Book of Shares in Turkey : Shareholder Register or Pay Defteri
Book of Shares (BoS), also referred to as Shareholder Register or Pay Defteri in Turkish, is a critical document used by companies to record and track the share ownership in Turkey. It plays a key role in ensuring transparency, legal compliance, and proper record-keeping in relation to the shareholders of a company. Below is an overview of the BoS and its importance in Turkey, especially for Joint-Stock Companies (Anonim Şirket) and Limited Liability Companies (Limited Şirket).
1.What is BoS?
The BoS is an official record that contains the list of shareholders of a company. It includes important information about the shareholders, such as:
- Name and address of the shareholder.
- Number of the company shares owned by each shareholder.
- Nominal value of the company shares.
- Type of the company shares (registered or bearer).
- Transfer of the company shares details, such as the date and names of the transferor and transferee.
- Shareholder rights (such as voting rights and dividend rights) associated with the shares.
In Turkey, this register is a legal requirement for both Joint-Stock Companies and Limited Liability Companies, though the implementation and specific requirements may differ depending on the type of company.
2.BoS in a Joint-Stock Company
In a Joint-Stock Company, the BoS serves as the official shareholder registry and is essential for tracking the share ownership and transfers. The BoS must be updated whenever shares are transferred, sold, or otherwise altered.
Key Features of the BoS in JSC
Mandatory for Share Transfers
Whenever there is a transfer of the company shares in an JSC, the shareholder register must be updated to reflect the new ownership. The company’s Board of Directors may be required to approve the transfer, and the BoS must reflect this change.
Physical and Dematerialized Shares
For physical share certificates, the shareholder register will be updated to reflect the transfer of the certificate.
In the case of dematerialized shares (for public joint-stock companies), the transfer of the company shares is processed electronically. But the company must still maintain a shareholder register to ensure proper tracking of the ownership.
Legal Requirement
The Turkish Commercial Code (TCC) requires that every JSC company maintains an up-to-date BoS as part of their legal compliance.
Updating the BoS
- Share Transfers: When shares are sold or transferred, the transferor (current shareholder) and transferee (new shareholder) must sign a share transfer agreement. The company must update the BoS to reflect the transfer, and in the case of physical certificates, a new share certificate may be issued.
- BoD Approval : In some cases, share transfers require the approval of the Board of directors. The Board of Directors may also be involved in approving the transfer of the company shares, particularly in private companies.
- Legal and Notarized Documentation: The share transfer agreement should be notarized to ensure that the transfer is legally valid. The company may also require additional documents, such as proof of identity or residence of the parties involved in the share transfer.
3.BoS in a Limited Liability Company
Unlike JSC, Limited Liability Companies in Turkey do not issue share certificates. However, they are still required to maintain a shareholder registry (known as the BoS), which is used to record the ownership of the company shares.
Key Features of the BoS in LLC
- No Share Certificates: In an LLC, ownership is represented by membership interests, not physical share certificates. The ownership details are recorded in the BoS, which is essentially the official shareholder registry for the company.
- Share Transfers: The transfer of the company shares in a Limited Liability Company is usually more restrictive than in an JSC. For the transfer to be valid, the other shareholders must generally approve the transfer, especially if the shares are being transferred to an external party. The company’s Articles of Association often include clauses about preemptive rights (the right of existing shareholders to buy the shares before they are transferred to outsiders).
- Notarized Agreement: Unlike JSC, the share transfer agreement in an LLC must be notarized to be legally binding. The agreement should clearly specify the number of the company shares being transferred, the price, and any other relevant terms.
- Updating the Registry: Once the transfer is approved, the BoS must be updated to reflect the change in ownership. There are no share certificates, so the BoS serves as the primary record of ownership.
4.Legal Importance of the BoS
The BoS serves several important legal functions:
- Proof of Ownership: The register is the official legal record of who owns the company’s shares. In case of disputes, the BoS serves as the evidence of ownership and is recognized by courts and government authorities.
- Transparency and Regulatory Compliance: Maintaining an up-to-date BoS ensures that the company remains in compliance with Turkish Commercial Law. It provides transparency regarding ownership, which is essential for both internal governance and external reporting.
- Shareholder Rights: The BoS records important information about each shareholder’s rights, including the number of the company shares, voting rights, and entitlement to dividends. It ensures that shareholders can exercise their rights accurately and according to the company’s rules.
5.How to Maintain the BoS
- Manual Record-Keeping: In smaller companies, the BoS can be kept in a physical ledger. Each entry should include the name of the shareholder, the number of the company shares, the nominal value of the shares, and details of any share transfers.
- Electronic Record-Keeping: Larger companies, especially public joint-stock companies, may use electronic systems to maintain their shareholder registers, particularly when shares are dematerialized. In this case, the Central Registry Agency (MKK) can manage the electronic shareholder records for publicly traded companies, but private companies still maintain their internal Books of the company shares.
6.Penalties for Non-Compliance
- Failure to maintain an accurate BoS or update the register when shares are transferred can lead to penalties or legal consequences for the company. Under the Turkish Commercial Code (TCC), companies that do not properly manage their shareholder registry may face challenges with:
- Invalid transfers of the company shares.
- Inaccurate reporting to authorities.
- Disputes over shareholder rights and ownership claims.
Book of Shares (BoS) is an essential document for all companies in Turkey, particularly Joint-Stock Companies and Limited Liability Companies . It serves as the official record of shareholders and ensures legal transparency, proper tracking of ownership, and compliance with Turkish commercial regulations. Whether for physical shares or dematerialized shares, keeping an up-to-date and accurate shareholder register is a key legal requirement for maintaining the integrity and functionality of a company in Turkey. 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.
