Amendments To The Articles of Association – Altaş Consulting Company

How to amend articles of association in Turkey?

Amendments to the Articles of Association (briefly mentioned as “AAA”) are common during the life of a company, especially as businesses grow, change, or adapt to new regulations. The Turkish Commercial Code (TCC) governs the procedure for AAA, and such changes require careful legal handling to ensure compliance and validity.

Here’s a detailed explanation of how AAA are made in Turkey, the required steps, and the conditions under which they are permissible:

1.Legal Framework for Amendments

Under the Turkish Commercial Code (TCC), companies can amend their AA to:

Change the company’s objectives or purpose.
Alter the company structure, such as the share capital, share transfer restrictions, or governance setup.
Adapt the company to new regulations or business needs.

AAA is typically done by the General Assembly (shareholders’ meeting), and certain amendments may require specific majorities or approval processes.

2.Common Reasons for AAA

Companies often amend their AA for the following reasons:

Increase or decrease the share capital.
Change in the company’s business purpose (e.g., expansion into new industries or markets).
Changes in the governance structure (e.g., altering the number of directors or management team).
Modification of shareholders’ rights, such as dividend policies or voting powers.
Transfer restrictions on shares or adjustments in shareholder approval procedures.
Legal compliance with new regulations or changes in the Turkish Commercial Code.

3.Procedure for AAA

The procedure for making AAA in Turkey generally involves the following steps:

Step 1: Proposal for Amendment

Board of Directors’ Proposal: The Board of Directors (or other managing bodies) typically prepares the proposal for amendments, especially when the changes are substantive, such as an increase in capital or change in company’s purpose.
Shareholder Proposal: In some cases, shareholders can also propose amendments, particularly if the change is related to shareholder rights or if the company’s Articles allow for shareholder-initiated amendments.

Step 2: General Assembly Meeting

Calling the Meeting: A General Assembly (shareholders’ meeting) must be convened to discuss and approve the proposed amendments. Notice of the meeting must be sent to all shareholders in advance (usually at least 14 days before the meeting).
Agenda: The agenda of the meeting should specifically mention the amendments being proposed to AA.
Voting on Amendments: At the General Assembly, shareholders vote on the proposed amendments. In most cases, a simple majority (50 % +1) is sufficient, but for certain significant amendments (e.g., changing the company’s purpose, increasing share capital), a supermajority may be required.

4.Required Majority for Approval

The majority required for approval of the amendment depends on the type of amendment and the company’s AA. Some common requirements are:

Simple Majority: Changes that are less impactful, such as altering the company’s internal procedures, may be approved by a simple majority (more than 50% of shareholders present at the meeting).
Supermajority : For significant amendments, such as altering the company’s objectives or making substantial changes to share capital or governance, a 75 % majority (or more) of shareholders’ votes may be typically required.
Unanimous Consent: In some cases, particularly when the AA dictate, unanimous consent may be required, especially for decisions related to fundamental changes or restrictions on share transfers.

5.Notarization and Registration

Once the amendments are approved by the General Assembly, the company must complete the following steps:

The amended AA must be notarized.
After notarization, the amended AA must be submitted to relevant Trade Registry for official registration. The registration must take place at the local Trade Registry where the company is located.
The Trade Registry Director ensures that the changes comply with Turkish law and that the amendments are legally binding.
Upon registration, the Trade Registry will provide an official Gazette publication of the amendments, making the changes publicly accessible. This step ensures that the amendments are legally recognized and enforceable.

6.Notable Restrictions on Amendments

Not all amendments are possible or allowed under Turkish law. Some of the most common restrictions include:

Capital Increase: Increasing share capital may require specific procedures, including approval from the General Assembly and updating the shareholder register.
Share Transfer Restrictions: If the AA include transfer restrictions (for example, limiting shares to insiders), amending this clause could require majority consent or approval by specific shareholder groups.
Changes in Company’s Purpose: Changing the company’s main business purpose can often require a supermajority vote and must be aligned with the legal framework governing the company’s industry.
Changes to Legal Structure: Some amendments, such as converting the company into another type (e.g., from a Limited Liability Company to a Joint-Stock Company), may require extensive procedures and specific legal documentation.

7.Post-Amendment Compliance

After successfully amending the AA, companies need to:

Notify Authorities: If relevant, inform regulatory bodies or other stakeholders about the changes (e.g., tax authorities, licensing bodies).
Update Documents: Ensure that any external documentation, such as official registers or contracts, reflects the updated AA.
File Annual Reports: Companies must update their annual reports or other filings to reflect the changes, including updated share capital, governance structure, or business activities.

8.Example of AAA

Here are a few practical examples of amendments that companies in Turkey may make in their AA:

Increasing Share Capital: A company may increase its capital by issuing new shares, and this requires an amendment to capital section of the AA.
Changing the Company’s Purpose: A company may wish to diversify its activities (e.g., from manufacturing to include IT services). The purpose section of the AA would need to be amended to reflect this change.
Modifying Shareholder Voting Rights: A company might want to adjust the voting rights of specific classes of shares (e.g., allowing preferred shareholders to have more voting power).
Alteration of Dividend Policy: Companies may amend their dividend policy to change how profits are distributed, whether as a higher percentage of profit or through a new method of distribution.
Reorganizing the Management Structure: Changing governance of the company, such as adding or removing positions on the Board of Directors or changing the number of directors, would require an amendment to relevant sections of the AA.

Amendments to the Articles of Association in Turkey is an important process that allows companies to adjust to evolving business needs, legal requirements, or strategic changes. It involves careful legal preparation, adherence to voting requirements, and proper registration with the Trade Registry. Given the legal complexities involved, it’s advisable for companies to consult with legal professionals to ensure that the amendments are compliant with the Turkish Commercial Code and are correctly executed. 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 Organized Industrial Zones Law database.