Principles of Registered Capital System in non-Public Turkish Companies
The effects of globalization, increase in financial institutions and transnational business operations after 1990s required the regulation of the financial market and the handling of laundering both in domestic and international standards. BY SAFAK HERDEM
The communiqué on principles of registered capital system in
non-public companies has been declared by the Ministry of Customs
and Trade (hereafter the “Ministry”) and published on the Official
Gazette dated 19 October 2012. The revolutionary communiqué brings
out new corporate responsibilities for non public companies having
registered capital system.
Pursuant to the article 5 of the communiqué, Companies with an initial capital of at least one hundred thousand Turkish Liras; subject to the permission of the Ministry shall either accept the registered capital system during incorporation or adopt later by amending the articles of association.
It is required that the issued capital must be fully paid and no capital loss shall exist at the companies will accept registered capital system. Initial capital must be fully paid in companies will accept the registered capital system during incorporation.
The initial capital, start and end dates of the authorization the board of directors limited to maximum five years to increase the capital up to the registered capital , the upper limit of registered capital, declaration method of board resolutions with respect to increasing capital must be clearly defined in articles of association of the companies looking to adopt or accept registered capital system .
It is also required to put the corresponding clauses with respect to the authorization of board of directors to issue shares over the nominal value or preferred shares or to limit preemptive rights, if any.
The upper limit of the registered capitalist not allowed to be more than five times of the initial capital. The upper limit of the registered capital, regardless of either it has been reached or not, is allowed to be increased with an amendment of articles of association. In subsequent periods after the acceptance of or adaptation to the registered capital system, the upper limit of the registered capital shall be maximum five times of the issued share during the meeting of general assembly that the amendment of articles of association will be resolved .
After the expiration of the authority granted to the board, it is required to make amendment in articles of association for re-authorization of the board to take the decisionon capital increase.
Companies have not amended their articles of association with respect to re-authorization period of the board until the meeting of the general assembly in the year that the authorization expired is considered out of the registered capital system.
The change in the board of directors within the period determined by the articles of association shall not eliminate the authority granted to the board.
In cases where the companies wish to get out of the registered capital system before the expiration of the specified period of time in articles of association, the board shall prepare the draft amendment of articles of association and submits it to the General Directorate of Domestic Trade.
During the amendment of their articles of association shall be provided by capital increase on principal capital system basis, provisions corresponds to the registered capital system on articles of association of the companies which are considered out of the registered capital system are removed.
Except for the purpose of registered capital system, the companies that are able to increase their capital easily due to their corporate structuring and without any need to registered capital system and lost the other qualifications of having registered capital system and in cases where the abuse of shareholders or other relevant third parties are apparent, are removed from the registered capital system by the Ministry.
Companies removed from the registered capital system are not allowed to adapt again within two years of the removal. However, upon the application of the company, providing that the company management is changed or the reason of removal does not exist anymore, Ministry may allow without waiting for the expiry of two years.
About the Author
Safak Herdem is a partner at Herdem & Co., a Turkish law firm.