OBLIGATION OF NOTIFICATION REGISTRATION AND PUBLICATION UNDER ARTICLE 198 OF TURKISH COMMERCIAL CODE (SEPTEMBER 2015)

Article 198 of Turkish Commercial Code (TCC) numbered 6102, one of the provisions of TCC regulating the group of companies, foresees an obligation of notification, registration and publication regarding shareholding status for the companies and enterprises which included to group of companies. 

Provisions regarding the group of companies have been included to TTC numbered 6102 differently from previous TCC.  Group of companies mean a legal structure of companies which directly or indirectly connected to the holding company. The holding company is defined as “main company”; the other companies which directly or indirectly connected to the main company are defined as “subsidiary company” under TCC. The control mechanism of the main company are as follows as per TCC: (i) to be shareholder, (ii) to have right to select the members who constitutes the majority to take resolution as per articles of association, (iii) to constitute majority of voting right singly or together with the other shareholders with regard to an agreement. Besides, article 195 of TCC foresees general control mechanisms such as control right which granted by an agreement or by any other means. Finally article 195 of TCC foresees a legal presumption regarding control mechanism which is holding the majority of shares or holding the majority of voting right.    

Article 198 of TCC foresees notification obligation to be addressed the Company subject to share transfer and to other competent authorities (Securities and Exchange Commission, Banking Regulation And Supervision Agency, Competition Authority, Treasury and other similar public and private institutions as the case may be) in case of a share transfer which directly or indirectly exceed five, ten, twenty, twenty five, thirty three, fifty, sixty seven and hundred percent or which directly or indirectly drop below the aforementioned percentages.

The registration and publication obligation of the notified Company is regulated under article 107/5 of Trade Registry Regulation. The notified companies are obliged to have the related notifications registered and published before the trade registry offices where they are registered within ten days’ period as of the delivery of the notification. The obligation of notification set forth by TCC includes all the shares. In other words, the obligation of notification cannot be allocated to the shares exceeding the percentages stipulated under article 198 of TCC.  

TTC set forth similar obligation of notification to the members of board of directors and managers of the companies and enterprises. Member of board of directors and managers are obliged to notify the shareholding status of themselves, their spouses, their children in a different company if the aforementioned people holds at least twenty percentage of the total share of that company. These kinds of notifications also have to be registered and published within ten days’ period as of delivery of the notification.

In case the notified company fail to have registered and published such kind of share transfers before the related trade registry within the legal period, the holder of the transferred shares cannot use the rights arisen from being shareholder. Besides, the holder of the transferred shares either cannot use voting right. Any decision to be resolved by the attribution of such votes, which constitutes the required majority to take the resolution, shall be deemed null and void. However, the rights arisen from being shareholder again can be used up on fulfilment of registration obligation.  

The main purpose of the provisions regarding obligation of notification is to release acquisitions to the public and to provide transparency in the capital market. Besides, such kind of share transfers must be declared under a separate title within the scope of the annual operation and audit reports and also must be announced in web page of the companies. 

Fulfilment of the obligation of notification, registration and publication within the required legal period is crucial due to the fact that failure in fulfilment of the mentioned obligations within the legal period causes suspension of use of the shareholder rights. We hope this brief would be helpful to clarify one of the procedural requisites of an acquisition or merger process under Turkish Law.