A Joint Stock Company (“JSC”) is a limited liability company which acquires legal personality upon registration with the Trade Registry. JSCs may be established by minimum one real person or legal entity shareholder. Minimum capital requirement for a JSC is presently 50,000 TL and liability of shareholders is limited to the amount of their respective subscription to the share capital.
There are two mandatory organs which must exist in a JSC; General Assembly of Shareholders (“GAS”) and the Board of Directors (“BoD”). GAS is the highest decision making body within a JSC. I t is also responsible for overlooking the performance of the Directors to ensure that the company is run in due compliance with the applicable laws and the Articles of Association (“AoA”) by adhering to the principles of objective good faith, justice and equity. The powers to decide on crucial issues, such as approving yearly financial statements of JSC, appointing and disc arching Directors, amending the AoA, increasing and where necessary decreasing the capital are rested in the GAS.
The BoD is responsible for the day to day management and running of JSC. Besides the BoD has the power and authority to represent and bind the company and is appointed by a GAS resolution.
The basic characteristics and some key issues regarding JSCs under the Turkish Commercial Code No.6102 (“TCC”) can be summarized as follows.
JSC with A Single Shareholder (Single Member JSCs)
If a JSC consists of single shareholder, than such shareholder will exercise all the legal powers of the GSA and the BoD.
Legal Entity Member of Board of Directors
According to Art. 359 of the TCC, a legal entity can be elected Director. In such a case, one real person should be determined by the legal entity director to act as its representative at the BoD level, i.e., to participate in BoD meetings and vote on issues to be discussed.
Delegation of Signature Authorities and Representation Powers
As per Art. 367 of the TCC, the BoD may be authorised by an express provision of the AoA to delegate all or part of its managerial powers to specified Directors or company officers from outside the BoD. The Directive shall set forth the rules for management of the company; describe the specific posts and positions to be held and specify who will report to whom.
Audit
Art. 397 of the TCC adopts an independent audit system for JSCs. All types of JSC’s are in principal subject to audit. However, independent audit requirement is introduced exclusively for those companies which meet the criterion specified in the Decree No. 2012/4213 on Designation of the Companies Subject to Independent Audit (“Decree on Independent Audit”).
As regards the JSCs which fall outside the mandatory independent audit requirement, secondary legislation is yet to be published to regulate the internal audit process of the companies.
Shareholders’ Assembly and BoD Can be Held Electronically
Art. 1527 of the TCC sets forth that GAS meetings can be held electronically. The holding of GAS meetings via electronic means is a legal requirement for the JSCs which are listed with Istanbul Stock Exchange, whereas it is optional for unlisted companies.
Obligation to Establish a Company Website
JSCs that are subject to independent audit requirement are obligated by law to set up a company website according to Art.1524 of the TCC.
The following information must at always be present at the company website.
- MERSIS (Central Registration Recording System of the Ministry of Customs and Trade) number of the company
- Registered commercial title of the company
- Registered address of the company
- Subscribed and paid up share capital
- Names of the directors and CEO, if any
- MERSIS number, commercial title and registered address of any legal entity director and name and surname of its real person representative, a statement that the legal entity board member is registered together with its real person representative
- Names, surnames, residential addresses of the selected auditors and, registered branches, if any.
In addition to the foregoing, there are a number of subjects which shall be announced at the web-site at 6 monthly intervals, such as announcements legally required to be made by the company under the law, required documents regarding all kinds of calls, including calls to GAS, declaration of the BoD, reports, merger agreements reports (if there is any), financial statements annual statements, etc.
Group Companies and Holdings
Detailed rules regarding group companies and holdings have been introduced for the first time by Art. 195-209 of the TCC. Prior to the effectiveness of TCC No. 6102, only the Turkish Tax laws regulated those areas.
In order to qualify as group companies, there must exist at least two companies with the parent company having the power to determine and control either directly or indirectly investments, operations and finance policies of the subsidiary company. Art. 195/1 specifies that the controlling power of the parent company over the subsidiary company is deemed to occur where the parent company, either directly or indirectly; owns shares of the subsidiary company with majority votes, or has the power to elect the members of its management organ, or holds the majority of the voting rights either on a standalone basis or by way of contract in conjunction with other shareholders.
Furthermore, in the absence of a shareholding, two separate commercial companies shall be deemed to form a group, if one of them controls the other by way of contract or in any other fashion.
- Registration and amendments of AoA of group companies are subject to the permit of the Ministry of Customs and Trade.
- A Ministry Representative shall participate in all of GAS meetings of the group companies.
- The BoDs of both controlling and dependent companies are required to report annually any inter-company transactions done in the year concerned.
- If parent company directly or indirectly owns such number of shares that represent 5, 10, 20, 25, 33, 50, 67 or 100 percent of the capital of subsidiary or the parent’s shareholding falls under any of the foregoing percentages at any point in time, the parent company must notify the subsidiary and the related authorized bodies within 10 days of the completion of the relevant transaction. The relevant transactions must be declared under a separate heading in the annual and audit reports and announced on the website of the subsidiary.
- Legal Liability of parent company can be specified by 3 dimensions. Accordingly; (i) parent company cannot manipulate subsidiary company by way of any transactions which involve e.g. assignment of profits, debts and receivables, restriction of production, etc., and (ii) parent company cannot interfere in the GAS meetings and significant decisions regarding merger, acquisition, split-up, change of corporate type, etc. of subsidiary company, and (iii) if the group companies had achieved a significant reputation within the community and had thereby created trust, the parent company becomes liable for any damage sustained by public due to any wrongdoing by the subsidiary.
- In case an opinion stating the existence of fraud and conspiracy in the subsidiary’s relationship with the parent company or with another group company was determined by the independent auditor, special auditor or early risk detection committee, each shareholder of the subsidiary has a right to ask for the appointment of a special auditor from the commercial court of first instance at the location of the subsidiary’s headquarters.