SHARE TRANSFER LIMITATIONS IMPOSED BY THE ARTICLES OF ASSOCATION IN JOINT COMPANIES 19 May 2020

As it is known, detailed regulations regarding share transfers in joint stock companies were made by the Turkish Commercial Code No. 6102. According to the relevant provisions, share transfers may be limited by the law or the articles of association.

In this article, the content of the limitation of share transfers with the articles of association will be mentioned.

SHARES IN JOINT STOCK COMPANIES

In joint stock companies, the shares are divided into two as bearer and registered shares. Bearer shares belong to the person holding the possession and all of the share fees have been paid. On the other hand, registered shares are written on behalf of certain person and that allow the exercise of the rights based on that share.

SHARE TRANSFERS IN JOINT STOCK COMPANIES

The transfer of bearer shares is possible by transferring the possession. Registered shares are transferred after being endorsed. Since it is not compulsory to issue shares for any registered shares in joint stock companies, the transfer of the bare shares not tied to stock is realized by the transfer agreement.

SHARE TRANSFER RESTRICTIONS/LIMIATIONS IN JOINT STOCK COMPANIES

As mentioned above, since the transfer of bearer shares in joint stock companies takes place with the transfer of possession, it is actually difficult to limit the share transfer in question. Transfer of registered shares may be restricted by law or articles of association.

As a rule, the transfer of registered shares is free. In the absence of any regulation in the articles of association, there is no obstacle in the transfer of registered shares bearing the conditions specified in the law.

However, it is possible to impose some limitations on the transfer of registered shares with the articles of association.

Accordingly, it can be regulated in the articles of association that the transfer of registered shares is possible only with the approval of the company. Thus the transfer of share certificates can be only possible with the approval of company besides the fully payment of shares. However, if the company enters the liquidation process, this limitation will have no provision.

If there are no limitations on the transfer of shares in the company's articles of association, such a limitation can be introduced by changing the articles of association.  Moreover, this change can be possible with aggravated quorums. The amendment may take place with the approval of the shareholders, who constitute at least seventy-five percent of the capital.

On the other hand, the limitations to be imposed by the articles of association under the provisions of the Turkish Commercial Code; It is organized in two scopes as “quoted on the stock exchange shares” and “unquoted shares”. These regulations also need to be examined.

UNQUOTED SHARE TRANSFER RESTRICTIONS/LIMIATIONS

Transfer of registered shares unquoted on the stock exchange can be limited in the following cases;

1) By stating an important reason stipulated in the articles of association,

2) By offering to purchase shares on their real value.

According to the Turkish Commercial Code, the important reason mentioned in the first case is exemplified as follows;

• Protection of shareholders' environment,
• Protection of the company's business subject,
• Protection of the economic independence of the business,
• In case the transferee refrains from expressing that he/she has acquired the shares on his/her behalf and account.

It is important to note that; it is not possible for every reason to be included in the articles of association as an "important reason".

In this case, in order to impose an effective limitation, the concept of the important reason in the articles of association should be embodied in three categories: "environment of the shareholders", "business subject" and "economic independence".

QUOTED ON THE STOCK EXCHANGE SHARES TRANSFER RESTRICTIONS/LIMIATIONS

For the transfer of the shared which listed on the stock exchange, limit can be set for not to acquire more than the share determined as certain percentage of capital. So if the limit is exceeded, independence of company will be protected by refusing the transfer of shares

In addition, it is regulated that in the transfer of these shares through the stock exchange, the rights regarding the said shares assign with the transfer. In the non-stock exchange transfer, the transferee must apply to the company. However, if the transferee does not apply to the company, the company has the right to refuse this transfer.