THE AUTHOR
Safak Herdem
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.
