10 Major Changes in Turkish Commercial Code

LAW514 - Legal Structures of Financial Institutions

Legal Structures of Financial Institutions

10 MAJOR CHANGES IN THENEW TURKISH COMMERCIAL CODE

NEW TCC

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22 May 2013, IUE

Tezer YelkenciIzmir University of Economics, MSc in Finance

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Tezer Yelkenci Izmir University of Economics, MSc in Finance P. 232 488 9876 / [email protected]

AIMS OF THE NEW TCC

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Transparency

Accountability

Institutionalization

Legal transaction on electronic environment

Corporate governance

Blocking black economy, informality

Increasing competition

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CONTENTS

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1. Website2. Innovations Regarding Electronic Transactions3. Prohibition of Providence of Corporate Loans to Shareholders4. Voting Right5. Prison Sentence6. Documentation7. Obligation of Documents Storage8. Renewing of Articles of Association9. Board of Directors 10.Liability

3 Tezer Yelkenci Izmir University of Economics, MSc in Finance P. 232 488 9876 / [email protected]


1. WEBSITE

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Article 1524: All capital stock companies are obliged to create a website; if the company already has a website, it must allocate part for “information society” services before 01.07.2013.

The website should be open and reachable to everyone and shall be unrestricted. The board directors are directly responsible for the information / documents published. The right of punishment is reserved for breach of any obligation.



1. WEBSITE

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Punishment (Article 562): Up to 6 months prison sentence and a 100-300 days administrative fine If the content that has been determined by law is not announced on

such website, up to 3 months prison sentence and in a 100 days administrative fine



INFORMATION SOCIETY

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All data that is relevant to the company and in which shareholders, minorities, creditors and stakeholders have an interest

Documents and calls regarding General Assembly (GA) meetings Assessment reports, founders’ declaration, public offering

commitments, text of decisions on the deferment of bankruptcy, Board of Directors (BoD) and GA decisions on the company’s acquisition of its own shares

Documents on merger, spin-off, conversion Documents pertaining to amendments to the articles of association Documents, reports and BoD explanations on all kinds of calls



INFORMATION SOCIETY

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Financial statements, interim statements, balance sheets drawn up for specific purposes, BoD annual reports, money paid to directors, travelling expenses, indemnities

Information that must be disclosed as per the transparency principle and for the sake of information society

Reports prepared by auditors, special auditors and transaction auditors Information demanded by related authorities



2. ELECTRONIC TRANSACTIONS

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Trade registry transactions Invoice and confirmation letter Notice, rejection and similar statements Invitation General assembly Voting, submission by e-signature



3. CORPORATE LOANS TO SHAREHOLDERS

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Article 358: Shareholders are prohibited on borrowing against the company unless the debt arises from a transaction conducted with the company as a requirement of the company’s scope of activity and shareholders commercial undertake need and unless such debt is subject to identical and similar terms applicable in similar cases.




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Enforcement and Application Code of TCC (“EAC”) Article 24: Payment of Current DebtsShareholders of joint stock companies and owners of limited liability companies who get into debt with the Company in contravention of Article 358 of the New Law are obliged to settle this debt by cash payments within three years as of the effective date of the New Law (before 01.07.2015).




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Article 562: Punishment for No PaymentIf the settlement has not been made within the 3 years period, an administrative fine of at least 300 days is given. The fine cannot be more than 730 days


Article 395: Board Member and his/her relatives until third degree (include third degree) , private companies which board member or his/her said relatives are partner and stock companies which they are shareholder at least 20%They are all prohibited to borrow cash or asset from the company.

Article 562: Punishment Administrative fine of at least 300 days.


4. VOTING RIGHTS

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Article 434:Shareholders exercise their voting rights in the General Assembly (“GA”). The shareholders will exercise their voting rights in proportion to the total nominal value of the shares they hold. This will establish shareholders’ democracy and brings justice. Similar applications in France, Germany and Switzerland



4. VOTING RIGHTS

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Total par values of the shares (presume as 1 share refers to 1 TL)10 TL= 10 shares30 TL= 2 shares50 TL= 1 shares

TOTAL = 120 votes (10 + [30 + 30] + 50) (Previous code was providing only 13 votes)



5. PRISON SENTENCE

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Article 562:

Not preparing the reports of main company and its subsidiaries; up to 2 years

Blocking the audit of Ministry of Industry and Commerce; 3 months up to 3 years

Wrong statement about company capital; 3 months up to 2 years Illegal documentation and statements; 1 year up to 3 year Corruption on valuation of company’s assets; 3 months up to 2 years Collecting money from public without permission; up to 6 months Website; up to 6 months and 3 months



6. DOCUMENTATION

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Provision 39:All commercial documents and papers should contain the following;

Registry number, Commercial Title, Head Office, Company Capital, Website,


In addition, commercial documents of stock companies and limited companies should also include:

Name and surname of the board chairman, directors and managers


7. DOCUMENT STORAGE

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Article 64:Photocopy, carbon copy, microfiche, computer record or similar of all documents send by the company should be kept in written, visual or electronically.

Punishment: At least 200 days administrative fine, but mostly 730 days.



8. ALIGNMENT OF ARTICLES OF ASSOCIATION

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EAC Article 22: joint stock and limited liability companies must align their articles of association with the New Law within 18 months.

If such an alignment is not made, New Law clauses are applied instead of the existing articles of association. There will not be any sanction or punishment.



9. BOARD OF DIRECTORS (BoD)

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Article 359:The possibility of forming a BoD with the presence of just one person is introduced to Turkish legislation.

However, at least one member of the BoD who is authorized for representation should have his/her domicile in Turkey and should be a Turkish citizen (only for joint stock companies) .


The necessity that the BoD member has to be a shareholder of the company has been abolished. Legal entities are granted the authorization to become BoD members.



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EAC Article 25: The joint stock company’s BoD and limited liability company’s Board of Partners continue to function until the term is completed, unless they are dismissed or their board membership terminates for any reason.




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Article 390 - Quorem: Save as provided otherwise by an aggravating clause in the articles of association, the BoD shall convene with the majority of all members and make its decisions with the majority of the members present at the meeting. This rule shall apply also in the event the BoD convenes in an electronic environment.

The board members cannot vote to represent each other nor are they allowed to participate in the meeting by proxy.




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Article 369: BoD members and third parties in charge of management shall be held liable for prudent performance and protection of the company’s interests (duty of care and duty of loyalty).



10. LIABILITY

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Article 243:Founders, board members, managers and liquidators are responsible to company, shareholders and creditors if they infringe their duties according to the law or articles of association (indemnity – prison sentence), unless no fault, negligence or omission.

Delegation of authority = No liability unless no due diligence on decision



10. LIABILITY

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Article 247:If more than one person is obliged to pay the same indemnity, every person will be responsible all together (conjointly) from that indemnity related to his/her own obligation. Own obligation of each person determined by judge according to fault, negligence and omission.

Total: 4.000,00 TL2.000,00 TL= A,B,C and D (conjointly)1.000,00 TL= A (only) 500,00 TL= B (only) 500,00 TL= C (only)



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Date post:	05-Dec-2014
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10 Major Changes in Turkish Commercial Code

Economy & Finance