A Circular of the General Directorate of Domestic Trade on Minimum Share Capital Amounts Has Been Published

Legal Regulations Regarding Share Capital

Recent Amendment on the Current Minimum Share Capital Amounts Required in the Turkish Commercial Code ("TCC") for Joint Stock and Limited Companies with Presidential Decree No 7887

As of 1 January 2024, the new minimum share capital amounts are set at TRY 250,000 for newly established joint stock companies, TRY 500,000 for non-public joint stock companies with the registered capital system and TRY 50,000 for limited companies. The implementation and scope of the changes in the Decree were understood to apply solely to companies established as of 1 January 2024. Indeed, in its announcement dated 27 November 2023, the Ministry of Trade emphasised that existing companies whose share capital is below the updated minimum amounts were not obliged to increase their capital, but suggested that strengthening their equity structure to at least the mentioned amounts would be beneficial.

Nevertheless, on 20 December 2023, the Ministry of Trade's General Directorate of Domestic Trade issued a circular titled "Minimum Share Capital" (the "Circular") to the trade registry directorates nationwide. It is understood that the requirement of having the current minimum share capital may be imposed on existing companies as a prerequisite of registration in certain transactions listed in the Circular.

The Ministry of Trade’s General Directorate of Domestic Trade Circular on Minimum Share Capital

Key Considerations in the Circular of the General Directorate of Domestic Trade

Following the Decree, the Circular was issued to ensure unity of practice and provide information on the procedures to be followed to prevent potential problems. The Circular emphasised the minimum share capital and links the performance of certain registration procedures from 1 January 2024, to meeting the specified conditions:

Decision on a Share Capital Increase: In order to register a resolution on a share capital increase, the new share capital of the company must be equivalent to or higher than the updated minimum share capital amount.

Partial Division: If a share capital decrease is carried out within the scope of a partial division, the share capital of the divided company should not fall below the updated minimum share capital threshold.

Transactions regarding the Change of Type of the Company: If the type of the company changes, the company's share capital must be equivalent to or higher than the updated minimum share capital amount.

Loss of Share Capital and Insolvency Cases: While the calculation of the loss of the company's share capital and legal reserves should be based on the registered capital of the company; in cases where precautions are necessary, transactions should be conducted within the framework of the explanations provided in the Circular.

Companies Deemed Dissolved Due to a Failure to Adjust their Capital: 1 In cases where companies falling under this category wish to continue their operations, the registration of share capital increase transactions is subject to obtaining a clear court decision allowing for the capital increase.

Circumstances not foreseen in the Circular: As of the date when the Decree comes into effect, the new minimum share capital amounts will be applied in transactions related to share capital of the companies.

In other words, even if established before 1 January 2024, when existing companies are applying to register a capitalrelated transaction, they must comply with the updated minimum share capital amount through the trade registry directorates. It is worth noting that companies addressed by the Circular may face difficulties during the registration process in practice, both because there has been no legal regulation other than the Decree in this regard and because they may not have access to this Circular through any other channel.

However, for administrative actions to have an effect on the party concerned, the administrative action must also be knowable. On the other hand, it cannot be claimed that the Circular has no executive effect since it is an internal administrative act.

This means that both existing and newly established companies should be aware that, if their registration applications regarding their share capital do not comply with the updated minimum capital amounts, the registration processes will not be completed.