Significant amendments are made in the provisions of the Turkish Commercial Code No. 6102 (“TCC”) regarding the bearer shares as Law No. 7262 on the Prevention of the Financing of the Propagation of Weapons of Mass Destruction (“The Law”) is published in the Official Gazette numbered 31351 on 31.12.2020. Primarily, together with the new regulation, bearer shareholders are obligated to notify their shares to Central Registry Agency (“CRA”). Hence, Article 489 of the TCC is amended as follows:
“(1) The transfer of bearer share certificates shall be in effect on the company and third parties only upon the notification to be made to the Central Registry Agency by the transferee who is taken over such shares through transfer of possession. In case such notification is not made to the Central Registry Agency, holders of bearer shares cannot invoke their share rights arising from this Law until the necessary notification is made.
(2) The date of notification made to the Central Registry Agency shall be taken as basis for claiming the rights of bearer shares against the company and third parties.
(3) The records kept by the Central Registry Agency regarding bearer shares are shared with the authorized authorities in accordance with the relevant laws.
(4) The procedures and principles regarding the notification and registration of bearer share certificates to the Central Registry Agency and the fees to be charged in this regard are determined by the communiqué issued by the Ministry of Trade.”
As per the abovementioned amended article, the natural and legal persons that take over bearer shares in joint stock companies are obligated to notify the Central Registry Agency in this regard. If the said obligation is not complied with, the bearer shareholder will not be able to invoke its share rights as per the TCC. Additionally, all records regarding the bearer shareholders will be kept by the CRA.
Prior to the amendment at issue, the transfer of actual possession of the bearer share certificates was sufficient for the completion of the transfer of bearer shares and no further transactions were required. Nevertheless, under the new legal regime, the notification regarding such transfer will be made by the new bearer shareholder to the CRA following the transfer of possession and the bearer shareholder will only be able to exercise its share rights as of the date of notification made. On the other hand, the corresponding sanctions are also stipulated by The Law in case the aforesaid notification is not made accordingly. As a consequence of the bearer shareholders’ failure to notify the CRA, it is stipulated by the Article 33 of The Law that non-compliance with the obligation of the notification will result in administrative fine in the amount of five thousand Turkish Liras in addition to the sanction on depriving the bearer shareholder of its share rights.
Moreover, in accordance with this regulation, Article 486 of the TCC is also amended through the Article 31 of The Law which reads:
“If the shares are bearer shares, the board of directors shall issue and distribute the share certificates to the shareholders within three months after the payment of the total share price. The resolution of the board of directors regarding the issuance of bearer shares shall be registered (to the trade registry) and announced and also posted on the website of the company. The information on the bearer shareholders and the owned shares are notified to the Central Registry Agency before the share certificates are distributed to the shareholders.”
Although the above article is related to the issuance of share certificates, in parallel with the new obligation imposed on the bearer shareholders, the obligation to make a notification to the CRA by the joint-stock company before the distribution of the bearer shares to the shareholders has also been stipulated in the relevant article. Similar to the sanction of administrative fine mentioned above, it has been determined with the Article 33 of The Law that non-compliance with the obligation of the notification herein will be sanctioned with an administrative fine in the amount of twenty thousand Turkish Liras.
In addition, since the information regarding the bearer shares were not required to be notified to the CRA prior to the enactment of The Law, Provisional Article 14 has been added to the TCC in order to dedicate a time period for the completion of the relevant obligations for the existing bearer shares which is worded as follows:
“(1) Bearer shareholders shall apply to the joint-stock company with their share certificates to be notified to the Central Registry Agency until the date of 31/12/2021. Upon the application, the board of directors of the joint-stock company shall notify the Central Registry Agency of the information regarding the bearer shareholders and the owned shares within five business days. If the bearer shareholders do not apply to the joint-stock company, they cannot invoke their share rights arising from this Law until the necessary application is made.
(2) Those who do not apply or make a notification in accordance with the first paragraph shall be sanctioned in accordance with the thirteenth paragraph of the Article 562.”
In this respect, in accordance with the relevant article, those who are currently holding bearer shares are required to apply to the joint-stock company which they hold shares in with their share certificates for the CRA to be duly notified. Subsequently, the board of directors of the joint-stock company is obliged to inform the CRA of the bearer shareholders and their shares within five working days. The abovementioned sanction of administrative fine is also present in terms of this type of notification, as those who do not comply with their obligation of notification will be sanctioned with an administrative fine of twenty thousand Turkish Liras.
Considering the purpose of the introduction of the legal regulations at hand, one can understand that the provisions of The Law is based on the regulation of the procedures for the implementation of the sanction decisions of the United Nations Security Council for the prevention of the financing of the proliferation of weapons of mass destruction as per the Article 1 of The Law. Taking together the purpose of The Law and the legal content of the regulations introduced into consideration, we are of the opinion that such regulations may be needed in terms of monitoring and control of bearer shareholders on the effective prevention of the financing of the proliferation of weapons of mass destruction, as prior to the adoption of The Law bearer shares were not required to be registered to the share ledger pursuant to the TCC.
In consequence, we would like to point out that it holds great importance to follow-up and comply with these legislative amendments which particularly concerns the current and/or prospective owners of the bearer shares, in order for the bearer shareholders to exercise their share rights and not to be subjected to any administrative sanctions.