On 31 December 2020, Turkey published the Law on the Prevention of the Financing of the Proliferation of Weapons of Mass Destruction No. 7262 in Official Gazette No. 31351 (the “Law”), which amends the Turkish Commercial Code No. 6102 (TCC) in relation to bearer share certificates of closed joint stock companies and the rules governing their issuance, distribution and transfer, share ledgers, general assembly meeting minute books and board resolution ledgers, and administrative fines.
Conservation of commercial books
The first amendment to the TCC in the Law concerns the conservation of share ledgers, general assembly meeting minute books and executive board decision books. Previously, companies could voluntarily keep their share ledgers and other books related to the company's electronic accounting. With the provision inserted by the Law in Article 64 of the TCC, the Ministry of Commerce can oblige companies to keep share ledgers, general assembly meeting minute books and executive board decision books electronically, provided that the provisions of the Capital Market Law are complied with.
Participation in general assembly meetings
The second change relates to the use of the rights of holders of bearer share certificates to attend general assembly meetings. Previously, holders of bearer share certificates could attend general assembly meetings by: presenting an admission ticket received at least one day before the meeting; or proving that they received the bearer share certificate after the admission tickets were issued. However, the Law has repealed the relevant provision of the TCC as effective from 1 April 2021. Accordingly, holders of bearer share certificates may no longer attend general assembly meetings by presenting the admission card they received at least one day before the meeting or by proving that they received the bearer share certificate after the admission tickets were issued. Pursuant to the amendments, the executive board will prepare a list of bearer share certificate holders who may attend the general assembly meeting in accordance with the table obtained from the Central Registration Agency. In addition, the Law introduced the possibility to prohibit the transfer of bearer share certificates during the general assembly meeting.
Reporting obligations of companies and shareholders
In addition to these changes in relation to general meetings, the Law introduces several obligations and liabilities for companies in relation to bearer share certificates. Firstly, from 1 April 2021, the holder of the bearer share certificate may enforce his rights against the company or a third party. The holder of the certificate must be notified to registered with the Central Registry Agency. Consequently, if the holder of a bearer share certificate is not reported to the Central Registry Agency, the holder will not be able to enforce any rights arising from the holding of the certificate against the company or any other party.
In addition, from 1 April 2021, executive boards are required to notify the Central Registry Agency of the issuance of bearer share certificates before distribution of the share certificates to holders. Prior to the amendment, the executive boards decided on the issue of bearer share certificates and these decisions were then registered and announced. The amendment added an additional phase of notification to the Central Registry Agency.
The amendment of Article 489 TCC introduced a reporting obligation for the transfer of bearer share certificates to the Central Registry Agency. Specifically, the acquirer of the bearer share certificate must notify the Central Registry Agency. Otherwise, the holder is not entitled to any rights until notification. The use of the rights begins on the day of the notification.
The Law introduces administrative penalties for the violation of the following obligations and liabilities:
- executive board members who fail to inform the Central Registry Agency of the issuance of bearer share certificates and their holders prior to distribution shall be fined TRY 20,000; and
- transferees who receive bearer share certificates but fail to notify the Central Registry Agency will be fined TRY 5,000.
Adapting to the amendments
The newly added provisional Article 14 of the TCC, which governs the transitional period, states that until 31 December 2021 the holders of bearer share certificates must apply to the relevant companies to notify the Central Registry Agency. Upon the holder's request, the board of directors of the relevant company must notify the Central Registry Agency of the holder of bearer share certificates and the related shares within five business days. Parties who fail to comply will be fined.
Details on the practice of the above changes and associated fees will be announced in a future communiqué from the Ministry of Trade.
For more information on the amendments to the TCC regarding bearer share certificates of closed joint stock companies, general assembly meetings and the retention of various trading books, please contact your regular CMS partner or local CMS experts: Hülya Kemahlı or Alaz Eker Ündar.