Introduction
The Turkish Parliament recently approved significant amendments to the Turkish Commercial Code No. 6102 (“TCC”). These amendments, published in the Official Gazette on May 29, 2024, under Law No. 7511 (“Amendment Law”), introduce substantial changes in the legal framework governing joint stock and limited companies.
Here is a concise summary of the key amendments:
Clarification of the Minimum Capital Requirements
The Presidential Decree No. 7887, published in the Official Gazette on November 25, 2023 had increased the minimum capital requirements for companies. For joint stock companies the minimum capital requirement was increased from TL 50,000 to TL 250,000, for non-public joint stock companies adopting the registered capital system from TL 100,000 to TL 500,000 and for limited companies from TL 10,000 to TL 50,000. However, these new thresholds were introduced to govern companies to be established, leaving the question of how they would affect already existing companies unresolved.
Article 17 of the Amendment Law remedied this issue by mandating that joint stock and limited companies should increase their capital to the required minimum levels by December 31, 2026 and those with capitals below the specified thresholds after this date will be deemed to have dissolved automatically. Moreover, non-public joint stock companies adopting the registered capital system with less than the issued capital of TL 250,000, will be considered to have exited the system unless they increase their initial and issued capital to the specified threshold by the foregoing date.
Furthermore, to facilitate the necessary adjustments, the Amendment Law simplified quorum requirements for general assembly meetings convened to increase capital to the minimum thresholds. These meetings will not require a meeting quorum, and resolutions will be passed by a majority of the votes present. Additionally, privileges cannot be exercised in voting during such resolutions.
It should also be noted here that the Ministry of Trade is authorized to extend this deadline by one year, up to a maximum of two times.
Simplification of the Board’s Duty Distribution Process
Before the recent amendments, Article 366 of the TCC required the chairman and vice-chairman of the board of directors of joint stock companies to be elected annually while Article 362 of the TCC allowed board members to serve three-year terms. This necessitated adopting board resolutions and registering them with the trade registry regarding the distribution of duties each year, leading to an increased workload and unnecessary expenses.
The Amendment Law eliminated the necessity to annually elect the chairman and vice-chairman by allowing the chairman and vice-chairman to serve their duties for the duration of the entire term of the board. Therefore, the election of the board of directors and their respective distribution of duties can now be carried out by a single board resolution, every three years.
Convening of the Board of Directors
Article 392/7 of the TCC, which regulates the right of board members in joint stock companies to obtain information and conduct inspections, previously stipulated that any board member could request in writing for the chairman to call a board meeting. However, the procedures to be followed after such a request, and the steps to be taken if the request was not fulfilled were unclear.
The Amendment Law mandates that the chairman calls for the board meeting, if the request is deemed appropriate, and upon a written request put forward by the majority of the board members, the chairman must call and have the board meeting convened within thirty days from the date of the request. If the chairman or vice-chairman fails to call the meeting or cannot be reached, the members who requested the meeting have the right to call the meeting themselves. Unless the articles of association specify otherwise, the meeting will be considered valid if the majority of the board members attend, and resolutions will be passed by the majority of those present. Additionally, the articles of association may outline a different procedure for convening board meetings.
Therefore, the Amendment Law provided for clear guidelines on the steps to be taken if such a request is left unfulfilled. This ensures that board members have a definitive course of action to enforce their rights, thereby enhancing corporate governance and accountability within the company.
Revision to the Non-delegable Powers of the Board
According to Article 375/1 of the TCC, which regulates the non-delegable duties and authorities of the board of directors in joint stock companies, the appointment and dismissal of managers and signatories were among the non-delegable powers of the board. Consequently, the appointment and dismissal of branch managers necessitated board resolutions and registration with the trade registry directorate.
Amendment Law revised Article 375/1-d of the TCC removing the appointment and dismissal of branch managers from the list of the non-delegable powers of the board of directors. Nevertheless, the Istanbul Chamber of Commerce has informed us in writing that this amendment shall be construed to reflect that the appointment of branch managers is still among the non-delegable powers of the board and only the appointment of limited representatives to the branch can now be carried out by a branch manager’s declaration.
Conclusion
To conclude, the recent amendments to the TCC introduced significant changes aimed at enhancing the legal framework for joint stock and limited companies. These changes address minimum capital requirements, harmonize the election and duty distribution of the board of directors, clarify procedures for convening board meetings, and revise non-delegable powers of the board. Companies should carefully review these amendments to ensure compliance and leverage the updated provisions to improve corporate governance and operational efficiency.
This article has been co-authored by Zeynep Tezan and Ezgi Alkım
