Pre-joint Stock Company in Turkish Law

Abstract

The Turkish Commercial Code No. 6102 makes a dual distinction in terms of the establishment of joint-stock companies and regulates the establishment process separately as establishment and gaining legal personality. In fact, although a joint-stock company is considered to be established when the founders declare their will to establish a joint-stock company in the articles of association, the signatures of which are approved by a notary or signed in the presence of the trade registry director or his/her deputy, it gains legal personality with registration in the trade registry. In this process from the establishment of a joint-stock company to the moment it gains legal personality, the existence of a pre-joint-stock company emerges. The legal status and liability of a pre-joint-stock company are controversial in the doctrine.

In this study, the controversial legal nature of the pre-joint stock company structure that emerged during the establishment process of joint stock companies in Turkish law will be examined, and then the actual structure and legal liability of the pre-joint stock company, as well as the duration of the pre-joint stock company and the termination cases will be discussed. Finally, the possible legal regulations that need to be made on this issue in order to clarify the current legal nature of pre-joint stock companies in Turkish law will be evaluated.

Key Words: Turkish Commercial Code, Joint Stock Company, Pre-Joint Stock Company, Ordinary Partnership, Legal Nature, Legal Personality, Establishment, Registration

I. INTRODUCTION

A joint stock company, which is regulated between Articles 329 and 563 of the Turkish Commercial Code No. 6102 (“TCC”)[1], is deemed to have been established when the founders declare their will to establish a joint stock company in the articles of association, which is drawn up by the law, in which they have unconditionally committed to pay the entire capital, their signatures are notarized or signed in the presence of the trade registry director or his/her deputy.[2] However, at this stage, the company does not yet have a legal entity. In fact, the first paragraph of Article 335 of the TCC quoted above only explains the establishment phase of joint stock companies, and the phase of gaining legal personality is separated by referring to the first paragraph of Article 355 in the second paragraph of the same Article. At this point, the pre-joint stock company structure, which was introduced as a new regulation by Article 335 of the TCC, is in question.

In fact, all commercial companies that are being established have the status of an ordinary partnership before they gain legal personality. However, an exception has been made to this rule for joint stock companies, and the provisions of ordinary partnerships have been excluded, and a stage called pre-partnership has been created, at least until the company gains legal personality, with the signing stage before the notary/trade registry.[3]

II. THE CONTROVERSIAL LEGAL NATURE OF THE PRE-JOINT STOCK COMPANY

A pre-joint stock company is established by making the articles of association of the planned joint stock company in written form and approving the signatures of all founders by a notary public or by signing the articles of association in the presence of the trade registry director or his/her deputy. The company planned to be established gains legal personality by registering the pre-joint stock company articles of association with the trade registry where the company headquarters is located.

Based on the fact that joint stock companies can gain legal personality through registration in the trade registry, it can be said that the pre-joint stock company, which is accepted to have come into existence at the stage before registration, is a “joint stock company-like” structure that does not have a legal personality and merchant status, and has the authority to carry out certain legal transactions through its organs within the framework of the articles of association, even if they are limited to the works specifically specified in the articles of association or to be carried out due to the nature of the business.[4]

The legal nature of the pre-joint stock company is not clearly stated in the TCC, but in the justification of Article 335 which states “The article points to the existence of the pre-joint stock company and clarifies the moment of formation of this company. The pre-joint stock company differs from the joint stock company with a legal personality. The mentioned point is emphasized by reserving the first paragraph of Article 355.”, it is emphasized that according to the prevailing view, the pre-joint stock company is not an ordinary company or an association, but a joint ownership (company). Again, the same justification includes the explanation that “The partners (founders) of the pre-joint company do not have the status of merchants, the pre-joint company ends without liquidation with the registration of the company. In a single-person joint stock company, the pre-joint company has the nature of the sole founder’s private property.”

Based on these explanations, it is understood that what the law-maker meant by the dominant view expressed in the justification was German law, and that in fact, with the provision of Article 355 of the TCC, the law-maker wanted to introduce the pre-company institution, which is valid in German law, into our law.[5]

However, concerning the inadequacy of the current legal regulation on this issue by stating in the justification of Article 335 that “The nature and legal status of the pre-joint-stock company in Turkish law will be clarified in the doctrine and court decisions.” this issue has been left to doctrine and precedents. In this context, no settled jurisprudence has yet been formed, and different views have emerged in the doctrine regarding the legal nature of the pre-joint-stock company.

At this point, the second paragraph of Article 620 of the Turkish Code of Obligations No. 6098 (“TCO”)[6] comes to the fore. The provision in question states that “If a partnership does not have the distinctive characteristics of partnerships regulated by law, it is deemed to be an ordinary partnership subject to the provisions of this section.” and in light of this article, there are also views that argue that pre-joint stock companies have the characteristics of ordinary partnerships. Indeed, Tekinalp argues that the company stated to have been established in Article 335 of the TCC is not a joint-stock partnership, because a joint-stock partnership has acquired legal personality in accordance with Article 355, and that this company cannot be described as a joint-stock partnership without legal personality, and that the company mentioned in Article 335 of the TCC is an ordinary partnership in accordance with Article 620/2 of the TCO, because according to the said paragraph, a partnership is considered an ordinary partnership if it does not have the distinctive characteristics of partnerships regulated by law.[7]

The application of the second paragraph of Article 620 of the TCO against Article 335 of the TCC essentially points to a conflict between the pre-company system envisaged in German law and the pre-company system valid in Swiss law. However, as can be understood from the justification of Article 335, since Turkish law refers to the model adopted in German law, it would be appropriate to explain the structure and legal nature of the pre-company, the existence of which is accepted, according to the principles valid in German law.

Moreover, during the period of the old Turkish Commercial Code No. 6762, the provision 620/2 of the TCO was decisive and valid, and in Turkish law, as in Swiss law, the formation that emerged during the process from the approval of the articles of association to registration was considered an ordinary partnership. However, instead of continuing the system of the old Turkish Commercial Code, the legislator felt the need for a new regulation with Article 335 of the TCC and referred to the principle of German law in its justification. When the necessity for this new regulation is taken into consideration, as Pulaşlı also argues, it can be said that the company up until the registration stage was not an ordinary partnership, because the founders aimed to establish a commercial company, not an ordinary partnership, with the joint-stock company agreement they signed.[8]

III. ACTUAL STRUCTURE OF THE PRE-JOINT STOCK COMPANY

Since the pre-joint stock company in Turkish law is of German law origin, the view adopted in German law regarding the actual structure and formation of the pre-joint stock company should also be accepted in Turkish law practice.

In German law, a pre-joint stock company is an institution with its own assets, rights, and liabilities, like a joint stock company with a legal entity, and has the organs of the company to be established (general assembly and board of directors). Therefore, in Turkish law, it can be said that the pre-joint stock company has the organs of the joint stock company being established, namely the board of directors and the general assembly, as determined by the articles of association. The board of directors or the persons determined as the organs with management and representation authority specified in the articles of association of the joint stock company being established may also conduct transactions with third parties on behalf of the company at this stage.[9]

IV. RESPONSIBILITY IN PRE-JOINT STOCK COMPANY

The second paragraph of Article 355 of the TCC states “Those who perform transactions and undertake commitments on behalf of the company before registration are personally and severally liable for these transactions and commitments. However, if it is clearly stated that the transactions and commitments are performed on behalf of the company to be established in the future and these commitments are accepted by the company within three months after the company is registered in the trade registry, only the company shall be liable.” and a dual distinction is made regarding the liability in the pre-joint stock company. In this context, the first issue addressed in the aforementioned article is that those who perform transactions and undertake commitments on behalf of the company before the registration of the joint-stock company to be established are personally and severally liable for these transactions and commitments. At this point, for example, if the board of directors delegates the authority to represent the company to third parties, it will be necessary to accept that these persons will also be personally and jointly and severally liable together with the directors who are bodies. In addition, if the company is not established or cannot be established, those who perform transactions during the pre-joint stock company phase and before registration will have unlimited personal and joint liability.[10]

In fact, in the continuation of the article mentioned above, it is regulated that only the company will be responsible if it is clearly stated that the transactions and commitments in question are made on behalf of the company to be established in the future and if these commitments are accepted by the company after the company is registered in the trade registry. Therefore, if the company is not established for any reason or if the transactions and commitments made by the authorities of the pre-joint stock company are not approved by the authorized bodies of the established joint stock company within the period specified in the article, the unlimited liability of the persons who made the transactions and commitments in question will continue.

The main difference between a pre-joint stock company and an ordinary partnership comes to the fore at this point. Because, in the pre-joint stock company, the provisions of a joint stock company are applied in internal relations. In terms of liability to third parties, the provisions of an ordinary partnership are applied, as emphasized in the second article of Article 355 of the TCC.

V. TERM AND TERMINATION OF THE PRE-JOINT STOCK COMPANY

As we have previously stated in our article, a joint stock company is established by the founders declaring their will to establish a joint stock company in the articles of association, the signatures of which are approved by a notary or signed in the presence of the relevant trade registry office, and it gains its legal personality by being registered in the trade registry. Since the first paragraph of Article 354 of the TCC states that “The entire articles of association of the company shall be registered with the trade registry of the place where the company's headquarters is located and announced in the Turkish Trade Registry Gazette within thirty days in joint stock companies to be established with the permission of the Ministry of Customs and Trade following the obtaining of the permission, in other companies following the establishment of the company per the first paragraph of Article 335.”, it can be said that the pre-joint stock company phase between establishment and registration is thirty (30) days as stated in the article.

On the other hand, the second paragraph of Article 345 of the TCC has concluded that the company cannot acquire legal personality within three (3) months from the date of notary approval or the signing of the articles of association in the presence of the trade registry director or his/her deputy, as stipulated in the first paragraph of Article 335. Therefore, although there are different opinions on this issue, it is possible to say that the pre-joint stock company period can be a maximum of three (3) months.

Once the company is registered with the trade registry and gains legal personality, the pre-joint stock company will end without liquidation, as explained in the justification of Article 335. At this point, in fact, the registration of the pre-joint stock company with the trade registry is not considered a reason for termination, on the contrary, the registration transforms the pre-joint company, which is considered a joint ownership, into a company with legal personality.

On the other hand, if the pre-joint stock company is terminated for any reason by the will of the founders, the pre-joint stock company enters the liquidation process and the purpose of the pre-joint stock company continues limited to liquidation until the pre-joint stock company is liquidated and terminated.

VI. CONCLUSION

The pre-joint stock company model, which has been adopted by all doctrines and high court decisions in German law and included as a new regulation in the TCC, is not an ordinary partnership or association, but rather a joint-stock company with a corporate structure, as explained in the justification of the relevant article. Since the pre-company is granted partial rights and juridical capacity, this company, which has all its organs, is managed by the board of directors and represented to the outside. Thus, a certain internally consistent system has been developed in German law regarding the pre-company. Therefore, the internal relations of the company, representation and responsibility, and the problems arising from these can be easily explained within this system.[11]

On the other hand, although the acceptance of the pre-joint stock company has paved the way for the application of the articles of association in resolving disputes that may arise between partners in the period before registration and some question marks on this issue have been eliminated, unlike the German legislation, issues such as the rights and authorities of the organs, the scope of liability and the legal nature of the pre-joint-stock company have not been clarified in the Turkish legislation and it has been stated that this issue will be clarified with the opinions in the doctrine and court decisions. Since the inadequacy of the regulations in the TCC has caused different opinions to emerge and created a controversial agenda in terms of both the legal status of the pre-joint stock company and its place in judicial processes, it is evaluated that new regulations should be made in the legislation and more explanatory provisions should be introduced in terms of the rights and party capacity of the pre-joint stock company and the authority of its organs in order to solve the mentioned problems.

REFERENCES

1. Tamer Bozkurt, Şirketler Hukuku, Issue 11, Ankara 2020

2. Ömer Adil Atasoy, Berkay Ergün, Türk Hukukunda Ön Anonim Şirket, Law Faculty Journal, Year 3, Issue 2, December 2017

3. Emrullah Kervankıran, Ön Şirket ve Hukuki Niteliği (https://dergipark.org.tr/tr/)

4. Ünal Tekinalp, Yeni Anonim ve Limited Ortaklıklar Hukuku ile Tek Kişi Ortaklığının Esasları, Issue 2, İstanbul 2012

5. Hasan Pulaşlı, Yeni Türk Ticaret Kanununa Göre Tek Ortaklı Sermaye Şirketleri ve Buna İlişkin Bazı Özel Durumlar, Regesta Journal, Issue 1, November 2011 (https://www.ito.org.tr/tr)