Client Alert:

New Circulars on (I) Subscription of Receivables as Share Capital Contribution and (Ii) Quorum for Dismissal of a Shareholder From the Partnership

The General Directorate of Domestic Trade (“General Directorate”) has recently issued two circulars with respect to the Turkish Commercial Code (“TCC”). The first was issued by the General Directorate on 15 July 2013 in which the General Directorate brings clarity to the concept of subscription of receivables as share capital contribution.

Article 127 and 128 of the TCC allows the shareholders to subscribe their receivables as share capital contribution. However, as regulated under Article 342 of the TCC, there is an exception to this rule in that undue receivables cannot be subscribed as a share capital contribution. The TCC is silent about how the receivables to be subscripted ought to be evaluated.

Accordingly, the General Directorate has, through its circular clarified that the receivables which will be subscribed by the shareholders as share capital contribution shall be considered as capital in kind and therefore subject to an evaluation as set forth under Article 343 of the TCC.

The second circular was issued by the General Directorate on July 17, 2013 and interprets the concept of quorum for dismissal of a shareholder from the partnership.

Article 640 of the TCC provides that the reasons for dismissal of a shareholder from the partnership can be determined under the partnership agreement at the incorporation stage. Moreover, pursuant to Article 621, dismissal of a shareholder from the partnership is deemed as an important decision and therefore the quorum for dismissal of a shareholder shall be at least two thirds of the represented votes and the majority of the share capital which has the right to vote.

In this respect, the General Directorate has advised that in order to include a provision into the partnership agreement regarding the dismissal of a shareholder, the decision to add such provision in shall have to be taken with the unanimity of the shareholders. The reasoning behind this interpretation is that, the partnership agreement reflects the consensus of all shareholders who have signed the agreement at the incorporation phase. Therefore, in order to add an article to the partnership agreement to dismiss a shareholder, such proposal shall be accepted by all shareholders who have initially signed the agreed form of partnership agreement.

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