In capital companies, the rights arising from being a shareholder can be vested in a share certificate by being stipulated in the articles of association and obtaining a board of directors' resolution for the issuance. The shares issued by a joint-stock company are negotiable instruments that represent the shareholders' ownership rights and serve as a capital market instrument. Depending on the transfer methods, shares can be categorized into two types: registered and bearer. Bearer shares are not issued in the name of a specific person and do not bear the name of the shareholder. Registered shares should include the name of the shareholder written on them.
By associating the company's shares with certificates the tradability of the shares increases, and obtaining the status of a shareholder becomes easier. This allows shareholders to have the opportunity to invest and manage their investments, while the joint-stock company can increase its existing capital and raise the necessary funds from the market. According to Article 484 of the Turkish Commercial Code No. 6102 , the type of shares to be issued is determined by the company's articles of association. Shares issued prior to the registration of the company and capital increase are invalid.
The types of shares can be converted from one type to another through an amendment to the articles of association. For the conversion of registered shares to bearer shares, the entire amount of the bearer shares' value must be paid.
If it is specified in the articles of association and the full payment of the designated shares' value is made, bearer shares can be issued. The board of directors is obliged to print the share certificates/equity instruments and distribute them to the shareholders within three months from the date of complete payment.
As a result of the legislative amendment that came into effect on April 1, 2021, bearer shares must be registered with the Central Securities Registry (MKK) before the initial printing and distribution or after the transfer of shares by the transferee. The transfer of ownership is considered valid against the company and third parties only when the transferee notifies the MKK after the transfer of possession. While the issuance of bearer share certificates is not possible in limited companies, in joint-stock companies, bearer share certificates can be issued if they are specified in the articles of association and the full payment of the share capital is made.
If the share type is specified as registered in the articles of association, a minority request is required for the printing and distribution of the corresponding share certificates. According to Article 411 of the Turkish Commercial Code, shareholders who constitute at least one-tenth of the capital are considered as the minority.
In order for the transfer of registered shares to be binding on the company, three stages are involved: endorsement on the certificate, transfer of possession, and registration in the share register of the company.
If the registered shares have not been fully paid for and the transfer does not occur through inheritance, matrimonial property regime provisions, or enforcement proceedings, the transfer can only be made with the approval of the company. Additional restrictions on the transfer of shares can be imposed by stipulating the requirement of company approval in the articles of association. Until the necessary approval for the transfer is granted, the ownership of the shares and all associated rights remain with the transferor.
In the case of limited companies, due to the legal nature of the relevant company type and the requirement for approval for share transfer, it is not possible to issue bearer shares. Although the law regulates the possibility of issuing "registered shares" for limited liability companies, these shares do not have the nature of negotiable instruments and are used as evidence. The decision to issue registered shares is within the authority of the board of directors and does not need to be specified in the articles of association. For the transfer to be valid, the signatures on the transfer agreement must be notarized and a resolution from the general assembly is required. However, it is possible to approach the nature of negotiable instruments for registered shares in limited liability companies by removing the requirement for general assembly approval.
The issuance and transfer of share certificates play a significant role in capital companies, enabling the circulation of ownership rights and providing growth, financial flexibility, visibility, and liquidity. The choice among share certificate types has distinct implications on transferability, ownership structure, and legal requirements; these implications also vary among different types of capital companies. While in limited liability companies, share certificates serve as a means of proof, in joint-stock companies, they offer ease of transfer and circulation due to their status as negotiable instrument.
Nazli OZKUL
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Deniz KAFKASLIOGLU
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