Limited Corporations Under Turkish Commercial Code Numbered 6102
The New Turkish Commercial Code Numbered 6102 (“New TCC”) and the Act numbered 6103 on the Entry into Force and Application of the Turkish Commercial Code[i] (“Application Act”), which became effective on 01.07.2012 has been partially repealed ―and where necessary―, re-enacted by the law numbered 6335 by the Parliament (“Law No: 6335”).
As per article 22 of the Application Act amended by Law No: 6335, the limited liability companies are allowed a statutory time limit to adapt their essential components of company structure and adhere to the articles of association format set out by the New TCC within 12 months following its effective date (until 01.07.2013). Failure to do so will result in the application of the provisions of the New TCC instead of the provisions of the companies’ own articles. If it is foreseen necessary, the Ministry of Customs and Commerce may extend this period only once for another year.
After a quick update regarding such an important change, this article will focus on exploring new aspects of the limited corporations introduced by the New TCC, which made major changes to the company law. In general, the provisions of the New TCC governing the joint stock companies (public limited liability companies) are also applicable to the limited corporations therefore, it can be assumed that the New TCC has taken an overlapping approach to establish closer correspondences between the limited corporations and joint stock companies. In the below, a brief guidance outlines the new-fangled aspects of the limited corporations under the New TCC.
The New TCC followed “single member company” trend, which became a popular company structure in other jurisdictions in recent years and allowed Turkish limited corporations, be formed with one or more members (shareholders). After enactment of the New TCC, the limited corporations, which had been established with more than one member may decrease the number of members of a shareholders to one with a notification that will be made to the director(s) of the company and continue to operate with just a sole member. The director should apply to the trade registry (equivalent of the UK Companies House in Turkey) for the registration and announcement of the company’s new structure within 7 days from receipt of such notification. The name, residence and nationality of the single shareholder should also be notified to the trade registry. The company management shall be liable for noncompliance of this application requirement.
With respect to structure of limited corporations’ share capital; the New TCC increased minimum authorized share capital amount from TRL 5,000 to TRL 10,000. The existing limited corporations, that had incorporated before enactment of the New TCC should increase their share capital up to TRL 10,000 ―if the share capital of is below this threshold― within 3 years of the publication of the New TCC. The par value of the shares should be at least TRL 25.
The limited corporations should have registered shares and should be represented with share certificates.
Unless otherwise stated in the articles of association (AoA), as a general rule the general assembly should grant consent to any share transfer transaction. The general assembly may reject to grant its consent without giving any reasons. The AoA may include secondary rights such as right of first refusal.
The board of directors and general assembly meetings may be held via electronic means (video or telephone conference) to the extent stated in the AoA of the company.
The AoA of a limited corporation may recognize an entitlement to resign as a member of company (i.e., director, secretaries and other managing officers) or list conditions to step down from the position. The AoA also may determine and list the reasons to remove a company member by a resolution of general assembly.
Unless the AoA states otherwise or the board of directors consist of more than one directors the representation of the company can be denoted by a joint signature. The directors may delegate the representation powers to one or more executive manager or appoint third parties. The manager may be a legal entity.
Article 628 of the New TCC, which required at least one Turkey domiciled director has been repealed by the Law No: 6335. Consequently, the extensionof repealed provision, which empowers such director having sole authorization to represent the company, will no longer be effective.
For determination of company ownership and control; the code requires that the limited corporation must keep a share ledger reflecting the following; names/titles and addresses of the shareholders, number of shares held by the shareholders, share transfers, nominal value of shares, share groups (if any), encumbrances over the shares and the information regarding the beneficiaries of such encumbrances formed over the shares.
Another renovated area introduced by the New TCC is regarding the company accounts. As per article 610 of the New TCC, the provisions of the joint stock companies governing the financial tables and reserve funds (art. 514-527) shall be applicable to limited corporations.
The limited corporation is obliged to keep the commercial books indicating the commercial transactions and asset structure of the company. The limited corporations shall apply Turkish Accounting Standards (which is an adaptation of International Financial Reporting Standards-IFRS) announced by the Turkish Accounting Standards Board.
The manager(s) of limited corporations must prepare and submit to the attention of the general assembly the financial charts, appendices and the activity report of the company for the preceding accounting period. This must be done in accordance with the Turkish Accounting Standards and within the first 3 months of the relevant financial period following the balance sheet date.
The provisions governing the auditing for joint stock companies also apply to the limited corporations. Briefly, the limited corporations should also have independent auditors who are either chartered or certified public accountants.
Limited corporations must have and maintain a web-site. Financial statements and resolutions, other important documents (i.e. signature circular) and information should be published in the web site.
The eventual upshot change made on limited corporations is that, as a requirement of Article 643 of the New TCC, the provisions governing the winding-up for joint stock companies also apply to the limited corporations.
[i] Published in the Official Gazette dated 14 February 2011 numbered 27846 (Türk Ticaret Kanunu’nun Yürürlüğü ve Uygulama Şekli Hakkında Kanun).
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