A RECENT PROPOSAL FOR PASSING NEW LAW AMENDING THE RULES IN RELATION TO BEARER SHARES OF JOINT STOCK COMPANIES AND KEEPING COMPULSORY COMPANY BOOKS IN ELECTRONIC ENVIRONMENT

An amendment proposal on Law on Preventing the Financing of the Proliferation of Weapons of Mass Destruction (“Proposed Amendment”) were submitted to the Grand National Assembly of Turkey (T.B.M.M.) on 16 December 2020 and was adopted by the Judicial Commission (Adalet Komisyonu). It is envisaged that the proposal will be quickly accepted and put into effect in the General Assembly of Grand National Assembly of Turkey (T.B.M.M. Genel Kurulu).

Proposed Amendment aims to bring an obligation for joint stock companies for notifying the Central Registry Agency for issuing and transferring processes of the bearer shares. Likewise, information regarding bearer shares and their shareholders will be notified to the Central Registry Agency before the shares are distributed to the owners though the general rule for issuing bearer shares will remain unchanged. This new proposal of law brings a phenomenal amendment in the corporate governance as currently the delivery of bearer shares shall suffice for its transfer to a third party.

Bearer shares is one type of shares in joint stock companies governed under the Turkish Commercial Code numbered 6102 dated 1 July 2012 (the “TCC”). The current requirement under the TCC provisions for bearer shares is to only delivery of the relevant share certificate without an endorsement is sufficient to complete the duly transfer. However, if this new proposal is enacted by the General Assembly of Grand National Assembly of Turkey (T.B.M.M. Genel Kurulu) and Presidency and takes full effect, the process of transfer of bearer shares will change accordingly.

Hence, with the new proposal, it is a requirement for the company before the transfer of bearer shares to notify the Central Registry Agency regarding such process. Therefore, for the transfer of bearer shares, not only the delivery will suffice, the transfer will also require to be notified to the Central Registry Agency. In the absence of such notification, the persons who acquire the bearer shares will not be able to exercise full legal rights in the shares until the required notification is duly fulfilled. The date of notification made to the Central Registry Agency will be taken as a basis for claiming the rights of bearer shares against the company and any third parties.

The proposal also stipulates an administrative fine for failure to comply with the aforementioned obligations. Accordingly, companies which are not in compliance with the notification requirement will be charged an administrative fine of TRY 20,000 (approximately EUR 2,000) and the third parties who acquire the transfer of the bearer shares but do not notify such transaction to the Central Registry Agency will be fined TRY 5,000 (approximately EUR 500).

The proposed amendment, provided it is enacted by the General Assembly of Tukish Grand National Assembly and subsequently is approved by the Presidency, is expected to come into force on 1 April 2021.

Moreover, the present bearer shares holders will be required to comply with the provisions of this new law until 31 December 2021, and the board of directors of the company are required to notify the Central Registry Agency of the information regarding bearer shares and of its ownership. In the event this notification is not made, an administrative fine of TRY 20,000 (approximately EUR 2,000) will be imposed on the shareholders and board members.

In concluding, the present practice of delivery of the relevant share certificate without an endorsement would be sufficient to complete the transfer shall be changed to a new system of registration such transfer at the Central Registry Agency provided that this proposal is duly enacted and approved to take full effect as a new law.

Apart from the bearer share certificates, the Proposed Amendment aims to authorize the Ministry of Commerce to make it mandatory to keep the share ledger, the resolution books of both board of directors and general assembly in electronic environment. Thereby, the Ministry will be authorized to determine the type and activity areas of company that need to keep the compulsory company books in  electronic environment.

Our Law Firm remains at your disposal for any further clarifications you may need.