Turkey: New Regulations Introduced On Bearer Share Certificates

Several articles of the Turkish Commercial Code No. 6102 ("TCC") were amended with the Law No. 7262 published in the Official Gazette dated 31 December 2020. The amendments (1) authorize the Ministry of Trade to oblige companies to hold their corporate books (i.e. share ledger, resolution books of the board and the shareholders' meetings) electronically and (2) bring new regulations for bearer share certificates. The former entered into force on the date of publication in the Official Gazette, whereas the latter (concerning bearer share certificates) will take effect on 1 April 2021.

Mandatory Notification of Bearer Share Certificates to the Central Securities Depository

The amended article 489 of the TCC provides that any transfer of bearer shares will only become effective against the company and third parties once the transferee notifies the transfer of possession to the Central Securities Depository. If the said notification is not made, the transferee will not be able to exercise its rights arising from holding the shares under the TCC. The date of the notification to the Central Securities Depository will also be taken as a basis for exercising the rights on the share certificates.

The procedures and principles regarding the notification and registration of bearer share certificates to the Central Securities Depository and the relevant fees will be determined by a communiqué from the Ministry of Trade. Failure to notify the Central Securities Depository after taking over the possession and ownership of a bearer share certificate will be punishable with an administrative fine of TRY 5.000.

Following the amendment to Article 486 of the Turkish Commercial Code, boards of directors areobliged to notify the Central Securities Depository about the bearer share certificates and their owners before such certificates are distributed to the relevant shareholders. An administrative fine of TRY 20,000 can be imposed on directors who fail to meet this obligation.

Mandatory Notification by Owners of Bearer Share Certificates

The provisional article 14 inserted to the TCC requires owners of bearer share certificates to apply to the joint-stock companies in which they hold such shares to enable the notification of their bearer share certificates to the Central Securities Depository, until 31 December 2021. The board of directors of these companies will then notify the details of the bearer share certificates to the Central Securities Depository within five business days.

Failure to apply to the company will result in the shareholder not being able to exercise its rights arising from holding the shares under the TCC until such application is made. The abovementioned administrative fines of TRY 5,000 and TRY 20,000 will also apply to those who fail to meet their application and notification obligations under the provisional article 14.

Bearer Share Certificate Owners' Attendance at General Assembly Meetings

The third paragraph of article 415 of TCC, which enabled the owners of bearer share certificates to attend the general assembly meetings with an entrance card obtained by proving the possession of the share certificate at least one day before the general assembly meeting has been repealed. Instead, a new article has been inserted, providing that a shareholders' schedule will be obtained from the Central Securities Depository to confirm the shareholders holding bearer share certificates. Accordingly, the lists of attendees for general assembly meetings shall be prepared based on the shareholders' schedule obtained from the Central Securities Depository. The amendments also provide that if it is deemed necessary, the transfer of bearer share certificates can be prohibited limited to the general assembly meeting date.

The procedures and principles of obtaining the shareholders' schedule for bearer share certificates from the Central Securities Depository and the prohibition of transfer will be regulated by a communiqué from the Capital Markets Board of Turkey regarding the shares that are monitored as per Art. 13 of the Capital Markets Law no. 6362 and by a communiqué from the Ministry of Trade regarding bearer share certificates.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.