Recent Development
The provisions on bearer share certificates of the Turkish Commercial Code No. 6102 (“Commercial Code“) were amended with the Code on the Prevention of the Financing of the Propagation of Weapons of Mass Destruction No. 7262, published in the Official Gazette No. 31351 and dated December 31, 2020.
The amendments to the Commercial Code stipulate that the bearer share certificates will be notified to the Central Registry Agency and revised the transactions regarding the transfer of the bearer share certificates. In addition, the Ministry of Trade was authorized to require share ledgers to be kept electronically and to determine the procedures and principles on providing the shareholder chart by the Central Registry Agency to companies regarding the owner of bearer share certificates in private joint stock companies, prohibiting the transfer of bearer share certificates, limited to the day of the general assembly meeting, when required and notification and registration to the Central Registry Agency. In addition, failure to comply with the relevant obligations on notification and registration is subject to administrative fines.
The amendment regarding the authority of the Ministry of Trade requiring companies to keep share ledgers electronically entered into force on the date of the publication in the Official Gazette. The effective date of the other changes is April 1, 2021.
What’s New?
- The Ministry of Trade may oblige that the share ledger, board of directors’ resolution book and the book of general assembly meeting and discussion be kept electronically.
In accordance with the addition to the fourth paragraph of Article 64 of the Commercial Code, which regulates the obligation of bookkeeping, the Ministry of Trade may oblige, without prejudice to the provisions of the Capital Market Law, the following to be kept electronically: share ledger, board of directors’ resolution book and book of general assembly meeting and discussion.
- The ability for owners of bearer share certificates in private joint stock companies to attend general assembly meetings only by proving that they possess the certificates is abolished.
With the abolition of the third paragraph of Article 415 of the Commercial Code, effective from April 1, 2021, owners of bearer share certificates cannot attend general assembly meeting (i) by presenting the entrance card they obtain after proving they possess share certificate, at the latest one day before the day of the general assembly meeting; or (ii) by proving, at a date after the issuance of the entry card, that they took over the said share certificate.
- The board of directors will issue a list of bearer share certificate owners who can attend the general assembly meeting pursuant to the shareholders’ chart provided by the Central Registry Agency.
Pursuant to the amendments, the list of those that may attend the general assembly meeting, which has been issued pursuant to the shareholders chart provided by the Central Registry Agency only for the owners of the dematerialized shares in accordance with the Capital Market Law, will now also be issued by the board of directors for bearer share certificate owners of private joint stock companies. Thus, regarding the issuance of the list of attendees to the general assembly meeting, only the shareholders’ chart provided by the Central Registry Agency will be taken as basis in terms of bearer share certificate owners as of April 1, 2021.
The procedures and principles for issuing the shareholders’ chart of owners of bearer share certificates provided by the Central Registry Agency will be regulated by a communiqué from the Ministry of Trade.
- The transfer of bearer share certificates may be prohibited, when necessary, limited to the day of the general assembly meeting.
When necessary, the transfer of bearer share certificates may be prohibited, limited to the day of the general assembly meeting. The effective date of the relevant regulation is April 1, 2021. The principles regarding the relevant transfer ban will be regulated by a communiqué from the Ministry of Trade.
- For exercising rights arising from share ownership against the company, the principle of notifying the Central Registry Agency of bearer share certificate owners has been introduced.
Persons who prove that they possess bearer share certificates and who have been notified to the Central Registry Agency of their ownership, will be authorized to exercise their rights arising from share ownership against the company. The effective date of the amendment is April 1, 2021.
- Obligation to notify the Central Registry Agency has been imposed on issuance of bearer share certificates.
In accordance with Article 486 of the Commercial Code, the board of directors issues and delivers the share certificates to the shareholders if they are bearer shares within three months from the date of payment in full of the share contributions. The board of directors’ resolution regarding the issuance of bearer share certificates must be registered and announced. With the amendment, effective from April 1, 2021, it is obligatory for a board of directors to notify the Central Registry Agency about bearer share certificates owners and their shares before the share certificates are distributed to the relevant shareholders.
- In the transfer of bearer share certificates, the transferee is obliged to notify the Central Registry Agency.
The amendment to Article 489 of the Commercial Code obligates the transferee of bearer share certificates to notify the Central Registry of the transfer, to effectuate the transfer against the company and third parties. If the relevant notification is not made, the bearer share certificates owners will be unable to exercise their rights subject to the share arising from the Commercial Code until the notification is made.
In share transfers, the date of notification made to the Central Registry Agency will be taken as a basis for exercising the rights of bearer share certificates against the company and third parties. The amendments allows the Central Registry Agency to share its records with the authorities authorized in accordance with the relevant laws.
The procedures and principles regarding the notification and registration of bearer share certificates to the Central Registry Agency and the associated fees will be determined by a communiqué from the Ministry of Trade.
The effective date of the amendments made within the scope of this article is April 1, 2021.
- Administrative fine is stipulated for those who do not notify the Central Registry Agency about the issuance and transfer of bearer share certificates.
Effective from April 1, 2021, (i) an administrative fine of TRY 20,000 will be imposed on board of directors’ members who, despite the issuance of bearer share certificates, do not inform the Central Registry Agency about the relevant shareholders and their shares before the share certificates are distributed to the shareholders; and (ii) in the transfer of bearer share certificates, an administrative fine of TRY 5,000 will be imposed on those who take over the possession and ownership of bearer share certificates and fail to notify the Central Registry Agency. Provisions on administrative fines are introduced with the thirteenth paragraph added to Article 562 of the Commercial Code.
- Owners of bearer share certificates must apply to the joint stock company with their share certificates that need to be notified to the Central Registry Agency until December 31, 2021.
Those possessing bearer share certificates are obligated to apply with the share certificates to the joint stock company to notify the Central Registry Agency about the certificates until December 31, 2021. Pursuant to provisional Article 14 added to the Commercial Code, after the bearer share certificate owners apply to the joint stock company, the company’s board of directors will inform the Central Registry Agency about the owners of bearer share certificates and their shares within five business days. If the shareholders do not apply to the joint stock company, they will be unable to exercise their rights on shares arising from the Commercial Code until the application is made.
Those who do not make an application and made a notification in accordance with the abovementioned procedure will be penalized with the administrative fines specified in the thirteenth paragraph added to Article 562 of the Commercial Code.
The effective date of relevant amendments is April 1, 2021.
Conclusion
Effective from April 1, 2021, many of the provisions of the Commercial Code on bearer share certificates were amended, and obligations on notification and registration were introduced, which are subject to administrative fines if not performed within due time. The Ministry of Trade was given the authority to regulate the procedures and principles regarding the implementation of the changes through a communiqué. Those who own bearer share certificates must apply to the joint stock company for the company to notify their information to the Central Registry Agency until December 31, 2021. Bearer share certificate owners and companies should closely monitor and adhere to the relevant regulations
