An examination of the transfer of registered shares and transfer restrictions (bağlam) in joint stock companies under Articles 490-501 of the Turkish Commercial Code: transfer procedures, statutory and contractual restrictions, approval conditions and entry in the share ledger.
1. Introduction
The fundamental principle for registered shares in joint stock companies is that shares may be freely transferred unless otherwise provided in the articles of association or by law. However, the transfer of such shares is subject to certain procedures and restrictions. These procedures and the restrictions that a share transfer may encounter under the articles of association or by law are regulated in Articles 490 to 501 of the Turkish Commercial Code (TCC).
2. Procedures for the Transfer of Registered Shares
The most fundamental distinction regarding the procedure applicable to the transfer of a registered share is whether the share is represented by a certificate. If a registered share is not represented by a certificate, it is treated as a bare share. Although the transfer of a bare share is not expressly regulated in the TCC, according to the prevailing view in doctrine and practice it is carried out in accordance with the provisions on the assignment of receivables. Accordingly, pursuant to Article 184 of the Turkish Code of Obligations (TCO), a written transfer agreement is required for the transfer of a bare share. If the registered share is represented by a certificate, the procedure changes: pursuant to TCC Article 490, the transfer requires the endorsement of the share certificate to the transferee and the transfer of possession of the certificate.
3. Restriction of the Transfer of Registered Shares by Law
The restriction of the transfer of registered shares is referred to as bağlam (transfer restriction). Transfer restrictions are divided into two categories: statutory restrictions and restrictions arising from the articles of association. Statutory restrictions are regulated in TCC Article 491. Within this scope, a registered share whose price has not been fully paid may only be transferred with the approval of the company, save where the transfer takes place by inheritance, division of an estate, matrimonial property provisions or compulsory execution. Under the same provision, where the transferee provides the security requested by the company in cases where its ability to pay the unpaid share price is doubtful, the company may not refuse its approval.
4. Restriction of the Transfer of Registered Shares by the Articles of Association
The scope of restrictions arising from the articles of association may be considerably broader. Pursuant to TCC Article 492, the transfer of registered shares may be made subject to the approval of the company by the articles of association. The law further subjects the restrictions that may be introduced by the articles of association to different regimes depending on whether the shares are listed on a stock exchange. Pursuant to TCC Article 493, in the case of registered shares not listed on a stock exchange, the company may refuse to approve the transfer by invoking an important ground set out in the articles of association. Matters such as preserving the composition of the shareholder base, maintaining the company's economic independence, or requiring certain qualifications in shareholders may be considered important grounds. The company may also refuse its approval by offering to acquire the shares from the transferor, for its own account, for the account of other shareholders or for the account of third parties, at their real value at the time of the request (escape clause).
5. Steps to Be Taken After the Transfer and the Obligation to Pay the Unpaid Share Price
After the transfer has been completed, in order for the transferee to be able to assert the share and the rights arising from the share against the company, the transferee must apply to the company's board of directors and request that the transfer be entered in the share ledger. Until the transfer is entered in the share ledger, the transferee cannot exercise the rights attached to the share vis-à-vis the company. In addition, in registered shares whose price has not been fully paid, the transferee becomes liable, together with the transferor, for the unpaid portion of the share price upon acquisition of the share.
6. Conclusion
In light of all these explanations, the transfer of registered shares in Turkish company law is subject to strict formal requirements and restrictions. Careful observance of the transfer procedure, the statutory and contractual transfer restrictions, and the requirement of entry in the share ledger is of critical importance both for the validity of the transfer and for the transferee's ability to assert its rights against the company.
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