Introduction
In a significant legal update, the Turkish Commercial Code (TCC), originally enacted under Law No. 6102, has seen substantial amendments through Law No. 7511, published in the Official Gazette (‘Resmi Gazete’) on 29 May 2024. These amendments, which became effective immediately, aim to streamline governance processes and reduce administrative burdens for companies across Turkey.
Simplified Management Structures and Reduced Bureaucracy
A notable revision in Law No. 7511 pertains to the election of board chairs and vice-chairs. Previously, the TCC required annual elections for these positions. With the new regulations, companies can now elect these officials to align with the board’s term, potentially extending up to three years, thus ensuring continuity in leadership and minimising annual administrative tasks.
Another significant shift is the delegation of authority concerning the appointment and removal of branch managers and certain key personnel. Previously, these powers were non-delegable within the board of directors. The amendment facilitates a more dynamic and responsive management structure, particularly beneficial for companies with extensive operations and a high number of authorised representatives.
Enhanced Meeting Protocols
The amendments also introduce more flexible protocols for convening board meetings. This change addresses the practical issues previously encountered when board chairs did not respond to meeting requests. Under the new rules, if a majority of board members demand a meeting, the chairperson must organise it within 30 days. If the chairperson is unreachable or fails to call the meeting, the requesting members can convene it themselves, ensuring that decision-making processes are not unduly delayed.
Financial Requirements and Corporate Survival
A pivotal regulatory update has been enacted affecting all joint-stock and limited liability companies in Turkey. This crucial change pertains to the adjusted minimum capital requirements, underscoring the government's commitment to bolstering financial stability across the corporate landscape. The new regulation mandates that existing companies meet these revised thresholds by 31 December 2026, with significant consequences for non-compliance.
As stipulated by the Presidential Decision No. 7887 dated 24 November 2023, the minimum capital requirements for joint-stock and limited liability companies have been increased. Specifically:
Joint-stock companies are now required to have a minimum capital of 250,000 Turkish Liras.
Nonpublic joint-stock companies utilising the registered capital system must raise their minimum initial capital to 500,000 Turkish Liras.
Limited liability companies must ensure their capital is at least 50,000 Turkish Liras.
Initially, these increased amounts were set to apply only to companies established after 1 January 2024. However, the amendment extends this requirement to all existing joint-stock and limited liability companies. Companies whose capital falls below these amounts must increase their capital to at least the minimum required by the end of 2026. Those that fail to meet this deadline will face dissolution, a measure that highlights the severity of maintaining fiscal health and regulatory compliance.
The legislation also simplifies the process of increasing capital to meet the new requirements:
General assembly meetings held to discuss capital increases to the new minimum amounts will not require a meeting quorum.
Decisions on capital increases will be passed by a majority vote of the shares present at the meeting.
The exercise of privileges against these resolutions will be prohibited, ensuring that no shareholder can block the necessary adjustments for compliance.
Furthermore, nonpublic joint-stock companies with an issued capital of at least 250,000 Turkish Liras that have adopted the registered capital system are not at risk of dissolution. However, they must increase both their initial and issued capitals to 500,000 Turkish Liras by the deadline to avoid exiting the registered capital system.
Recognising the potential challenges in meeting these new requirements, the Ministry of Trade retains the authority to extend the 31 December 2026 deadline by up to two additional one-year periods. This provision allows for flexibility and ensures that companies can adequately prepare and comply with the updated regulations without undue hardship.
This regulatory update is a decisive step towards ensuring that Turkish companies maintain sufficient capital to sustain operations and manage liabilities effectively. It is imperative for all affected businesses to carefully review their current capital status and plan accordingly to meet the new thresholds by the stipulated deadline, thus securing their corporate survival and continued operation within the frameworks of Turkish law.
Implications for Legal Proceedings
In legal domains, the amendment brings clarity and relief to the commercial registries involved in company reactivation lawsuits. Going forward, these registries will not be burdened with litigation costs and attorney’s fees, which aligns legal responsibilities with administrative capacities and reduces the financial strain on government bodies.
Conclusion
The recent amendments to the Turkish Commercial Code signify a progressive step towards modernising corporate governance and simplifying legal processes. These changes are expected to enhance operational efficiency, encourage corporate compliance, and foster a more robust business environment in Turkey.
For companies navigating these changes, understanding the nuances and strategic implementations of the new laws is crucial. CCS Law remains at the forefront to assist businesses with tailored advice and expert legal services. For specific guidance, please visit our contact page.