EXPULSION OF SHAREHOLDERS UNDER TURKISH COMMERCIAL CODE NO. 6102
Under Turkish Commercial Code (“TCC”) the liability of shareholders of a joint stock company is limited with the payment of the contributed share capital (“single dept principle – tek borç ilkesi”). According to this principle, save for exceptions stipulated under the TCC, no obligation shall be conferred upon the shareholders by the articles of association, other than the premium exceeding the share price or nominal value of the shares. (TCC 480). The payment obligation of the shareholder is to the company (TCC 329).
A shareholder, who does not pay the contributed share capital in due time will be in default without needing to serve a notification to that end (TCC 482).
In the event that a shareholder is in default in paying its share capital the company is entitled to initiate (i) enforcement proceedings for the payment, or (ii) expulsion procedures against the defaulting shareholder.
This brief note will only analyse expulsion of shareholders in general terms.
Requesting the Outstanding Share Capital
Who is entitled to request the payment?
In the event a shareholder of a joint stock company is in default for paying its share capital, the board of directors of the company is entitled to deprive this shareholder of its rights arising out of its partial payment and expel the shareholder from the company (TCC 482). The board of directors’ decisions regarding expulsion of a shareholder are subject to TCC 390 with regards to quorum.
How to request the payment?
In order to request the payment, the board of directors must issue a notification, addressed to the defaulting shareholder, for the payment. This notification has to be published in Trade Registry Gazette in accordance with Article 35 of TCC.
The content of the notification is also determined under TCC. Accordingly, the board of directors must notify the defaulting shareholder that the payment must be made within a month and inform the consequences of the non-payment.
Consequences of non-payment of the share capital despite notification?
If the defaulting shareholder insists on not paying the share capital within the notified one month, the board of directors deprives of the shareholder’s right arising out of its partial payment and the defaulting shareholder can be expelled from the company in accordance with the decision of board of directors (TCC 390).
The board of directors should find a potential acquirer for transferring the shares of the defaulting shareholder. The shares of the defaulting shareholder will not be transferred to any other shareholder or the company automatically.
Legal Consequences of Expulsion
Upon expulsion the defaulting shareholder will lose its shareholder title for the shares for which he is in default. The board of directors cannot deprive of the shareholders rights for the shares which the shareholder has already paid its contribution amount. The shareholder title of the defaulting shareholder continues for these shares.
Statute of Limitation for Due Share Capital Payments
The Court of Appeal has different decisions regarding statute of limitation on payment of share capital. However in its latest decision the Court ruled that share capital contribution shall not be subject to any statute of limitation if the company still exists. On the other hand, the interests and secondary payments arising out of the non-payment of the contributed share capital are subject to general statute of limitation terms.
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