Summary: This article sets out some of the changes in relation to joint stock companies introduced by the new Turkish Commercial Code numbered 6102, such as single-shareholder company, board of directors, website requirement, audit and electronic meetings.
Certain Articles of the Turkish Commercial Code No. 6102 (“TCC”), together with various amendments in other laws, have been amended in accordance with the “Code Regarding the Amendments of the Labour Code, Certain Other Codes and Statutory Decrees and Reconstruction of Certain Receivables” No. 6552, which was passed by the Turkish Grand National Assembly on 10 September 2014, in relation to authority to represent in joint-stock companies and limited liability companies, obligation of increasing capital to a certain amount and period of liquidation.
- The provisions in respect of the extent and limits of authority to represent in joint-stock companies
In principle, authority to represent the company in joint-stock companies vests with the board of directors unless otherwise provided as per the articles of associations thereof. Having said that, the board of directors can assign the mentioned authority to one or more managing directors or third parties acting in the capacity of managers.
Article 371 of the TCC provides that limitations regarding authority to represent cannot be enforced against bona fide third parties. However, as an exception to this rule, limitation on the authority to represent may only be allocated to activities pertaining to the registered office or branches of joint-stock companies or such may be achieved by issuance of joint signature. These limitations will become valid solely upon registration thereof with the relevant Trade Registry. It is noted that registration of signature circulars restricting authority is still being permitted in some cases due to the varying practices of trade registries or of officers within the same trade registry, however, as a general principle, in accordance with Article 371, it is not possible to restrict authority to represent with the exception of the aforementioned cases.
An additional subparagraph has been included into Article 371 of the TCC and this 7th subparagraph provides that the board members lacking an authority to represent or persons who are employed with a joint-stock company can be appointed as commercial representatives or other merchant assistants with limited authority. The 2 following actions shall be undertaken in order to render the mentioned appointment valid and binding upon third parties:
(i) A Board of Directors resolution shall be adopted for the appointment of the relevant persons. The appointment of commercial representatives or merchant assistants cannot be achieved by way of issuance of an internal directive.
(ii) Duties and authorities of the appointed individuals shall be expressly stipulated in the company’s internal directive which needs to be prepared in accordance with Article 367 of the TCC.
(iii) Both the appointment of the individuals and the internal directive shall be registered with and announced at the Trade Registry.
The Board of directors is severally liable for any loss arising from the acts of these individuals against the company and any third parties.
“Article 371 of the TCC:
- Persons who are authorised to represent a company shall be entitled to carry out on behalf of the company any and all acts and legal procedures covered within the scope and purpose of the company and to use the company title for such purpose. Company’s right of recourse due to procedures which are contrary to law and the articles of association shall be reserved.
- Procedures falling outside the company’s scope of business, which are carried out with third persons by those authorised to represent the company, shall also bind the company, unless it is proven that such third person is aware of, or according to the circumstances, is in a position to be aware of the fact that the procedure falls outside the company’s scope of business. The fact that the company’s articles of association have been announced shall not be sufficient evidence in itself for the purpose of proving the mentioned issue.
- Limitation of the right of representation shall not be effective against bona fide third persons; however, registered and announced limitations in relation to the right of representation having been allocated only to the acts and procedures of the principle office or a branch, or joint exercise of the right of representation shall be applicable.
- The fact that a procedure carried out by a person authorised to represent the company is contrary to the articles of association or the general assembly’s decision shall not preclude bona fide third persons from proceeding against the company due to such procedure.
- The company shall be liable for wrongful acts committed by those who are authorised to represent or manage the company in the course of performing their duties. The company’s right of recourse shall be reserved.
- Regardless of whether the company is represented by its single shareholder or not in the course of execution of the agreement, in joint stock companies with a single shareholder, validity of the agreement between such shareholder and the company shall be dependent on the agreement having being entered into in writing. This requirement shall not apply to agreements with respect to day to day, insignificant and ordinary procedures according to market conditions.
- In addition to representatives set out above, the Board of Directors may appoint board members not having the authority to represent or persons who have a contract of employment with the company as a commercial agent with limited authority or as other merchant assistant. Duties and powers of those so appointed will be expressly determined in the internal directive to be drafted in accordance with Article 367. In this case, registration and announcement of the internal directive will be obligatory. Commercial agents and other assistants to merchants may not be appointed by an internal directive. Commercial agents or other assistants to merchants authorised in accordance with this paragraph will be registered with and announced by the commercial registry. The board of directors will be jointly and severally responsible for all damages to be caused by such persons to the company and third parties.”
- The provisions in respect of the extent and limits of authority to represent in limited liability companies
A provision similar to the abovementioned one has also been adopted with respect to limited liability companies by way of insertion of an additional paragraph into Article 629 of the TCC as the 3rd subparagraph.
Article 629/3 provides that persons who are employed with the company can be appointed as commercial representatives or assistant merchants with limited authority by the managers. Article 367 and Article 371/7 of the TCC will be applied to the abovementioned appointment by comparison.
Law makers have anticipated finding a solution to the problems associated with the restriction, brought by Article 371/3 of the TCC, in relation to authority to represent the company by introducing these amendments in both joint-stock companies and limited liability companies. In the meantime, we shall all see in the close future how these amendments will be construed by the Trade Registries in practical terms.
“Article 629 of the TCC:
1) The provisions of this Code relating to joint stock companies shall be applied by comparison to the scope of the authority of directors to represent, restriction of authority, determination of authorised signatories, form of signature and registration and announcement of the same.
2) Notwithstanding whether the Company is represented by a single shareholder during the making of the agreement, in limited liability companies with a single shareholder, the validity of the agreement between such shareholder and company is conditional upon the agreement being in writing. Such requirement shall not be applicable to agreements relating to daily, insignificant and ordinary transactions.
3) Article 367 and the seventh paragraph of Article 371 will be applied to limited companies by comparison with respect to appointment by managers of persons who have a contract of employment with the company as a commercial agent with limited authority or as other merchant assistant.”
- The date regarding liquidation of joint-stock companies, limited liability companies and cooperatives which are notified or identified as having satisfied the conditions stipulated in relevant article of the TCC has been altered
” in sub-paragraph of the first paragraph have been amended as “until 1.7.2015”.
(c) Cooperatives which have dissolved for any reason in accordance with the provisions of the Cooperatives Code.
(d) Joint stock companies and cooperatives general assemblies of which have not been held for the last five consecutive years due to any reason whatsoever.
(e) Companies and cooperatives the liquidation procedure of which began prior to the date on which this Law became effective but whose entry could not be deleted from the trade registry due to failure in submission to the Genera
The time period for liquidation and deletion of joint-stock companies, limited liability companies and cooperatives from the relevant trade registries, which are notified or identified as having satisfied the conditions stipulated in the relevant article of the TCC is extended until 1 July 2015 in accordance with the Provisional Article 7 of the TCC.
“Provisional Article 7:
1) Liquidation of joint stock companies and limited companies which are determined or notified to be in the following conditions beginning from this Law becoming effective until 1.7.2015 and cooperatives and deletion of the entries thereof will be effected in accordance with this Article without complying with the liquidation procedure in the relevant law.
(a) Joint stock companies and limited companies which have not increased their capital to the amounts prescribed in the Decree Law in relation to Amendment of Certain Articles of the Turkish Commercial Code numbered 559 dated 24.6.1995.
(b) The expression “within two years beginning from this Law becoming effective” in the first paragraph of the provisional Article 7 of Law no. 6102 and the expression “within two years beginning from the date of effectiveness l Assembly of the interim balance sheet or last and final balance sheet as a result of the failure in holding the General Assembly.”
- The time period granted for capital increase as per the relevant articles of the TCC has been extended
The Provisional Article 10 has been added into the TCC. If the companies which had failed to increase their capital as per the relevant articles of the TCC until 14 February 2014 manage to increase their capital within three months from the announcement of this article at the Official Gazette, such companies will not be terminated. As for the companies whose records had been deleted from the relevant Trade Registry due to their failure to increase capital as per the relevant articles of the TCC, such companies will be registered ex officio in case they successfully apply for capital increase within the abovementioned period.
“Provisional Article 10:
The termination procedures will not be applicable for companies which have not effected the requisite capital increase by 14.2.2014 in accordance with the provisions of the Turkish Commercial Code for any reason whatsoever in the event that they fulfil the minimum capital requirement within three months beginning from the publication of this Article. Trade registry entries of those whose entries have been deleted by reason of failing to increase their capital will be reinstated ex officio upon application for capital increase within the aforementioned period.”
Minimum capital required for joint-stock companies is set as fifty thousand Turkish Liras (in non-public joint stock companies which have accepted the registered capital it is one hundred thousand Turkish Liras).
Minimum capital requested for limited liability companies is set as ten thousand Turkish Liras.
The information given in this note are aimed only at providing information, and does not serve as a legal opinion under any circumstances.