Issuing Stock Certificates of A Limited Liability Company
We briefly explain the stock certificates of LLC. Significant tax advantages have been provided for transfers made with share certificates in Turkish Tax Law. Shares not tied to a certificate are deprived of these advantages.
The issuance of share certificates is regulated in the Turkish Commercial Code. The issuance of share certificates for joint-stock companies is mandatory under the Turkish Commercial Code No. 6102, and the issuance conditions for bearer shares and registered shares are clearly defined.
Turkish Commercial Code also envisages some innovations regarding the issuance of certificates by limited liability companies. The former Commercial Code only allowed limited liability companies to issue share certificates as a means of proof. In contrast, the Turkish Commercial Code grants limited liability companies the optional right to issue share certificates. A limited liability company can issue share certificates as a means of proof or can also print registered share certificates.
The issued share certificates must explicitly specify any additional payment and ancillary obligations, non-compete clauses, if any, which are formulated to apply to all partners, and the rights of pre-emption, repurchase, and acquisition as stipulated in the company’s articles of association.
However, despite the Turkish Commercial Code allowing the issuance of registered share certificates by limited liability companies, unfortunately, this certificate does not provide the same ease of transfer and circulation as the share certificates of joint-stock companies.
This is because, although the Turkish Commercial Code grants this opportunity, it has maintained the obligation for the transfer of shares in limited liability companies to be made in written form before a notary. Therefore, even if a limited liability company issues registered shared certificates, the transfer of company shares must be executed with a transfer agreement signed before a notary.
As a result, the issuance of share certificates by limited liability companies does not provide any tax advantages to the transferring partner, unlike in joint-stock companies. Due to the restrictive provision in the Turkish Commercial Code, while both are capital companies, partners of joint-stock companies benefit from tax advantages in share transfers, whereas partners of limited liability companies are deprived of these advantages.
In contrast, the Swiss Code of Obligations, which forms the basis of the regulation in the Turkish Commercial Code, allows the printing of registered share certificates for limited liability companies and eliminates the requirement for notarized signatures for share transfers. However, in the Turkish Commercial Code, despite the use of the term “registered share certificate,” the requirement for notarized signatures has not been removed.
For your questions about the stock certificates of LLC in Turkey, please feel free to contact us.
