1- Restrictions on Share Transfers and Concept
Although the main principle in incorporated companies
is the free transfer of shares by the shareholder, some certain rules arising
from both the applicable law and the articles of association may lead to
restrictions on the transfer of shares.
Paragraph 2 of Article 339 of the TCC (Turkish Commercial
Code), which sets out the content of the Articles of Association, lists the
mandatory and optional provisions in the articles of association, and
subparagraph d of this paragraph explicitly stipulates that transfer
restrictions may be included in the articles of association by stating “d)
Registered or bearer shares; privileges granted to certain shares; restrictions
on transfer.”
Although this restriction against the transfer of
shares is a restrictive rule against the shareholders, its main purpose is to
protect the company. Although share transfer restrictions are a rule against
the shareholders' freedom of transfer, they also provide the shareholders with
a choice and protection against the persons who will be in their circle as
shareholders and with whom they will become partners.
In this respect, the restriction on share transfer in incorporated
companies constitutes a terminological contradiction. The reason why incorporated
companies are referred to as “incorporated” is that these companies, which are
capital companies, are a partnership structure that stands independent of the
shareholders and the personalities of the shareholders. Where the articles of
association places restrictions on share transfers, it interferes with the
shareholder who wishes to transfer her/his shares and chooses with whom to
become a partner.
In this respect, the anonymization of the
shareholders' circle in the incorporated company is prevented, which is seemingly
incompatible with the name of the company.[1] Accordingly, the issue of share
transfer restrictions in incorporated companies, where terms and contradictions
are of great importance, also causes the incorporated company partnership to
differ and differentiate from other types of partnerships in the Turkish Legal
System.
Even though it is not included in the current Turkish
Commercial Code Nr. 6102, which is the main applicable regulation on this
subject, the concept of “restriction”, which is mentioned in the doctrine and
comparative law, refers to the share certificates that are literally restricted,
and it is stated that the share certificates are restricted in order not to be
transferred.
2- Inclusion of “Restriction” Rules in the Articles of
Association and Removal Thereof
Restrictions are divided into two categories as those
arising from the applicable law and those arising from the articles of
association. The present analysis will focus on the restrictions arising from
the articles of association. Restrictions may be included in the articles of
association at the establishment of the company. It is also possible to amend
the articles of association by introducing restriction rules afterwards.
Paragraph 3 of Article 421 of the TCC stipulates that “The following
resolutions to amend the articles of association shall be adopted with the
affirmative votes of the holders of the shares constituting at least
seventy-five percent of the capital or their representatives: a) Changing the
subject of the company's business completely. b) Creating privileged shares. c)
Restricting the transfer of registered shares.” It is stipulated that a
quorum of at least seventy-five percent of the capital is required for the
amendment of the articles of association to restrict the transfer of shares.
For the quorum required for the abrogation of the restriction
rules, paragraph 1 of Article 42of the TCC should be referred to. The relevant
provision reads as follows: "Unless otherwise provided by law or the
articles of association, resolutions amending the articles of association shall
be adopted by a majority of the votes present at the general assembly meeting
where at least half of the company capital is represented. In case the meeting
quorum foreseen in the first meeting is not achieved, a second meeting may be
held within one month at the latest. The meeting quorum for the second meeting
shall be the representation of at least one third of the company capital at the
meeting. Provisions in the articles of association that reduce the quorums
stipulated in this paragraph or stipulate a quorum shall be invalid."
Pursuant to this provision, the abolition of some, if
not all, of the restriction rules or restrictions in the articles of
association will be possible with the majority of votes in the general assembly
where at least half of the company capital is represented, which is the quorum
for amendment of the articles of association. Of course, this provision only applies
where the articles of association of the company does not stipulate otherwise.
3- Concept of Restriction for Registered and Bearer
Shares
The distinction between registered and bearer shares
is important for the examination of the restriction on the transfer of shares.
The main reason for this is the difference in the transfer method of registered
and bearer shares. Since the transfer of bearer share certificates is made only
by the transfer of possession without any control, registration or condition,
and since those who present these certificates are deemed to be the owners of
the said certificates, it is effectively impossible to restrict the transfer of
these certificates. [2]
Paragraph 1 of Article 492 of the TCC entitled
“Restriction by Articles of Association” sets out as follows: “The articles
of association may stipulate that registered shares may be transferred only
with the approval of the company.” So, while the text includes restrictions for registered shares resulting from the articles of
association, bearer shares are not included. The ultimate reason for this is
that, as mentioned above, the transfer of bearer shares is possible through the
transfer of possession. This is because it is incompatible with the nature such
shares to restrict their transfer, and in addition, it does not appear possible
to control the restriction for these shares either,
which can be transferred in the ordinary way.
When the other provisions of the applicable law on restriction
are examined, it is clearly seen that regulations are made on registered
shares. One of these provisions is Article 491 of the TCC regarding the restriction
of fully unpaid registered shares. This article is an explicit restriction set
forth under the TCC. Although, in principle, registered shares may be
transferred without any restriction, unless otherwise stipulated under the applicable
law or the articles of association, Article 491 of the TCC, titled “Statutory Restriction”,
states that "Registered shares that have not been fully paid may be
transferred only with the approval of the company; unless the transfer is
realized through inheritance, inheritance division, the provisions of the
property regime between spouses or compulsory debt enforcement proceedings. (2)
The company may refuse to give its approval only if the transferee's solvency
is doubtful and the security required by the company has not been
provided." The provision stipulates that registered shares that have
not been fully paid may be transferred only with the approval of the company.
As mentioned above, it is possible for share transfer restrictions to be
included in the articles of association, as well as in cases specified under the
law.
The articles of association may stipulate the form of
share transfer, as well as the conditions under which the transfer of shares
may take place. A real restriction can be is present where the transfer of
shares is restricted by material facts rather than a formal determination. The
most common examples in this regard are the requirements of certain
characteristics of the potential shareholder, such as being a member of a
certain family.
Restrictions in this sense are closely related to the
constitutional provisions of Article 35 and Article 48 of the Constitution,
pertaining respectively to freedom of contract and the right to property, as
limited by such restrictions. For this
reason, share transfer restrictions should be proportionate. [3]
Restrictions which are conceived as a conceptual
contradiction in terms of the structure of incorporated companies, and which
limit the shareholders' right to transfer shares, freedom of contract, and
property rights, of course have certain objectives and considerations. Although
the main principle is the freedom to transfer shares in incorporated companies,
the purpose of imposing restrictions on shareholders is the instinct to protect
the company. The qualifications required for the shareholders are aimed at
preventing the structure of the company from deteriorating and becoming
alienated.
Article 493 of the TCC, which follows Article 492 of
the Turkish Commercial Code mentioned above and titled “Unlisted registered
shares”, reads as follows: “The company may reject the request for approval
by asserting an important reason stipulated in the articles of association or
by proposing to the transferor to purchase the shares for its own account or
for the account of other shareholders or third parties at their actual value at
the time of application.” The following paragraph reads as follows: "The
provisions of the articles of association regarding the composition of the
shareholders' circle constitute an important reason if they justify the
rejection of approval in terms of the company's field of activity or the
economic independence of the enterprise.”
In light of these provisions, it is important to
evaluate the most common restriction of “belonging to a certain family” in the
context of the articles of association within the framework of the provisions
of this article. This is because while personal characteristics such as having
a certain profession, which is another common restriction, may be directly
related to the company's field of activity, belonging to a certain family does
not seem to be directly related to the company's field of activity or economic
independence at first glance.
In addition, the composition of the shareholders'
circle in the first paragraph and the ability of those who belong to a certain
family to become shareholders appear to be compatible, and are considered
compatible by the majority opinion in the doctrine; the rule of belonging to a
family also provides a certain criterion for the restriction, and emerges as a
transparent restriction that is free from interpretation. [4]
The difficulty of comprehending and drawing
connections between certain expressions and consequences of Article 493 and its
preamble have led to different opinions in the doctrine. Even if it is clearly
understood that the articles of association may contain a provision restricting
the transfer of shares, the main issue of debate is whether these restrictions
are valid or not, and whether the refusal of transfer on the basis of an important
reason in the articles of association or the TCC will be applied in cases where
the transfer of shares is on the agenda.
The problem here is what constitutes an important
reason. The important reason is explained in the second paragraph, and this is
also seen in the preamble of the provision. The legal justification of
paragraph 2 reads as follows: “Second paragraph: The concept of ”just
cause" herein refers to the reason that is important for the company,
unlike the just cause that makes the relationship unbearable, which is valid in
the law of obligations and the law of private companies.
Although the draft version of the law provides for
three categories, the just causes are not limited (numerus claususus).
The categories of just cause are (1) the composition of the shareholders'
circle, (2) the subject matter of the company, and (3) the independence of the
enterprise. In addition, the composition of the shareholders' circle is also
considered as an important reason. At this point, the limitation of being a
member of a family seems to be acceptable as the composition of the
environment.
Although there are opinions that these restrictions
would be contrary to the shareholding structure in incorporated companies,
which are capital companies, and that the concept of environmental composition
is not fleshed out, there are also opinions that approach the issue from a
different direction, that the shareholder who wants to transfer her/his share
should take into account the interests of other shareholders due to the
importance of the relationship of trust and loyalty between the shareholders, and
that the structure of the company established by certain family members may
have share transfer restrictions due to the obligation of loyalty. [5]
Recently, there has been a growing view that restrictions
in respect of family members (family clause) and stipulation in the articles of
association that only members of the relevant family may be shareholders are
not considered as important reasons. Perhaps the sole reason for this is the
approach is that it is not desired to move away from the incorporated company
structure, which is also predominant in the Swiss doctrine, and that the
company structure and economic rules should gain importance.
4- Conclusion
In conclusion, we can say that under the Turkish Legal
System, belonging to a certain family plays an active role in share transfer
restrictions. This is based on the importance of family in Turkish culture and
life, as well as the conceptual place of the “incorporated company” structure
in the Turkish legal system. Even if it is explicitly stipulated that restriction
rules may be included in the articles of association, the important reasons
specified under the TCC should be taken into consideration in order for the
relevant rules to be valid, and the quorums specified in the TCC are applied
for the subsequent addition or removal of restriction rules to the articles of
association.
Melda İz, Legal Intern
References:
1. Dr. Tamer
Bozkurt, Anonim Şirketlerde Pay Devrinin Sınırlandırılması (Bağlam)
2. Mustafa
Yavuz, Yeni TTK’ya Göre Anonim Şirketlerde Pay Devrinin Sınırlandırılması
3. Dr. Tamer
Bozkurt, Anonim Şirketlerde Pay Devrinin Sınırlandırılması (Bağlam)
4. Tekinalp,
Bağlam
