Turkish Commercial Law Reforms On Joint Stock Companies

The newly enacted Turkish Commercial Code (TTC) came into force on the 1st of July 2012.

Considering the competition between the modern legal systems and the necessity to make Turkish law compatible with the body of EU law, the reform of the commercial law was inevitable.

Moreover, existing rules were inadequate to meet the needs of the practice and the Turkish legislator deeply reformed, among other things, Turkey’s joint stock company law. A modern vision of commercial law was adopted, therefore the focus has been put on transparency, auditability and reliability, democracy among shareholders and use of information technologies. The TCC took Turkey to a higher level creating a great opportunity for Turkish companies, and for international companies who want to enter the Turkish market, to improve their way of managing and leading their business.

Two years after haven been set into force, companies still have to comply with the TCC. In that matter, it is very important to understand all the possibilities that are offered to companies. The TCC  indeed proffers a lot of new commercial opportunities to those who are familiar with it, especially regarding the structural changes of companies or the financial managing aspects. Companies who are already settled, as well as those who want to settle in Turkey should be guided through the scope of legal possibilities provided by the new law.

Furthermore, Turkey has adopted liberal principles with respect to foreign capital under its direct foreign capital system with the purpose to encourage foreign capital. Following that logic, the reform of the joint stock company law is, undoubtedly, a stepping stone toward a closer economical cooperation between Turkey and other countries, especially EU-countries.

The new system implements both institutional aspects and structural changes of joint stock companies.


As regards institutional aspects it is important to take in consideration the creation of joint stock companies, the role of the board of direction which became professional and the function of the general assembly focused on the shareholders.

Creation of joint stock companies ;

The gradual incorporation of joint stock companies has been abolished. The founders of a company were supposed to collect the whole capital, this method has not gained currency in practice and has been replaced with public incorporation. Pursuant to article 332 TCC the fully subscribed capital in the article of association cannot be less then TRY 50.000. In case of non public joint stock companies which have adopted a registered capital system indicating the authority limit granted to the board of directors with respect to any capital increase, the initial capital shall be at least TRY 100.000 though. This system makes it easier to increase capital as it can be performed by board of directors and the onerous procedure of holding a general assembly meeting is not necessary.

In accordance with the twelfth Company Law Directive from EU-Law, one man companies have been regulated. Thus, it is now possible to have a sole shareholder. This is one of the great opportunities created to build an attractive Turkish market, as it is now possible for a company to create a related structure on its own without having to solicit other shareholders. This practice is very common in the EU-systems, so that foreign companies can feel more comfortable investing in Turkey. Also, it is now possible for a shareholder to buy other shareholders shares.

Capital of a company can now be in cash or in kind, which makes it possible to contribute with intellectual property rights like domain rights, registered names or brands. The registration of the capital in kind on behalf of the company is made directly to the title deed registry directorates.

Board of directors (corporate governance and liability) ;

The presence of just one person was introduced in the new Code of commerce, insuring a possible centralized management. This solely person or, a member of the board of director can be a legal entity.

Another step towards a modern legal system has been taken, as the necessity for members of the board of direction to be shareholders has been abolished. In this context obligations of prudence and fidelity of directors representing shareholders in the board has been enhance. Corporate governance is served and an effective board of directors is secured.

Regarding representation in the board of directors, normally the majority of shareholders determines the composition. The articles of association may furnish several groups of shares to be represented though. In that matter it is important to know that the commercial Code does not allow the direct appointment of the members but the members shall be nominated by a group of shares or by minority shareholders.

Modern needs of business and information technology services were also taken into consideration. The Code of commerce enables meetings of board of directors to be taken online.

Liability of members of the board of director arises when they fail to fulfill their obligations originating from the law or articles of association. This liability is a fault liability where the burden of proof is inverted, she is based on the commitment of the management function. Depending on the circumstances the director will be liable to the company, to the shareholders or the creditors.

General Assembly focused on shareholder ;

By-laws, registered in the commercial registry, drafted by the board of directors shall organize the mechanism and the conduction of general assembly. Besides those general rules applying to the assembly, shareholders rights have been put as the central point of the new law. The right of information and the right to attend the general assembly have been consolidated in a very efficient way. Many information have to be given to shareholders by the board of directors to involve them in the decision mechanisms of the company.

Minority shareholders are also more protected as matter now stands. They earn the right to call a general assembly meeting, to claim for the dissolution on fair reasons, to ask the board of directors to print the shares and more importantly to leave the corporation in case of merger, to benefit of options in the event of capital augmentation, and to revoke a merger, scission or transformation.

The new law recognizes privileged shares but restricted them so that they can’t no longer block the system. A single share can have a maximum of 15 voting rights (Article 479 (2)) and cannot be used in certain circumstances like amendments to the articles of association, election of transaction auditors, filling actions for release and liability.


The TCC enforces a comprehensive legal regime for restructuring of the corporations. The new legal regime reflects many challenges for the commercial law practice, especially in matters of acquiring own shares and merger and acquisition.

Possibility to acquire his own shares

The company can acquire its own shares or accept thereof as pledge up to a maximum of 10 %  of company capital, provided that the authorization from general assembly is obtained by the board of directors and such authorization is exercised within a maximum of 5 years. This enable public traded companies to play the role of a market-maker and takeovers can be avoided.

Only fully paid shares can be acquired in this fashion, but a company can acquire her own shares during a capital decrease.

In cases where the maximum of 10% of company capital is exceeded the transfer agreement is null and void. In fact the company will have to dispose of the shares through the voided transaction within a year.

Merger and Acquisition

The new law only regulates structural changes through in connection with the principle of nationality that is to say that cross border mergers and divisions aren’t covered by the new law. 

Concerning mergers the new system encompasses the concept of “merger project”, which arrangement is obligatory. In that way beneficiaries have the possibility to observe the merger process in efficient manner. Two types of mergers are regulated in the TCC, the takeover of a company from another company and mergers of companies by incorporating a new company.

Regardless of the type of merger or acquisition the law protects partnership shares and rights and provides continuity. Even in situation of merger a shareholder can request inspection and has a legal right to claim for rescission and respective responsibility.

Structural changes have to be audited by a transaction auditor so that transparency is provided.


Transparency is another significant fact who has been introduced by the new law.

Joint stock companies shall arrange a web site and inform stakeholders through this web site. On this web site a joint stock company shall announce its audited statements of accounts.  Incorporation is audited by the special transaction auditor appointed for this purpose. Initially, the New law was considering separately the auditor who would audit the financial statement and the one who would draft the annual report of the company.  This distinction has been dropped. The TCC considers only one auditor in its newest version.   

Third parties are also recipients of the transparency principle in the new law.

For a delegation of management authority directive of organization changing the statute is necessary. This rule provides protection for third parties. Third parties are taken into account by the reform, as the ultra vires principle has been dropped, so that any transaction of the company taken outside of the scope of the business activity of the company are now considered as valid.

Furthermore, the new law regulates in details who and how can take binding actions for the company.   Under Article 370 of the TCC, unless (i) otherwise stipulated in the articles of association, or (ii) the board of directors consists of only one director, a joint stock corporation must be represented by the joint signatures of any two board members. In this regard, if there is a specific provision in the articles of association of a company, a board of director may assign his representation authorities to any other board member or to third parties.

Under Article 371 of the TCC, the authorities of representatives shall not be limited (e.g. monetary, transaction limits), other than with regard to limitations related to the transactions of headquarter or branch offices. In light of the foregoing, the authorized representatives must have the broadest power to represent and bind the company. Once an authorized representative is registered with the trade registry, the TCC protects third parties acting in good faith who sign any contract with the registered authorized representative of a company.

This new legislation stands in sharp contrast with the former system as signature circulars which provided different degrees of authorized signatures for monetary and transactions are now void. Only general authorizations can be given to the representatives of the company.

In conclusion, the Turkish commercial Code is an important step towards redefining the rules of commercial life in Turkey. It provides practical rules and focuses on the important issues such as establishment, corporate governance, transparency and accounting. In order to achieve the goals of the new law companies adapt their organizations to these novelties.


Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. 

Other Makaleler