Law on Amendments to the Turkish Commercial Code and Certain Laws

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As is known, on May 3, 2024, as detailed on our DL note, the Draft Law on The Amendments to the Turkish Commercial Code and Certain Laws ("Draft Law") was submitted for the approval of the Grand National Assembly of Turkey. The changes proposed in the Draft Law have been accepted within the scope of the Law.

The amendments introduced to the corporate regulations in the TCC under the Law are summarized below:

Alignment of the Term of the Office of the Chairman and Vice-Chairmen of the Board of Directors with the Term of the Office of the Board of Directors

According to Article 366 of the TCC, the board of directors is mandated to elect a chairman and vice-chairmen among its members every year. In practice, for the board of directors appointed with terms exceeding one year, the distribution of duties related to the chairman and vice-chairmen could not be done annually. Consequently, the chairman and vice-chairmen's duties would expire after one year, even though the board of directors' term continued.

What to Expect from the Amendments?

To address this issue, the phrase "every year" is removed from the relevant article. This amendment would allow the chairman and vice-chairmen of the board of directors to serve for a term longer than one year, aligning with the term of office of the board of directors.

Removal of the Appointment of the Branch Managers and Signature Authorities Who are not from Upper Management Amongst the Non-Transferrable Duties of the Board of Directors'

Article 375 of the Turkish Commercial Code outlines the non-transferable duties of the board of directors. Clause (d)of the first paragraph of the relevant article categorizes the appointment and removal of managers, individuals with similar functions, and those holding signing authority as non-transferable duties of the board of directors. The explanatory memorandum of the Draft Law highlights that the appointment of all signing authorities and branch managers by the company's management body and the non-transferable nature of this authority have caused practical problems, particularly in multi-branch company structures.

What to Expect from the Amendments?

To address this issue, the appointment of "those holding signing authority" and "branch managers" are removed from the non-transferable duties of the board of directors. This will allow the board of directors to delegate the authority to appoint and remove branch managers, enabling companies to take faster and more effective action.

Convening the Board of Directors upon Written Request of a Majority of Board Members

Article 392 of the TCC was granting each board member the right to request a board meeting in writing from the chairman, as part of the right to information and inspection. However, there were no further explanation regarding the actions to be taken by the chair manor the vice-chairman. As mentioned in the explanatory memorandum of the Draft Law, in some cases where the need for a board meeting arises, problems may arise if the chairman remains silent or if the board meeting is not convened upon the request.

What to Expect from the Amendments?

To strengthen the internal decision-making mechanisms and negotiation environment of companies, a new provision has been introduced regarding the convening of the board meeting upon a written request of the majority.

Mandatory Increase of Company Capitals to Minimum Amounts by December 31, 2026

Effective as of January 1, 2024, the initial minimum capital requirements for newly established commercial companies were increased as follows:

As it is known, although there was a letter published by the Ministry of Commerce on this issue, as a result of the change, there was a gap in the law regarding what companies whose capital was currently below the new minimum capital amounts should do. This change created uncertainty regarding the actions required by existing companies whose capital fell below the new minimum capital requirements.

What to Expect from the Amendments?

To address this issue, the Law introduces a transitional provision. It mandates that existing companies must increase their capital to comply with the new capital requirements by December 31, 2026. Companies that fail to comply by the specified date will face liquidation proceedings.

No Judgement of Trial Expenses Against the Trade Registry Office in Revival Cases

In practice, this amendment is frequently requested by the trade registry offices, which are often being a party to revival cases. The Provisional Article 7, paragraph 15of the TCC has been amended and it has been regulated that in the trials to beheld regarding the revival of the company or cooperative whose registration has been deleted, the relevant trade registry directorate shall not be judged against trial expenses and attorney fees.