Subject: General Information About The New Turkish Commercial Code
A new page will be opened in the Turkish economy with the introduction of the New Turkish Commercial Code, which is based on the principles of corporate governance, transparency and honesty.
The new Turkish Commercial Code, which will come into force as of 1 July 2012, consists of six main chapters: Enterprise Law, Company Law, Securities Law, Transportation Law, Maritime Commercial Law and Insurance Law
1. Provisions Concerning the Company Law
1.1. Regulations Regarding Commercial Accounts and Statutory Ledgers
Within this scope, commercial accounts will be kept according to the Turkish Accounting Standards in compliance with the International Accounting Standards as of the date 01.01.2013. Moreover, tax payers will be obligated to keep all of their books in electronic format.
The financial statements have to be prepared in conformity with the Turkish Accounting Standards (“TAS”) published by the Turkish Accounting Standards Board (“TMSK”), which are inline with International Financial Reporting Standards (“IFRS”).
1.2. Corporate Governance
The essence of corporate governance in the new TCC is based on four key aspects: Transparency, equivalence, accountability and responsibility.
In accordance with the principle of transparency, all equity companies are obliged to establish a web site that shall include the following items in short:
· Financial statements and its attachments, interim statements required by law, balance sheets and other financial statements issued for special purposes, financial reports to be presented to shareholders and stakeholders.
· The annual report of the board of directors
· The reports prepared by the auditor, special auditor and transactional auditors.
Penalties and sanctions shall apply if the company fails to fulfill these obligations.
2. The Main Amendments Introduced by the New TCC for the Joint-Stock Companies
The gradual formation mechanism which takes place in the current TCC legislation has been abolished in the new TCC which will be effective from 1 July 2012.
In addition, the new TCC allows the establishment of the Joint Stock Companies (“A.Ş.”) or the Limited Liability Companies (“L.Ş.”) with a single shareholder or partner, respectively.
As per another amendment introduced by the New TCC, obligation regarding the appointment of auditors by the Ministry of Industry and Commerce has been abolished.
2.1.Structural Arrangements for Joint-Stock Companies
One of the significant amendments in New TCC is related with the restructuring tools (i.e. mergers, spin-offs and conversions).
The aim of the related provisions of the Law, which have been designed in accordance with the EU legal system, is to secure the shares of the company partners, shareholders and other stakeholders.
In New TCC, merger processes and merger agreements have been discussed in detail.
Based on the provisions of the New TCC, equity companies are authorized to execute mergers with the following types of entities;
· Equity companies
· Cooperative companies
· Registered Partnerships and Limited Partnerships, on condition that they are the surviving companies.
According to the New TCC, equity and cooperative companies are only authorized to be spun-off into equity and cooperative companies.
Spin-off transactions have been categorized as partial spin-offs and full-scale spin-offs.
Full-scale spin-off refers to the cases where all the assets of a company is classified and transferred to other companies.
Partial spin-off is defined as transferring of some portion of the assets owned by a company to other companies.
As in the case with merger and spin off processes, conversion process has also been described in detail. At the same time it can be proclaimed that the procedure of conversion process is similar to merger process.
2.2.Innovations Brought for Joint-Stock Companies
With the abolishment of the gradual formation, the Article 346 of the New TCC introduces a new model for the companies that are willing to go public soon after their establishment. Accordingly, a certain portion of the capital will be converted into cash shares and the company will be allowed to go public within two months after the establishment.
And also, The New TCC has abolished “Ultra Vires Application”.
2.3.Joint-Stock Company with a Single Shareholder
As mentioned above, the New TCC allows the establishment of the Joint Stock Companies (“A.Ş.”) or the Limited Liability Companies (“L.T.D”) with a single shareholder or partner.
According to the Law No. 6762, which is currently in effect, Joint-Stock Companies may be established with minimum five shareholders whereas limited liability companies may be established with minimum two partners.
The main four benefits of the regulation regarding the establishment of the Joint Stock Companies (“A.Ş.”) or the Limited Liability Companies (“L.T.D”) with a single shareholder are;
· Economic and legal realities will be harmonized,
· A new risk-free model for some entrepreneurs will be developed,
· Parent company shall not require another shareholder for establishing affiliate companies
· The associations or foundations shall not require another shareholder for establishing companies
In line with this regulation, shares of the formerly established companies will be allowed to be collected in one hand.
On the other hand; according to the Article 338/3 of the New TCC, companies are not authorized to acquire their own shares to be the only shareholder.
2.4.Registered Capital System
The New TCC gives an opportunity for non-public companies to adopt registered capital system. In this case, non-public joint stock companies will also benefit from the opportunity of flexible capital increase introduced by the registered capital system.
Accordingly, the initial capital of Joint-Stock Companies cannot be under 50.000 TRY whereas non-public joint stock companies’ initial capitals registered to capital system, cannot be under 100.000 TRY.
2.5.Innovations and Restrictions on Capital In-Kind
The New TCC introduces a new regulation on the tangibles that can be contributed as capital in-kind. (Article 342). In this context, intellectual property rights can be contributed as capital in-kind directly as well as virtual platforms.
The considerable point is; in order to contribute such assets as capital in-kind, those assets should have transferable qualifications, should be appropriate for valuation in cash, should not be restricted with any right in rem and also should not be subject to any compulsory execution.
Another provision of the law regarding the protection of capital states that, it is not permitted to include any unmatured receivables in capital. Especially, this regulation is beneficial for prohibiting the abuse of this issue.
2.6.Innovations About General Board, Board of Directors and Auditing
· The board of directors can be composed of a single person (Article 359/1)
· Legal entities will be allowed to become member of board of director (Article 359/2)
· The obligation of being a share holder in order to be a member of the Board of Directors is abolished.
· At least one-quarter of the members of the board of directors must be university graduates. On the other hand, it is not obligatory for the single shareholder manager to be a university graduate. (Article 359/3)
· The management authority can be transferred to someone who is not a member of the board of directors.
· The board meetings may be held in electronic environment. The decision of the boards can also be signed with electronic signatures.
· It is obligatory that at least one of the board member must attend the general shareholders’ meetings. (Article 407/2)
· In New TTC, the financial audit of Joint-Stock Companies will be carried out by external auditors.
2.7.Basic Amendments for Joint-Stock Companies about Share Capital Increase
· Apart from the capital increase by internal funding, capital increase is not permitted in case the compensation of the shares are not totally paid.
· The capital increase decision can be made by General Shareholders’ Board for the principal capital system whereas it is decided by Board of Directors for the registered capital system
· In order to prevent the delay of increase, it is obligated to register the capital increase within three months after the relevant decision is made.
· It is obligated to receive a documentation report from a Process Auditor stating that the company satisfied the relevant conditions and is suitable for capital increase.
· It is possible to increase the capital conditionally, unless the increase exceeds half of capital.
3. Limited Company
The New TCC also introduces amendments for limited liability companies. Some of the issues are;
· Minimum capital requirement for the establishment of a limited company is 10.000 TRY.
· For decisions to be made, the absolute majority of represented shares’ votes should be received positively. However for some special cases, decisions will be made in case the positive votes of a pre-defined number of shareholders, stated in the law or the master agreement, are received.
· In this scope, the most important decisions will be taken by the absolute majority of capital and in every condition the represented votes in the General Board should be in favor by a ratio of at least 2/3. (Article 622)
· Limited companies are subjected to IAS (International Accounting Standards) by means of Turkey Accounting Standards (TAS)
· Auditing process is carried out in the same manner as Joint-Stock Company’s process
· In case one partner leaves the partnership without a justifiable reason, other partners are enabled to leave the partnership as well.
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