A Guide on How to Transfer Shares of Companies in Turkey
Transfer of company shares in Turkey is a regulated process that varies depending on the type of company (e.g., Joint-Stock Company (Anonim Şirket) or Limited Liability Company (Limited Şirket)). The process involves several legal steps, documentation, and in some cases, approval from other shareholders. Below is a breakdown of how to transfer shares in both types of companies in Turkey:
A. Transfer in a Joint-Stock Company : Step-by-Step Process
1. Shareholder Agreement and Articles of Association
- Review the Articles of Association (company’s founding document) to check for any restrictions on share transfers, such as the preemption rights of existing shareholders or any approval requirements from the board of directors.
- Some joint stock companies may require approval from the Board of Directors, for certain transfers, especially if the transfer is to an external party.
2. Transfer Agreement
- The transferor (current shareholder) and the transferee (new shareholder) must sign a share transfer agreement. This document should outline the terms and conditions of the transfer, including the number of shares being transferred, the price, and the date of the transfer.
- The share transfer agreement can be notarized to ensure its legal validity, especially for substantial or formal transactions.
3. Notifying the Company
- The transfer must be recorded in the shareholder registry. This is the official record of all shareholders of the company. The company’s board of directors must be notified of the transfer, and the transfer will be updated in the shareholder registry.
- If the company operates in a specified sector like banking, energy, media, insurance, etc. or under any specific legal framework (like public joint-stock companies), additional approvals or steps may be necessary.
4. Share Certificate Transfer
- After completing the transfer agreement and updating the shareholder registry, a new share certificate will be issued to the transferee (new shareholder). The old certificate should be returned to the company if it is a physical certificate.
- For dematerialized shares (in public companies), the transfer is made through the Central Registry Agency (MKK), and the transaction is recorded electronically.
5. Approval and Documentation
- If required, Board of Directors will approve the transfer.
- The company must update its internal records to reflect the new shareholder.
6.Key Considerations for JSC Shares:
- Preemption Rights: Existing shareholders may have the right to purchase shares before they are offered to outsiders. This right is often stated in the company’s Articles of Association.
- Approval of the Board: Certain shares may require approval from the Board of Directors before being transferred, especially if the transfer affects the company’s control or ownership structure.
- Public Companies: For public joint-stock companies listed on the Borsa İstanbul, share transfers are typically handled electronically via the MKK system.
B. Transfer in a Limited Liability Company : Step-by-Step Process
In a Limited Liability Company (LLC), share transfers are subject to stricter regulations, and they require the consent of other shareholders. Here’s how the process works:
1. Review the Articles of Association
- In an LLC, the Articles of Association (or company bylaws) may include specific rules about the transferability of shares. The Articles often require approval from other shareholders before any transfer can occur, particularly if the shares are being transferred to someone outside the existing group of shareholders.
- Unlike JSC, there is usually no free transfer to third parties without the approval of other partners.
2. Transfer Agreement
- Similar to a JSC, the transferor (current shareholder) and the transferee (new shareholder) must sign a share transfer agreement. This document should clearly specify the number of shares, the value, and other terms of the transfer.
- This agreement must be notarized for legal validity, as required under Turkish Commercial Code.
3. Approval of Other Shareholders
- If the company’s Articles of Association require it, the transferor must obtain the approval of other shareholders before the transfer is finalized. This is often achieved by holding a shareholders’ meeting where the proposed transfer is voted on.
- If the Articles include a preemptive right clause, existing shareholders may have the first right to purchase the shares before they are transferred to an external party.
4. Amending the Shareholder Registry
- After the transfer is approved, the company’s shareholder registry must be updated to reflect the new ownership.
- Unlike in JSC, share certificates cannot be transferred for LLC companies, as ownership is usually recorded only in the shareholder registry.
5. Notifying the Trade Registry
- After the transfer has been completed and approved by the shareholders, the company’s trade registry must be updated to reflect the change in ownership. The transfer will be recorded officially in the company’s registration details.
- Any changes in the company’s structure, including ownership, must be notified to the Turkish Trade Registry within a specified time (usually 15 days).
6.Key Considerations for LLC Shares:
- Shareholder Approval: Unlike in a JSC, where shares can be transferred freely (subject to certain conditions), LLC shares often require approval from other shareholders, especially when transferring to outsiders.
- Preemptive Rights: Existing shareholders usually have the right of first refusal, meaning they can buy the shares before offering them to third parties.
- No Share Certificates: LLC partners cannot transfer their share certificates; the transfer is recorded solely in the shareholder registry.
C. Tax Considerations in Transfers
- Capital Gains Tax: In both JSC and LLC, if a shareholder sells their shares, they may be liable for capital gains tax on any profit made from the sale. The rate of taxation depends on the specific circumstances, such as the duration of ownership, the nature of the transfer, and whether the shares were held for investment purposes.
- Stamp Duty: A stamp duty is applied to the share transfer agreement for LLCs, which is calculated based on the nominal value of the shares being transferred.
- Transaction Taxes: For public joint-stock companies, when shares are traded on the stock exchange, the Transaction Tax (on financial transactions) may apply.
D. Foreign Ownership and Transfers
- Foreign investors can transfer shares in Turkish companies, but they must comply with Turkish foreign investment regulations.
- If a foreign investor is transferring shares in a company in which foreign ownership is restricted, the transfer must still comply with the foreign investment laws of Turkey.
E.Summary of Transfer Process in Turkey
1. Joint-Stock Company
- Review Articles of Association.
- Sign share transfer agreement
- Notify the company and update shareholder registry.
- Issue a new share certificate to the transferee (if applicable).
- Public companies use the MKK system for electronic share transfers.
2. Limited Liability Company
- Review Articles of Association (and check for restrictions).
- Sign a share transfer agreement (notarized).
- Obtain approval from other shareholders.
- Update shareholder registry.
- No transfer for certificates; ownership is recorded in the registry.
- Notify the Trade Registry.
Transfer of company shares may result serious changes. Understanding the legal requirements and ensuring compliance with Turkish regulations is crucial to successfully transfer shares. It’s recommended to seek legal advice when transferring shares, particularly for more complex or high-value transactions. 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.
