Since the joint stock company is most common form to establish a Turkish Commercial entity, the concept of share transfers has been discussed several times as Turkish Commercial Code ("TCC" or "the Law") numbered 6102 was regulated. The Law regulated numerous rules and procedures governing share transactions in terms of joint stock companies in order to structure the borderlines of the rapid commercial life in the commercial areas of Turkey. It is of vital importance to evaluate and know the procedures before the need of share transfer of shareholders arise. In this context, TCC regulates the general principle as the freedom of share transfer and stipulates several exceptions in this manner. In this article, the concept of the share, the share transfer in joint stock companies, the limitation of share transfer in both perspectives of legal restriction and restriction of share transfer by articles of association will be discussed in terms of Turkish Commercial Code.
1. THE CONCEPT OF THE SHARE IN JOINT STOCK COMPANIES
Primarily, it should be stated that the share is defined in Article 329 of the TCC along with the joint stock companies, that is, shares of joint stock companies are small units of capital that express the shareholding position which are also the title of ownership. To put it differently, share are the core of the joint stock companies.
Pursuant to the Article 484 of the TCC, the share certificates can be either in a form of bearer or registered. However, the joint stock companies are not required to issue share certificates. Within this respect, the share certificates can be in a form of not only bearer or registered shares but also uncertificated securities in joint stock companies. Such uncertificated securities are called bare shares in the legal literature.
Besides, the share is acquired mainly in two ways. The first of these acquisition types is the original acquisition, and the second is the derivative acquisition. Originally, the acquisition arises with the registration of the capital increased in the establishment of a joint stock company or in the capital increase in the relevant trade registry, so the registration is the founder and ensures the formation of the share. The nominal value of each share is written in the company's articles of association and the number of shares acquired by the shareholders is determined in direct proportion to their participation in the capital.
2. MAIN PRINCIPLE: FREE CIRCULATION OF SHARES
The main principle can be stipulated as the free circulation of shares in joint stock companies. Pursuant to the afore-mentioned principle, the share, whether bare or certificated shares, can be transferred to other shareholders or third parties without seeking the approval of any company body, shareholders or third parties. Likewise, the Law categorize the transfer of share in terms of the types of share. Howsoever, it should be underlined that, as stated above, the bare shares is not expressly stated in the TCC, even though it is the most common form of the share. Therefore, in this article, the transfer of bare share are also included in the context besides the bearer and registered share transfers.
2.1. Transfer of Bare Shares
Since there is no regulation under the TCC and applicable legislation regarding the transfer of bare shares, the procedure in this regard has been determined by the Supreme Court decisions, doctrine and practice. According to the decision of Supreme Court 11th Civil Chamber with the 2007/8112 Doc. and 2007/10405 Dec. dated 09.07.2007, "the transfer of the bare shares of a joint stock company is not dependent on the form and is possible by means of assignment of receivables. In addition, the share transfer takes effect in terms of shareholding structure only by registering it in the share ledger.". Thus, the general principles of assignment of receivables, which are regulated in Article 182 and following articles of Turkish Code of Obligations numbered 6098 ("TCO"), will be applicable in terms of the bare transfer shares. Pursuant to Article 183 of the TCO, the transfer agreement must be in writing; therefore, in practice, this transaction is realized by signing a share transfer agreement to be concluded by the authorized representatives of the seller and buyer parties by concluding a share transfer agreement.
2.2. Transfer of Bearer Share
In accordance with Article 489 of the TCC, the transfer of bearer shares takes place with the transfer of possession. In other words, the transfer of shares will take place with the delivery of the bearer share to a third party. However, since the TCC uses the phrase "zilyetliğin geçirilmesi" which means transfer of possession, as a broader term instead of delivery, it is possible to transfer bearer share certificates by other means other than delivery, which lead to the transfer of possession.
2.3. Transfer of Registered Share
The registered shares can be transferred without any restrictions, unless otherwise stipulated under the law or articles of association according to Article 490 of the TCC. To put it differently, for the transfer of registered share certificates, in case that there is no contrary regulation in the law and the articles of association, the endorsement of the share certificates by the owner of the power of disposition of the share certificate and its delivery to the transferee is required. Accordingly, it should be stated that the share transfer must be registered to the share ledger in order to be effective by legal means.
3. THE LIMITATION OF SHARE TRANSFER
The rules regarding the limitation of share transfer in joint stock companies are regulated between Article 491 and 498 of the TCC. The basic idea in the emergence of these restrictions is to protect the own structure of the joint stock company in terms of registered shares that are not listed on the stock exchange and to prevent alienation and transfer of shares to third parties who are foreign to the company. These limitations appear in two different ways and regulated under Article 491 and 492 of the TCC namely legal limitation and limitation by articles of association.
Except for these two possibilities listed below, the company may only reject the request for approval by citing an important reason stipulated in the articles of association or by suggesting to the transferor to buy the shares at the actual value at the time of application, on behalf of its own or other shareholders or third parties. This concept is defined as the "escape clause" in the doctrine and plays an important role in preventing alienation in companies.
3.1. Legal Restriction
Pursuant to Article 491of the TCC, in case the price of the registered shares has not been fully paid, the said shares can only be transferred with the approval of the target company. However, cases where the transfer is realized through inheritance, division of inheritance, property regime provisions between spouses or forced execution are stipulated as exceptions from afore-mentioned rule.
On the other hand, the second paragraph of the Article allows the target company to reject the share transfer. In order for the target company to refuse the transfer of the said shares, the ability of the transferee to pay the unpaid shares must be doubtful or the target company must have requested a guarantee and the guarantee has not been given to the target company. If either of these two issues has occurred, the target company will have the right to reject the planned share transfer.
3.2. Restriction By Articles Of Association
The transfer of registered shares may also be limited by the provisions to be included in the articles of association. Article 492 of the TCC states that the articles of association may stipulate that the transfer of registered shares can only be rejected with the approval of the company. In addition, the following articles made a distinction between the registered shares that are and are not quoted on the stock exchange.
4. SUMMARY AND CONCLUSION
The core of the joint stock companies, established under the Turkish Law, is the share certificates, that is, the title of ownership. Share transfer, on the other hand, can be explained as the transfer of the entire rights and debts tied to the share. The TCC stipulates the general principle in terms of share transfers as the free circulation of shares and categorizes the exceptions within the following articles. The categorization mainly leads by the types of the shares i.e. bearer and registered. Even though there is no regulation under the TCC and applicable legislation regarding the transfer of bare shares, the procedure, which was determined by the Supreme Court decision, is the general principles of assignment of receivables, which are regulated in TCO. On the other hand, the Law defined the borderlines and conditions of the share transfers by establishing several restrictions. The underlying reasons of afore-mentioned restrictions seems to be to protect the own structure of the joint stock company in terms of registered shares. Additionally, the TCC regulates a rejection mechanism for the company regarding the transfers of shares. From what has been discussed above, the conclusion can be drawn that the share transfers is applicable for all types of shares, even though the form of share is uncertificated securities, provided that the rules and conditions are fulfilled which are also regulated within the Law.
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