Amendments to the Turkish Commercial Code by Law No. 7511
Law No. 7511 on Amendments to the Turkish Commercial Code and Certain Laws was published in the Official Gazette dated 29.05.2024 and numbered 32660, and amended the Turkish Commercial Code No. 6102 ("TCC"), Competition Law No. 4054, Consumer Protection Law No. 6502 and other laws.
The amendments to the TCC may be summarized under three headings;
- Amendments regarding the functioning of the governing body of joint stock and limited liability companies,
- Narrowing the liability framework of the Trade Registry in a possible dispute due to the deletion of the title from the trade registry within the scope of Provisional Article 7 of the Turkish Commercial Code, and
- Regulations imposing capital increase obligations on companies with capital below the minimum capital amount.
- Amendments Regarding the Functioning of the Governing Body in Joint Stock and Limited Liability Companies
- Amendment Regarding the Term of Office of the Chairman and Vice-Chairman
With the Law No. 7511, the expression "every year" has been removed from Article 355 of the TCC, which stipulated that the board of directors of joint stock companies shall elect a chairman and vice-chairman every year. Thus, the chairman and the vice-chairman elected among the members of the board of directors will be able to continue their roles without the need for a new election provided that their board membership continues.
However, despite this amendment, it is also still possible for the governing body to elect the chairman and/or vice-chairman for a certain period of time (e.g., one year).
- Amendment Regarding the Call Procedures for Board of Directors Meetings
It can be asserted that the principal revision to the TCC is the addition to Article 392/7. The content of the provision before the amendment was as follows: "Each member of the board of directors may request the chairman in writing to call the board of directors for a meeting." Prior to the amendment, the courts had a limited interpretation of the authority granted in this article, which could result in court intervention in a general assembly convened pursuant to a board of directors' resolution issued upon a call made by a board member.
Indeed, in a case subject to the decision of the 43rd Civil Chamber of the Istanbul Regional Court of Appeals No. E. 2021/973 K. 2021/918 T. 14.7.2021, the agenda of the general assembly meeting of the relevant joint stock company was determined by a board member who was not the chairman, and the Regional Court of Appeals accepted the request for interim injunction not to implement the relevant general assembly resolution: "According to Article 410/1 of the Turkish Commercial Code, the general assembly may be called for a meeting by the board of directors, even if its term has expired. Liquidators may also call the general assembly for matters related to their duties. The authority to appeal the board of directors to a meeting belongs to the chairman of the board of directors, and since the authority of each member of the board of directors is limited to requesting the chairman to call the board of directors to a meeting in writing according to Article 392/7 of the TCC, the member of the board of directors does not have the authority to directly appeal the board of directors to a meeting."
The new legislation expands the content of Article 392/7 of the TCC and regulates the solution of the problem on how to resolve the inaction of the chairman upon the request of a board member to the chairman to convene a meeting. Accordingly, if the request for a meeting of the board of directors is submitted to the chairman in writing by the majority of the members, the chairman must call the meeting within 30 days from the receipt of this request. However, if the chairman does not convene the board of directors within 30 days in response to the request from the majority of the members, or if the chairman and the vice chairman cannot be reached, the call for the meeting may be made by the "requestors", in other words, the board members. This new regulation can be defined as the authority of the majority within the board of directors to compel the board of directors to convene. Although it is stipulated in the continuation of the article that the meeting and decision quorum specified in Article 390/1 shall be applied in the board of directors convened upon a "call", this provision is merely a repetition.
In addition to these innovations introduced to Article 392/72 of the TCC, another important amendment is that the procedure for calling the board of directors for a meeting may be subjected to a different procedure according to the articles of association. This provision firstly means that the provisions of the TCC regarding the meeting order of the board of directors are not mandatory. With this amendment, it is now possible to define the procedure for calling the board of directors to a meeting in the articles of association, which is, in practice, usually determined in an agreement signed between the shareholders, especially in cases involving different shareholder groups.
- Amendments to the Inalienable Powers of the Board of Directors
With the Law No. 7511, the authority of the board to decide on the appointment and dismissal of branch managers has become transferable. It will now be possible to determine a procedure that will eliminate the obligation to take a board decision for the appointment of a branch manager when the company opens a branch. This regulation will have practical implications especially for companies that open branches frequently but hold board meetings at intervals that do not correspond to the frequency of these branch openings.
- Narrowing the Liability of the Trade Registry under Provisional Article 7
Provisional Article 7 of the TCC regulates the removal of liquidated companies and cooperatives from the registry in certain cases without being subject to the liquidation provisions in special laws. Within the scope of this provision, it is regulated that the judicial costs and attorney fees cannot be awarded against the registry in a dispute regarding such removals.
- Regulation on Compliance with the Minimum Capital Limit
The minimum capital amounts for joint stock and limited liability companies are set out in the TCC. These amounts were increased from TRY 50,000 to TRY 250,000 for joint stock companies and from TRY 10,000 to TRY 50,000 for limited liability companies for companies to be established as of January 1, 2024. However, the requirements for already existing companies were unclear. (Click here for our article regarding the current capital amounts.)
Temporary Article 15 added to the TCC by Law No. 7511 clarified the issue and obliged established companies to increase their capital to these limits until 31 December 2026. Otherwise, the relevant company will be dissolved without any further action. In addition, non-publicly traded companies that have adopted the registered capital system are also required to increase their capital to the current minimum capital amount of TRY 500,000; otherwise, they will be deemed to have exited from this system.
It is also regulated that no "meeting quorum" will be required for the general assembly meetings to be held to increase the minimum capital amounts of the companies and that decisions can be taken by simple majority in these meetings.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.