ISSUANCE AND TRANSFER OF SHARE CERTIFICATES (JOINT STOCK COMPANIES)
Share certificates are negotiable instruments issued by joint stock companies and used for representing participation in the capital of the company. As a result of being a demonstration of the shareholders shares in the joint stock company, it provides many rights such as right to participate and to vote in management, right to receive dividends, right of pre-emption, right to have a share in liquidation, right to ask for information.
It is stated that the share certificates shall be issued in written to the registered or bearer pursuant to Article 484 of the Turkish Commercial Code. In the continuation of the article, it is mentioned that bearer share certificates are subject to different regulations than registered share certificates. It has been foreseen that bearer share certificates cannot be issued for the shares which are not fully paid, and that the shares issued against the provision shall be null and void. Considering the occasions such as the fact that the owner of the bearer share certificate is not known and the transfer of the share is possible only with the transfer of possession.
There is no obligation to print registered share certificates in joint stock companies. However, the exception to this rule is provided in article 486(3) of the Turkish Commercial Code. Accordingly, if the minority requests the registered share certificates to be printed, then all the registered share certificates shall be distributed to its beneficiaries. The significant point is that the share certificates will be printed not only for the minority but also for all registered shareholders upon the request of the minority.
The bearer share certificates would be printed if certain conditions are met. According to Article 486 of the Turkish Commercial Code, the board of directors shall have the share certificates to be printed and distribute them to the shareholders within three months upon the full payment of the related equity.
Additionally, the decision of the board of directors to have the bearer share certificates to be printed, shall be registered and announced along with a post on the company's website. It should be emphasized that before the share certificates are distributed to the owners, the information regarding the bearer shareholders and the shares they hold must be reported to the Central Registry Agency under Turkish law. Lack of such shall be subjected to an administrative fine of twenty thousand Turkish Liras.
On the contrary to the Turkish Commercial Code it should be noted that not only the printing of the bear share certificates but also the transfer is subjected to notification to the Agency by the new Communiqué. The transfer of bearer share certificates shall be accepted by the company and shall be valid for the third parties with the notification to the Central Registry Agency. Therefore, the transfer of ownership via on its own, but it is also necessary to make a notification. In the absence of notification to the Central Registry Agency, holders of the bearer share certificates would not exercise their share-related rights until the necessary notification. Finally, extra administrative fines shall be imposed to those who did not notify.
The above mentioned procedures regarding the notification and registration of the bearer share certificates to the Central Registry Agency has been provided by the Ministry of Commerce with the “Communiqué on Notification and Registration of Bearer Share Certificates to the Central Registry Agency” dated 06.04.2022.
In this Communiqué, the procedure of notifications to be followed has been provided in detail. Although the Communiqué states that the record will be kept confidential, we cannot state that the nature of bearer shares has been preserved.
In addition to the notification obligation during the printing and transfer process of share certificates, the related Communiqué also stipulates the notification obligation in case of cancellation of the shares. According to the Communiqué, if the share certificate is canceled due to decision of capital decrease or share certificate replacement, the registration of such should be withdrawn from the Central Registry Agency. In case where it is determined that the company has been unregistered from the trade registry, upon notification or ex officio, the registrations regarding the bearer share certificates should be also canceled by the Central Registry Agency.
We believe that these new provisions, which severely restrict circulation in terms of bearer share certificates are contrary to the Turkish Commercial Code. We are of the opinion that it is against the Turkish Commercial Code to keep a record other than the share ledger of the related company for bearer shares. However, refreshing of the share ledger is a must only before the general assembly meetings of the related company. Any other changes in the ownership that will occur in the interim period between the two official general assembly meetings do not require any kind of registration under the Turkish Commercial Code. A contrary application would lead to the annulment of the principles and differentiation between registered share certificates and bearer share certificates under Turkish Commercial Code. However, considering that this allegation would only be brought forward with a possible lawsuit, the implementation shall continue as explained above.