 367-368.

[4] Pulaşlı, Hasan: Kıymetli Evrak Hukukunun Esasları, expanded and updated 4. ed., Adalet Yayınevi, Ankara, 2015, p. 56.