There are certain restrictions, as regulated under the new Turkish Commercial Code No. 6102, which may be imposed in respect of share transfers in joint stock companies, which may arise from law or from the articles of association. This article briefly stipulates the mentioned restrictions and possible consequences of non-compliance.
Turkish Commercial Code No. 6102 (“TCC”), in principle, TCC provides that registered shares may be transferred without being subject to any restrictions. However, it also stipulates certain legal and Articles of Association (“AoA”) based restrictions on share transfer.
According to the relevant provisions, legal restrictions imposed on share transfers apply to registered shares prices of which have not been fully paid. In fact, with the exception of inheritance, division of inheritance, marital property regime and forced sales, the TCC stipulates that registered shares may only be transferred with the approval of the relevant company. The company is also entitled to reject the relevant share transfer in case the transferee’s payment capacity is doubted and the requested security is not provided.
Imposition of an AoA based restriction in respect of share transfer is only possible by inserting a provision in the AoA stating that registered shares may only be transferred with the company’s approval.
Under the TCC, a company may reject approving a share transfer: (i) by putting forth an important reason as stipulated under the AoA, (ii) by proposing that the transferor purchases the relevant shares on their actual value on the relevant date. As for shares acquired as a result of inheritance, division of inheritance, marital property regime or forced sale, the company may exercise its right of refusal only by way of proposing to purchase the shares over their actual price.
Joint stock companies that have restricted the transfer of registered shares must harmonize the relevant provisions in their AoA’s with TCC provisions by 1 July 2014; otherwise, the relevant restrictions will become invalid as of 1 July 2014. In other words, after 1 July 2014, even if any restrictions are imposed in the AoA, it will be possible to freely transfer shares. In such a case, since the restrictions imposed by the AoA will become ineffective, a company will no longer be able to refuse to approve a share transfer based on an important reason. Whether a company may refuse to approve a share transfer by way of proposing to purchase the shares over their actual price is also a matter of dispute.
The date of 1 July 2014 is also important for joint stock companies and limited liability companies to harmonize their AoA’s with the provisions of the TCC. In the event that the required harmonization is not made until the mentioned date, the relevant provisions of the TCC shall be applicable instead of the provisions of the AoA.
Therefore, in order to avoid any possible risks, it is important to fulfil the harmonisation requirement in full by the date of 1 July 2014.