The Amendments on the Turkish Commercial Code and Certain Laws (“The Amendment”), was adopted and published in the Official Gazette on May 29th, marks a significant legislative development. This comprehensive omnibus bill proposes amendments to several pivotal articles within the Turkish Commercial Code (“TCC”), including Article 366, 375, 392, and Temporary Article 7, alongside the introduction of a new temporary article.

The essence of this law proposal extends beyond mere adjustments to the TCC, encompassing substantial revisions to various legal frameworks such as the Cooperatives Law, the Law on the Protection of Competition, and the Law on Consumer Protection. By addressing key aspects of commercial and economic regulations, this legislative initiative reflects Türkiye’s ongoing commitment to fostering a dynamic and competitive business environment while ensuring consumer rights and market integrity.

The proposed amendments outlined in the draft law aim to address various aspects of legal frameworks, focusing on key objectives. These include extending the registration deadline within the Cooperative Information System under the TCC, enhancing clarity regarding the Competition Board’s authority to alter positions, titles, and degrees.

Additionally, reforms are proposed to streamline the defense procedure to expedite investigations by the Competition Board in cases lacking allegations of infringement.

Moreover, the utilization of the allocation method exclusively in sales places within enclosed market areas is suggested. Changes to the structure and functions of the board of directors in joint stock companies are envisaged, along with ensuring alignment of joint stock and limited liability companies with minimum capital requirements.

Furthermore, regulations concerning the Advertisement Board’s authority to remove content and block access are to be refined. The legislation also addresses recognition of rights pertaining to timeshare vacation arrangements and their sale, as well as the regulation of inspections concerning exorbitant price increases and stockpiling, coupled with proposed increments in administrative fines for such actions. Additionally, administrative fines for companies exporting unsafe products are slated for augmentation.

These amendments collectively aim to enhance regulatory clarity, market efficiency, and consumer protection within the Turkish commercial landscape.

Amendments to TCC

  • Amendment to the Terms of the Chairman and the Vice Chairman of the Board of Directors

The amendment to the TCC eliminates the requirement for joint stock companies to elect a Chairman and Vice Chairman of the Board of Directors every year.

With the amendment introduced by Article 13, a change was made to the first paragraph of Article 366 of the TCC, titled “Distribution of Duties.” The phrase “The board of directors is elected annually from among its members” in the first sentence of the paragraph was revised to “The board of directors is elected from among its members.”

Previously, under the existing law, board members could serve for a maximum period of three years, while the Chairman and Vice Chairman were elected annually. This led to uncertainty regarding who would hold these positions in years when elections were not held. The amendment aims to align the election of the Chairman and Vice Chairman with the term of office of the board of directors, thereby reducing ambiguity.

  • Amendment to the Non-Delegable Duties and Authorities of the Board of Directors

The power to appoint branch managers has been removed from the list of duties and powers that the Board of Directors cannot delegate in Joint Stock Companies.

With Article 14 of the Amendment, the first paragraph of Article 375 of the TCC, titled “Non-Delegable Duties and Powers,” was amended as follows:

“(d) Appointment and dismissal of directors and persons holding the same functions, except branch managers.”

Previously, the first paragraph of Article 375 of the TCC stated that the appointment and dismissal of directors, individuals with similar roles, and those authorized to sign were non-delegable duties and powers of the board of directors. These actions required a board decision and could not be delegated. However, due to the wording of paragraph (d), there were disputes regarding whether the appointment and dismissal of all directors and signatories fell under non-delegable duties.

To simplify company operations and clarify ambiguities, the amendment removes the appointment and dismissal of individuals other than top executives from the list of non-delegable duties and powers of the board of directors.

  • Amendment Regarding the Authority to Convene a Board Meeting

With Article 15 of Law No. 7511, insertions were made to the 7th paragraph of Article 392 of the TCC titled as Right to Information and Inspection, which outlines how board meetings are convened.

Under the current regulation, the authority to call a board meeting was only vested in the chairman of the board of directors, but if the chairman fails to do so despite a request from a board member, this authority was given to the vice-chairman of the board of directors.

Under the proposed amendment, if a majority of board members make a written request, the chairman must call a meeting within 30 days from the date of receipt of the chairman of the board of directors. If the chairman or vice chairman can’t be reached, or if no notice is issued, the requesting board members can directly convene the meeting. With the amendment it is understood that the aim is to contribute to the establishment of a negotiation environment in the management body of the joint stock companies.

  • Litigation Expenses Against Trade Registry Directories in Reinstatement Lawsuits

With Article 16 of the Amendment, additions were made to the 15th paragraph of Temporary Article 7 of the TCC.

The Amendment envisages a new provision stipulating that in the reinstatement lawsuits to be filed by creditors or other persons with a legal interest in relation to companies or cooperatives that were de-registered by the trade registry pursuant to the Provisional Article 7 of the TCC, no judicial expenses and attorney fees can be awarded against trade registry directorates involved in the judicial process due to legal obligation.

  • Regulations on Minimum Capital Requirements

According to Presidential Decree No. 7887, the minimum capital requirements for newly established joint stock companies and limited liability companies were raised, effective January 1, 2024. The minimum capital for joint stock companies increased from TRY 50,000 to TRY 250,000, and for limited liability companies from TRY 10,000 to TRY 50,000. Additionally, the minimum capital for privately held joint stock companies operating under the registered capital system rose from TRY 100,000 to TRY 500,000.

The Amendment envisages the addition of the following provision to the TCC as Provisional Article 15, outlining rules for companies formed before January 1, 2024, with capital amounts below the new thresholds;

“PROVISIONAL ARTICLE 15-

(1) Joint stock and limited liability companies whose capital is below the minimum capital amount shall increase their capital to the amounts stipulated in Articles 332 and 580 until 31/12/2026, otherwise they shall be deemed to have dissolved. Non-public joint stock companies that have adopted the registered capital system with an issued capital of at least 250,000 Turkish Liras shall be deemed to have exited from this system unless they increase their initial capital and issued capital to 500,000 Turkish Liras by the aforementioned date.

(2) In the general assemblies to be held for the increase of the capital to the amounts stipulated in Articles 332 and 580, no meeting quorum shall be required, decisions shall be taken by the majority of the votes present at the meeting and no privilege shall be exercised against these decisions.

(3) The Ministry of Trade may extend the period stipulated in the first paragraph for a maximum of two times for one year.”

According to the Amendment, joint stock and limited liability companies failing to meet the new minimum capital requirements by December 31, 2026, will be considered dissolved. Similarly, privately held joint stock companies under the registered capital system must increase their initial capital to TRY 500,000 by the same date or exit the system. Any such companies with increased capital below TRY 250,000 will also face dissolution.

To simplify the capital adjustment process, the Amendment states that general assembly meetings for increasing capital to statutory levels will not require meeting quorums. Decisions will be based on a simple majority of votes present, without any special privileges.

Moreover, the Ministry of Trade will have the authority to extend the deadline for meeting minimum capital requirements by up to two years, with each extension not exceeding one year.

When Will the Changes Enter into Force?

Article 1 of the Amendments will enter into force as of 26.04.2024 and the other provisions will enter into force on the date of publication.