Share Certificates in Turkey - Uzman Pay Senedi

Share Certificates (SCs) of Companies in Turkey

Share certificates in Turkey represent ownership in a company, specifically in a joint-stock company (“Anonim Şirket” or A.Ş.) or limited liability company (Limited Şirket or L.T.D. ŞTİ.). The issuance of SCs is governed by Turkish commercial law, primarily under the Turkish Commercial Code (TCC), as well as related regulations. Here’s an overview of the process and key points related to the issuance of SCs in the country.

1.Share Certificates in Joint-Stock Companies (A.Ş.)

In a Joint-Stock Company (A.Ş.), shares can be represented by SCs (known as “pay senedi” in Turkish), which serve as proof of ownership. The issuance and transfer of SCs must adhere to legal and regulatory frameworks.

Types of Shares in A.Ş.

Registered Shares: These shares are issued in the name of a specific person and are registered in the company’s shareholder registry. Transfer requires official documentation and approval from the company.
Bearer Shares: These are shares that are not registered in the name of a specific individual, and the ownership is determined by physical possession of the SC. However, bearer shares have largely been abolished in the country for transparency and regulatory reasons.

Issuance Process for SCs

Company Incorporation

When establishing a Joint-Stock Company in the country, the company must issue SCs to shareholders after the capital is paid.
The initial share capital must be at least 250,000 TRY for a private joint-stock company and 500,000 TRY for a public joint-stock company that prefers registered capital sysstem.

Shareholder Agreement

The founding shareholders agree on the number of shares, the nominal value of each share, and the rights attached to each share.
The SCs are issued to shareholders based on their capital contribution. Each certificate will list the shareholder’s name, share amount, and other relevant details.

Capital Payment

The share capital must be paid in full (or at least a portion) before the company is legally recognized and SCs can be issued.

Issuance of Share Certificates

Once the capital is confirmed and the company is officially established, SCs are issued.
These certificates must be signed by the authorized representatives of the company and stamped by the company.
The SCs are typically issued for physical shares, though the dematerialization of shares (conversion to electronic form) is becoming more common in the country.

Registration in the Shareholder Registry

After issuance, the company is required to maintain an official shareholder registry (known as “pay defteri” in Turkish), where the details of each shareholder (name, number of shares, and type of shares) are recorded.
This registry is publicly available, ensuring transparency in ownership.

Legal Requirements

For any changes in shareholding (such as the transfer of shares), the company’s shareholder registry must be updated. The company must also update the registry of SCs accordingly.
If shares are transferred or sold, the transfer should be recorded in the shareholder register, and the shareholder may receive a new certificate.

2.SCs in Limited Liability Companies (Ltd.Şti.)

In a Limited Liability Company (LLC), there are no physical SCs like those in a joint-stock company. Instead, ownership is represented by the membership interest in the company, and SCs are not issued.
Transfer of Shares in a limited company is typically more restrictive and requires the approval of the other shareholders in most cases.
Shareholder Registry: Similar to A.Ş., an LLC must maintain an official registry of the shareholders, which records the members and their respective ownership percentages.

3.Dematerialization of Shares

Electronic Share Certificates: While physical SCs were historically the norm, Turkey is gradually moving towards dematerialization, where shares are held electronically in the Central Registry Agency (MKK). This change simplifies share transfers and increases transparency.
MKK System: In the case of public joint-stock companies, shares can be dematerialized and stored electronically through the MKK (Merkezi Kayıt Kuruluşu), the central depository for the Turkish capital markets.
Advantages: This system reduces risks related to physical SCs, including theft or loss, and ensures that the transfer of ownership is tracked electronically.

4.Transfer of Shares and Issuance of New SCs

Transfer Process: The process for transferring shares depends on the type of company:
In a Joint-Stock Company, share transfers are typically recorded in the shareholder register, and a new SC may be issued to the buyer.
In a Limited Liability Company, shares can only be transferred with approval from other shareholders (unless specified otherwise in the company’s articles of association).
New SCs: When shares are transferred, the company will typically issue a new SC to the new shareholder and update the shareholder registry. In the case of dematerialized shares, the transfer is reflected electronically.

5.Regulations Governing SCs

The issuance, transfer, and registration of SCs in the country are subject to various laws, including:

Turkish Commercial Code (TCC): Sets the general framework for company incorporation, share issuance, and shareholder rights.
Capital Markets Law: Governs the issuance and trading of shares for public companies.
Central Registry Agency (MKK): In charge of the dematerialization process and the electronic tracking of shares for public companies.

6.Foreign Shareholders and SCs

Foreign ownership in Turkish companies is generally permitted, and foreign shareholders have the same rights as local shareholders, provided they comply with local regulations.
Foreign investors can also receive SCs or hold their shares electronically via the MKK system.

7.Key Points to Remember

SCs serve as legal proof of ownership in joint-stock companies (A.Ş.) in the country.
Companies must maintain an official shareholder registry and issue SCs reflecting the number and value of shares owned by each shareholder.
Limited liability companies (LLC) do not issue SCs; ownership is recorded in the shareholder registry.
Dematerialized shares (electronic shares) are becoming more common, especially for public companies, as part of Turkey’s move towards a more transparent, efficient capital market.

Share certificates in Turkey play a crucial role in taxing transfer gains. The issuance of SCs is a well-regulated process that ensures transparency and legal ownership of shares. For joint-stock companies (A.Ş.), the issuance of SCs is a critical part of the process, and the shares may be represented physically or electronically. The Turkish legal framework also provides several safeguards for the transfer of shares, capital reporting, and shareholder rights. For companies transitioning to more modern practices, dematerialization offers an efficient, transparent way to manage share ownership. Please feel free to contact us for more information and further inquiries about our unique services. You can also subscribe to Tacirsoft Hukuk Bilgi Sistemi, that is Turkey’s only Corporate Law and OIZ Law database.