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

Law on Preventing the Financing of the Proliferation of Weapons of Mass Destruction numbered 7262 which contains a part concerning amendment of the provisions on bearer shares of the Turkish Commercial Code numbered 6102 dated 1 July 2012 (the “TCC”), has come into force on 31 December 2020 (except the articles between 28 and 34 which shall come in force as of 1 April 2021) and published in the official gazette numbered 312351.

Just as a background note, bearer share is one type of share in joint stock companies governed under the TCC. It used to be the case that under the TCC provisions for bearer share was to only delivery of the relevant share certificate without an endorsement which would be sufficient to complete the duly transfer. However, with the introduction of this amendment, the process of transfer of bearer shares significantly changes.

The amended provisions of the TCC concerning joint stock companies for notifying the Central Registry Agency (in Turkish, “Merkezi Kayıt Kuruluşu”, hereinafter referred to as “CRA”) for issuing and transferring processes of the bearer shares and other liabilities will be effective on 1 April 2021.

This amendment brings an obligation for joint stock companies for notifying the CRA for issuing and transferring processes of the bearer shares. Likewise, information regarding bearer shares and their shareholders will be notified to the CRA before the shares are distributed to the owners although the general rule for issuing bearer shares will remain unchanged. This recent development brings a phenomenal amendment in the corporate governance as previously the delivery of bearer shares would suffice for its transfer of property to a third party.

Pursuant to Article 486 of the TCC, the board of directors issues and delivers the share certificates to the shareholders if they are bearer shares within three (3) months from the date of payment in full of the share contributions. The board of directors’ resolution regarding the issuance of bearer shares must be registered and announced. With this amendment, as of 1 April 2021, the board of directors are under an obligation to notify the CRA regarding bearer share owners and their shares before they distribute the share certificates to the shareholders.

Pursuant to Article 489 of the TCC, as of 1 April 2021, it requires the transferee of bearer share to notify the CRAof the transfer, to effect the transfer against the company and third parties. 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 CRA will be taken as a basis for claiming the rights of bearer shares against the company and any third parties. The amendment allows the CRA to share its records with the authorities authorised in accordance with the relevant laws.

The amendment 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 CRA will be fined TRY 5,000 (approximately EUR 500).

Moreover, the present bearer shares holders are 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 CRA 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.

The ability for owners of bearer shares in private joint stock companies to attend general assembely meeting only by proving that they possess the shares is abolished. With the abolishing of third paragraph of Article 415 of the TCC, effective from 1 April 2021, owners of bearer shares cannot attend general assembly meeting (i) by presenting the entrance card they obtain after proving they possess shares at the latest one day before the day of the general assembly meeting, or (ii) by proving, at a date after the issuance of the entry card they took over the mentioned shares.

In concluding, effective from 1 April 2020, the provisions of the TCC on bearer shares were amended and obligations on notification and registration were introduced which are subject to administrative fines if not complied with in due time. With regards to procedures and principles regarding the notification and registration of bearer shares to the CRA and the associated fees will be determined by a communique to be issued by the Ministry of Trade. Accordingly those bearer share holders are required to apply to joint stock company  for the company to notify the bearer shares to the Central Registration Agency until 31 December 2021.

In addition, effective from the date of the publishing (31.12.2020) of the Official Gazette, the Ministry of Trade may oblige that the share ledger, board of director’s resolution book, and the General Assembly resolution book be kept electronically. 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.

In the meanwhile, we will continue to update you for further developments on the above issues.

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

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