Procedure for the Transfer of Shares in Joint Stock Companies

PROCEDURE FOR THE TRANSFER OF SHARES IN JOINT STOCK COMPANIES

As a natural consequence of their character as capital companies, the transfer of shares in joint stock companies is in principle free. That freedom is not absolute, however. Turkish Commercial Code No. 6102 differentiates the transfer of shares in joint stock companies according to the type of share (bearer or registered), whether the share is traded on the stock exchange, and the provisions of the company's articles of association.

1. BEARER SHARES

Under Article 489 of the Turkish Commercial Code, the transfer of bearer share certificates takes effect vis-à-vis the company and third parties only upon the transfer of possession.

As the provision makes clear, no written agreement between the parties and no endorsement of the share (an annotation made on the certificate) is required for the transfer of the share; possession (ownership) is transferred by physical delivery.

For the transferred shares to be asserted against the company, the new shareholder applies to the company and the board of directors notifies the transfer to the Central Registry Agency within five business days. Otherwise, although the transfer remains valid inter partes, the rights and claims arising from it (voting rights, dividend entitlements and so forth) cannot be asserted against the company. Where the board of directors fails to give notice, the shareholder may bring an action for damages in respect of the loss suffered through the impairment of their rights and/or a liability action against the board of directors for failure to perform their duties.

2. REGISTERED SHARES

Article 490 – (1) Unless otherwise provided by law or the articles of association, registered shares may be transferred without any restriction. (2) Transfer by legal transaction may be effected by transferring possession of an endorsed registered share certificate to the transferee.

Registered shares (those recorded in the name of a particular person) are divided into registered shares evidenced by a certificate and registered shares not so evidenced. Where a certificate has been issued, endorsement and transfer of possession are required; where no certificate has been issued, a written transfer agreement must be made. In both cases, entry in the share ledger is a condition for the transfer to take effect vis-à-vis the company.

RESTRICTIONS ON THE TRANSFER OF REGISTERED SHARES (ARTS. 492–494)

The articles of association may provide that registered shares, and the creation of usufruct rights over them, may be transferred only with the company's approval. Such a transfer restriction ceases to apply once the company enters liquidation. Registered shares listed on the stock exchange may be acquired on or off the exchange. Where they are acquired on the exchange, the rights arising from the share pass to the transferee upon transfer. Where they are acquired off the exchange, for the rights to pass to the transferee the transferee must apply to the company and have their status as shareholder recognised by it.

For registered shares listed on the stock exchange:

The company may refuse recognition only where the articles of association provide, in relation to the registered shares that may be acquired, an upper acquisition limit expressed as a percentage of the capital at which the acquirer will be recognised as a shareholder, and that limit has been exceeded. Where shares are acquired by inheritance, division of an estate, the provisions on the matrimonial property regime between spouses or by compulsory enforcement, recognition of the transferee as a shareholder may not be refused. If requested by the company, the transferee must expressly declare that they have acquired the shares in their own name and on their own account; otherwise the company may refuse to record the transfer in the share ledger. Until recognised by the company, the transferee may not exercise the right to attend the general assembly, the voting right or other rights dependent on the voting right. In the exercise of all other shareholder rights, particularly pre-emption rights, the acquirer is subject to no restriction.

For registered shares not listed on the stock exchange:

The company may refuse the request for approval by invoking an important ground provided for in the articles of association (the company may not make the conditions of transferability more onerous), such as protecting the company's economic independence or its business object, or by offering to acquire the transferor's shares at their real value as at the date of application, for its own account or that of other shareholders or third parties. Where the shares have been acquired by inheritance, division of an estate, the provisions on the matrimonial property regime between spouses or by compulsory enforcement (purchase of attached shares at auction), the company may refuse approval only if it offers to acquire the shares from the acquirer at their real value. The transferee must expressly declare that they have acquired the shares in their own name and on their own account; otherwise the company may refuse to record the transfer in the share ledger.