Usufruct Right on Joint Stock Company’s Registered Shares
The usufruct right, which is regulated under Turkish Civil Code numbered 4721 (“Civil Code”), enables the right holder (“usufructuary”) to fully use and enjoy property subject to such right. A usufruct right may be established on movables, immovable properties, rights, and groups of assets. Although there are several provisions foreseen under Turkish Commercial Code numbered 6102 (“TCC”) regarding the establishment of usufruct rights on shares, the TCC does not particularly regulate this issue. The following sections of this article include general information on usufruct rights, as well as the establishment of such rights on the registered shares of joint stock companies, the joint stock company’s entitlement to limit the establishment of usufruct rights, and the scope of such rights.
Usufruct Rights in General
Usufruct rights are regulated under Article 794 et seq. of the Civil Code. Unless otherwise agreed, usufruct rights enable the usufructuary to fully use and enjoy the subject property, subject to such right. A usufruct right granted to a real person terminates upon the usufructuary’s death; whereas, those granted to legal entities terminate upon the expiration of the agreed upon time period by the parties. If there is no time restriction for usufruct rights granted to a legal entity, then the right terminates upon dissolution of the legal entity. A usufruct right can be granted to a legal entity for a maximum period of 100 years. The usufructuary is entitled to hold the subject of the right in its possession and manage, use, and benefit from it while, at the same time, it should fulfil its duty of care to the owner of the subject of the right as a diligent manager. On the other hand, the owner is entitled to object to the manner in which the usufructuary uses the subject of the right, if such usage is contrary to the law, or is inappropriate with the nature of the property. Unless otherwise agreed to, or the circumstances of the case require the enjoyment of the right by the usufructuary, personally, the usufructuary may transfer the entitlement to enjoy the right to a third party. In such a case, the owner would be entitled to exercise its rights and direct its claims directly to the transferee.
Establishment of Usufruct Rights on Joint Stock Company’s Registered Shares and Registration in the Share Ledger
Pursuant to Article 795/1 of the Civil Code, a usufruct right is established on a movable property through the transfer of possession; whereas, it is established on receivables through the procedure of assignment of receivables. Accordingly, if the registered share is printed, the usufruct right is established through endorsement and delivery of the share certificate for usufruct purposes. It is possible to establish such right without the endorsement of the share certificate, by way of a written assignment declaration indicating the purpose of establishment of usufruct right, and transfer of the share certificate’s possession. It is not mandatory that the share is represented by a printed share certificate for the establishment of the usufruct right; it may be also established on unprinted shares by way of a written usufruct right agreement to be made in accordance with the provisions of assignment of receivables.
Pursuant to Article 499/1 of TCC, the usufructuary shall be registered in the company’s share ledger. This principle is significant to provide transparency in terms of both the percentage of the dividends the shareholder and the usufructuary are entitled to, and to whom the voting right shall belong. Although it is not clearly stated under the TCC, the purpose of Article 499 of the TCC, as well as the principle of clarity, require an indication in the share ledger as to whether the usufruct right arises from law or from an agreement, and the ratio of the usufruct right on a particular share. In parallel, it would be appropriate to indicate to whom the voting right belongs; since, as elaborated upon below, a voting right attached to a share can be exercised by either the usufructuary, or by the shareholder.
Pursuant to Article 499/4 of the TCC, as for a relationship with the company, only the person who is registered in the company’s share ledger is to be deemed as the usufructuary. This provision shows that even if the usufruct right is legally existent and valid, the company would not recognize such right unless it is registered in the share ledger. The legal nature of the registration is explanatory. The registration enables the usufructuary to easily exercise its voting rights at the general assembly meetings, and to collect its dividends without the need to evidence its usufruct right every single time.
Finally, pursuant to Article 499/2 of the TCC, the company cannot register the usufructuary in the share ledger unless it is evidenced that the usufruct right is legally established over the subject share. For printed shares, the company annotates on the reverse side of the share certificate that the usufruct right is registered with the share ledger; whereas, for unprinted shares, the usufructuary is entitled to request a document from the company confirming that the registration is made.
Limitation of Establishment of Usufruct Right
The fact that the voting right, in principle, belongs to the usufructuary, would render the legal interest aimed to be protected by share transfer limitations meaningless, if it is accepted that these limitations do not apply to the usufruct right. Therefore, Article 492/2 of the TCC allows joint stock companies to regulate under their articles of association that the establishment of usufruct rights on company shares is subject to the company’s approval. That is to say, the company is entitled to reject the requests for establishment of usufruct rights, based on the same reasons that would justify rejection of share transfers.
Article 492/2 of the TCC only refers to Article 491/1, which regulates the share transfer limitations foreseen under the company’s articles of association, but does not refer to the provisions regarding the statutory limitations of share transfers. Therefore, joint stock companies cannot refrain from approving the establishment of usufruct rights based on statutory limitations applicable to share transfers, which provide that the not fully paid-in registered share could be only transferred with the approval of the company, and the company is entitled to grant approval if the transferee’s solvency is doubtful, and the transferee fails to provide sufficient collateral requested by the company. Accordingly, the fact that the shares are not fully paid-in, or the solvency of the usufructuary is doubtful, would not constitute sufficient justifications for a joint stock company to not approve the establishment of usufruct rights.
Scope of the Right
In principle, the usufructuary holds economic rights, such as entitlement to dividends, as well as managerial rights, such as the right to participate in general assembly meetings, voting rights, rights to access information and examination, and the right to request the annulment of general assembly resolutions. The voting right, right to participate in general assembly meetings, and the right to request annulment of general assembly resolutions, are elaborated upon, below.
Pursuant to Article 432/2 of the TCC, unless otherwise agreed by the parties, the voting right attached to a share shall be exercised by the usufructuary. However, if the usufructuary fails to act equitably considering the interests of the shareholder, it shall be liable to the shareholder. This provision is in parallel with Article 794/2 of the Civil Code stating that unless otherwise agreed, the usufruct right entitles the usufructuary to fully enjoy the subject of the right, and with Article 803/2 of the Civil Code, according to which the usufructuary shall act with all due respect as a diligent manager while enjoying the usufruct right.
Right to Participate in General Assembly Meetings
As a consequence of holding the voting right attached to the shares, the usufructuary is also entitled to participate in the general assembly meetings. Pursuant to the legal doctrine, in addition to the usufructuary, the shareholder may also attend the general assembly meetings without having a voting right. The fact that the usufructuary is entitled to participate in the meetings and exercise a voting right, does not prevent the shareholder from participating in general assembly meetings, as well, and to annotate its objections to the resolution in the relevant meeting minutes.
Right to Request Annulment of General Assembly Resolutions
As is generally asserted in the legal doctrine, the usufructuary has the right to request the annulment of general assembly resolutions. Although Article 446 of the TCC indicates that the right to request annulment belongs to the shareholder, it should be accepted that the usufructuary, by itself, is also entitled to request annulment, and there is a voluntary joinder of parties between the shareholder and the usufructuary. When the usufructuary is entitled to voting rights, but not to the right to request annulment, which is the particular legal remedy to protect one’s voting right, this would constitute a restriction to the scope of the voting right. Both the usufructuary and the shareholder have an interest regarding the share subject to the usufruct right; for example, the usufructuary would have an interest in requesting annulment of a resolution of the general assembly not to distribute dividends; whereas, the shareholder would have an interest in requesting annulment of a resolution regarding capital decrease and redemption of certain shares.
On the other hand, pursuant to Çamoğlu, the right to request annulment of a general assembly resolution, in principle, belongs to the shareholder, and the shareholder is entitled to file a lawsuit in this regard, provided that it participated in the relevant meeting and annotated its objection to the meeting minutes; whereas, the usufructuary could exercise such right only if the shareholder did not participate in the relevant general assembly meeting.
Unless otherwise agreed, a usufruct right entitles the usufructuary to fully use and enjoy the property, subject to such right. The usufruct right can be established on the printed registered shares of joint stock companies either through endorsement and delivery of the share certificate for usufruct purposes, or without endorsement, by way of a written assignment declaration indicating the purpose of establishment of usufruct right and transfer of the share certificate’s possession. As for establishing a usufruct right on unprinted shares, a written usufruct right agreement shall be made in accordance with the procedure of assignment of receivables. The usufruct right shall be registered with the company share ledger. Only the person who is registered with the company’s share ledger shall be deemed as the usufructuary in terms of the relationship with the company. The articles of association of the company may require company approval in order to establish a usufruct right on registered shares. In principle, a usufruct right provides its holder with both economic and managerial rights, such as right to dividend, right to participate in general assembly meetings, voting right, right to request annulment of general assembly resolutions, and right to access information and examination.
 Civil Code (Official Gazette, 08.12.2001, No. 24607) entered into force on 01.01.2002.
 TCC (Official Gazette, 14.02.2011, No. 27846) entered into force on 01.07.2012.
 Pulaşlı, Hasan: 6102 Sayılı Türk Ticaret Kanuna Göre Şirketler Hukuku Şerhi, Cilt I, Ankara 2011, p. 740.
 Tekinalp, Ünal: Anonim Ortaklıkta Yeni Bağlam Sisteminin Esasları – Pay Defteri Hukuku İle, İstanbul 2012, p. 93.
 Tekinalp, p. 92.
 Tekinalp, p. 94.
 Tekinalp, p. 100.
 Tekinalp, p. 100.
 Tekinalp, p. 23.
 Tekinalp, p. 22.
 Preamble of Article 492 of the TCC.
 Tekinalp, p. 23.
 Tekinalp, p. 23.
 Çamoğlu (Poroy/Tekinalp): Ortaklıklar Hukuku I, Yeniden Yazılmış 13. Bası, İstanbul 2014, p. 486.
 Moroğlu, Erdoğan: 6102 Sayılı Türk Ticaret Kanunu’na Göre Anonim Ortaklıkta Genel Kurul Kararlarının Hükümsüzlüğü, 6. Bası, İstanbul 2012, p. 233.
 Moroğlu, p. 231.
 Pulaşlı, p. 847, Moroğlu, p. 232.
 Moroğlu, p. 233.
 Çamoğlu (Poroy/Tekinalp), p. 540.
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