Bearer Shares in Turkish Joint Stock Companies: Issue, MKK Notification, Transfer and Due Diligence (TCC 484-489)

A foreign investor who is offered shares in a Turkish joint stock company (anonim şirket) may find that the shares are bearer shares (hamiline yazılı pay) rather than registered shares. The questions then come quickly. Can bearer share certificates still be issued in Türkiye? Who must report them to the Central Registry Agency (Merkezi Kayıt Kuruluşu, MKK)? Is handing over the certificate enough to transfer the shares? What can a holder do, and not do, if the MKK has not been notified? And what should a buyer verify before paying the price? The Turkish Commercial CodeTTKTurkish Commercial Code No. 6102The statute that governs merchants, companies, commercial paper, insurance and carriage — the framework a foreign business actually operates inside.Glossary → (TCC, Law No. 6102) answers these questions in Articles 484 to 489 (Articles 486 and 489 were amended by Law No. 7262 of 27 December 2020), together with Articles 417 and 426, Provisional Article 14 and the Ministry of Trade's Communiqué on the Notification of Bearer Share Certificates to the Central Registry Agency and their Registration (the Communiqué). This guide follows the statute and the Communiqué step by step.

1. What a Bearer Share Is and When It Can Be Issued (TCC 484-488)

Two kinds of certificate. Under TCC 484(1), share certificates are either bearer or registered. TCC 487(2) requires a registered share certificate to name its holder and imposes no such requirement on a bearer certificate. The company's articles of association must state whether the share certificates will be registered or bearer (TCC 339(2)(d)). The whole articles of association are registered and announced, and TCC 354(1)(e) lists the types of share certificates and whether they are bearer or registered among the items of the registered and announced articles to which TCC 36(1) applies.

Full payment first. Under TCC 484(2), bearer share certificates cannot be issued for shares whose price has not been paid in full. Certificates issued contrary to this rule are invalid, and the compensation rights of persons in good faith are reserved. The same idea appears in the rule on conversion: unless the articles of association provide otherwise, the type of a share can be changed by conversion, which is made by amending the articles of association; where conversion is required by law, the board takes the necessary resolution, applies it at once and starts the process of reflecting it in the articles (TCC 485(1)). Registered share certificates can be converted into bearer share certificates only if the share prices have been paid in full (TCC 485(2)).

No shares before registration. Under TCC 486(1), shares issued before the registration of the company and of the capital increase are invalid, although the obligations arising from the subscription undertaking remain valid. Under TCC 486(4), a person who issues a share certificate before registration is liable for the damage arising from it.

Form of the certificate. Under TCC 487(1), a share certificate must state the company's trade name, the amount of its capital, the date of incorporation, the amount of capital on that date, the series of the certificate issued and the date of its registration, the type and nominal value of the certificate and the number of shares it contains, and must be signed by at least two of the persons authorised to sign on behalf of the company. In closely held companies, a printed signature must be perforated or other anti-forgery security measures must be applied. Under TCC 487(2), registered share certificates must also state the holder's name and surname or trade name, place of residence and the amount of the certificate price that has been paid, and are recorded in the company's share ledger; TCC 487(2) sets no such requirement for bearer certificates.

Damaged certificates. If a share certificate or an interim certificate (ilmühaber) is worn or damaged to the point that it cannot circulate, or its content or distinguishing features cannot be understood without doubt, its holder is entitled to ask the company for a new certificate or interim certificate, provided that the holder pays the costs in advance (TCC 488(1)).

2. Printing Bearer Share Certificates and the First MKK Notification (TCC 486(2) and the Communiqué)

The three-month rule. Under TCC 486(2), if the shares are bearer shares, the board of directors prints the share certificates and distributes them to the shareholders within three months from the date on which the share price is paid in full. The board's resolution on printing bearer share certificates is registered and announced, and is also placed on the company's website. Until the share certificate is printed, an interim certificate may be issued, and the provisions on registered share certificates apply to interim certificates by analogy.

Notification before distribution. Law No. 7262 added a sentence to TCC 486(2): the information on the bearer shareholders and the shares they hold is notified to the MKK before the certificates are distributed to the shareholders. The statute uses the passive form. The Communiqué, issued under TCC 489(4), says how the notification is made:

• bearer share certificates are printed on the basis of a board resolution taken after the share prices have been paid in full, and the resolution states, at a minimum, the number, series, nominal value, number and amount of shares represented, group and company serial number of the certificates, together with the total number of shares and the total share price (Communiqué, Art. 4(1));
• the persons authorised to represent the company notify the MKK of the board resolution and of the identity and contact details of the bearer shareholder to whom each certificate will be distributed; for a natural person who is not a Turkish citizen, the foreign identity number, Blue Card number or passport number is given, and for a legal person, its trade name, MERSİS number, tax identity number or registration number in its country of registration, and the address of its seat; the notification also includes the company's contact details (Communiqué, Art. 4(2));
• each certificate is recorded in the shareholder's name under a unique number generated by the MKK system, and the company prints the certificates so that they carry that unique number (Communiqué, Art. 4(2) and (3));
• before the board resolution is registered, the trade registry directorate confirms that the bearer share certificates have been recorded in the MKK system (Communiqué, Art. 4(3));
• the certificates are signed by at least two persons authorised to sign and, after the necessary checks, are distributed to the shareholders against signature (Communiqué, Art. 4(4)).

Under Article 4(5) of the Communiqué, printing, notification to the MKK and distribution are completed within three months from the date on which the share prices are paid in full, and under Article 4(6) the same rules apply where bearer share certificates are printed and distributed in connection with a capital increase.

Scope. The Communiqué covers joint stock companies other than those whose shares are monitored on records under Article 13 of the Capital Markets Law No. 6362SPKThe Capital Markets Board — and the Capital Markets Law No. 6362In Turkish the same three letters are used for the regulator (Sermaye Piyasası Kurulu) and for the statute it administers (Sermaye Piyasası Kanunu No. 6362).Glossary → (Communiqué, Art. 1(2)).

3. Transferring Bearer Shares: Possession Plus Notification by the Transferee (TCC 489)

The rule. TCC 489 was rewritten by Law No. 7262. Under TCC 489(1), the transfer of bearer share certificates has effect with regard to the company and third persons only through a notification to the MKK made by the transferee who has acquired the share through the transfer of possession. Two elements therefore appear in the text: the transfer of possession of the certificate, and the transferee's notification to the MKK.

Who notifies. The statute places the notification on the transferee, not on the seller or the company. Under Article 5(1) of the Communiqué, where the transferee applies to the company, the transfer notification is made through the company. Under Article 5(2), the notification contains the transferee's identity and contact details, and a copy of the share certificate is attached to it. On notification, the transferee is recorded in association with the certificate, under the certificate's unique number (Communiqué, Art. 5(3)).

How it is filed. Under Article 11 of the Communiqué, records and notifications are made electronically in the MKK system, either through the e-Government Gateway (e-Devlet Kapısı) using an electronic signature, an e-Government password or a Turkish identity card, or directly through the MKK's “e-Yatırımcı: Investor Information Centre” application. When the transferee makes the notification, the MKK informs the transferee and the transferor that the record has been created, by text message to the telephone registered in the system or by e-mail (Communiqué, Art. 12(1)). The person making the notification is responsible for its accuracy (Communiqué, Art. 7(5)).

Special cases. In transfers based on universal succession, such as inheritance, the MKK records are changed on a notification made by the persons concerned together with a document showing entitlement (Communiqué, Art. 14(1)). Unless the authority concerned decides otherwise, no transfer notification can be recorded for a share certificate that has been attached or made subject to an interim measure (Communiqué, Art. 13(2)).

What the statute does not say. TCC 489 contains no period within which the transferee must notify. It speaks of the effect of the transfer with regard to the company and third persons; the relationship between seller and buyer should be settled in the share purchase agreement.

4. What Happens If the MKK Is Not Notified (TCC 489, 426(2), Provisional Article 14 and TCC 562(13))

Rights are suspended. Under the second sentence of TCC 489(1), if no notification is made to the MKK, holders of bearer share certificates cannot use the share-related rights arising from the TCC until the required notification is made. Article 10(1) of the Communiqué repeats this rule. The statute speaks of the share-related rights arising from the TCC as a whole; it does not list them one by one.

The notification date counts. Under TCC 489(2), the date of the notification made to the MKK is the basis for asserting the rights attached to a bearer share certificate against the company and third persons. Article 10(2) of the Communiqué refers to the date of the notification made to the MKK by electronic means.

Possession alone is not enough against the company. Under TCC 426(2), a person who proves that they possess a bearer share certificate and who has been notified to the MKK is authorised to use the rights arising from shareholding against the company. The words “and who has been notified to the MKK” were added by Law No. 7262.

General meetings. Under TCC 417(1), the board draws up the list of bearer shareholders who may attend the general meeting according to the “shareholders' schedule” (pay sahipleri çizelgesi) obtained from the MKK. Under Article 6 of the Communiqué, the persons authorised to represent the company apply through the MKK system at least two days before the general meeting (where the meeting is called by a court-appointed trustee, a shareholder, the minority or the liquidators, the application can be made by them), and the MKK prepares the schedule on the basis of the end-of-day records in its system on the day before the meeting. A transferee is recorded in the MKK system under the certificate's unique number on notification (Communiqué, Art. 5(3)), and the schedule is prepared from the records in that system.

Certificates issued before the new regime. Under Provisional Article 14(1), holders of bearer share certificates had to apply to the joint stock company with their certificates by 31 December 2021 for notification to the MKK; on the application, the board notifies the MKK of the bearer shareholders and their shares within five working days. Shareholders who do not apply to the company cannot use the share-related rights arising from the TCC until the required application is made.

Administrative fine. Under TCC 562(13)(a), those who do not make the notification required by TCC 486(2) are punished with an administrative fine; check the figure in force at the time. Sub-paragraph (b) of TCC 562(13) has been annulled by the Constitutional Court; as the official text now stands, TCC 562(13) lists a fine only for the notification under TCC 486(2). Under Provisional Article 14(2), those who do not make the application or notification under its first paragraph are punished under TCC 562(13). Unless otherwise provided, administrative fines under the TCC are imposed by the highest local civil administrator (TCC 562(14)).

5. Bearer Shares Compared with Registered Shares (TCC 487, 490, 492 and 499)

Registered shares. Unless the law or the articles of association provide otherwise, registered shares can be transferred without any restriction (TCC 490(1)). A transfer by legal transaction can be made by transferring to the transferee possession of the endorsed registered share certificate (TCC 490(2)). The articles of association may provide that registered shares can be transferred only with the company's approval (TCC 492(1)); that restriction is a rule for registered shares, and if the company enters liquidation the restrictions on transferability fall away (TCC 492(3)).

The share ledger. The company records holders of uncertificated shares and registered share certificates, and usufruct holders, in the share ledger with their first names, surnames, trade names and addresses (TCC 499(1)). As long as it is not proven that the share has been duly transferred or that a usufruct has been created over it, the transferee and the usufruct holder cannot be entered in the share ledger (TCC 499(2)), and in relations with the company only the person recorded in the share ledger is accepted as shareholder and usufruct holder (TCC 499(4)); the Capital Markets Law provisions on registered shares tracked by the MKK are reserved (TCC 499(5)). Under TCC 426(1), the rights arising from uncertificated shares, registered share certificates and interim certificates are used by the shareholder recorded in the share ledger or by a person authorised in writing by that shareholder.

The table below sets the two regimes side by side.

Holding certificates for someone else. A person who holds a bearer share certificate by reason of a pledge, a right of retention, a custody agreement, a loan for use or a similar agreement can use the rights of shareholding only if the shareholder has authorised them by a special written document (TCC 427(2)).

6. Due Diligence for a Foreign Buyer or Investor: A Checklist

Why the MKK record matters to a buyer. The statute links the effect of the transfer towards the company and third persons, and the use of share-related rights, to the MKK notification (TCC 489(1)). A buyer who holds the certificates but has not notified the MKK cannot use those rights until the required notification is made, and the date that counts for asserting them against the company and third persons is the notification date (TCC 489(2)).

Records are confidential. The records kept by the MKK on bearer share certificates are shared with authorities empowered under the relevant laws (TCC 489(3)). Under Article 8(1) of the Communiqué, these records are confidential and are shared only with such authorities. Bearer shareholders can query the shares registered in their own name through the MKK's e-Yatırımcı application and obtain a document on them (Communiqué, Art. 8(3)), but documents produced by the MKK do not on their own establish any shareholding right (Communiqué, Art. 12(2)). The buyer therefore asks the seller to produce the seller's own MKK record, and reads it together with the certificates and the company's corporate records.

Points to check before signing and before closing:

1. Read the articles of association: do they provide for bearer or registered share certificates (TCC 339(2)(d)), and has any conversion been made by amending them (TCC 485(1))?
2. Confirm that the share price was paid in full before the bearer certificates were issued; certificates issued for shares not paid in full are invalid (TCC 484(2)).
3. Obtain the registered and announced board resolution on printing the certificates (TCC 486(2)) and check that each certificate carries the unique number generated by the MKK system (Communiqué, Art. 4(3)).
4. Check the form of each certificate against TCC 487(1): trade name, capital, incorporation date, series, registration date, type, nominal value, number of shares and at least two authorised signatures.
5. For certificates issued before Law No. 7262, ask whether the holder applied to the company for notification to the MKK under Provisional Article 14(1); if not, the share-related rights cannot be used until the required application is made.
6. Ask the seller for its MKK record and compare the unique numbers with the physical certificates (Communiqué, Arts. 4 and 8(3)).
7. Ask whether any certificate has been attached or made subject to an interim measure: unless the authority concerned decides otherwise, no transfer notification can be recorded for it (Communiqué, Art. 13(2)).
8. Ask whether any certificate is held by a pledgee or custodian; that person can use shareholder rights only with a special written authorisation from the shareholder (TCC 427(2)).
9. Make the transfer of possession and the transferee's MKK notification part of the closing mechanics, and decide in advance who will file it, with what documents, and whether the notification will go through the company (TCC 489(1); Communiqué, Arts. 5 and 11).
10. If a general meeting is planned soon after closing, take into account that the MKK prepares the shareholders' schedule from the end-of-day records of the day before the meeting (Communiqué, Art. 6(3)).

Drafting the share purchase agreement. Because the statute places the notification on the transferee, the agreement can set out the seller's cooperation (delivery of the certificates, the seller's MKK record and any documents the company needs) as a condition of closing. The seller's representations can cover full payment of the share price, the validity and form of the certificates and the absence of attachments and interim measures, so that the buyer has a contractual route if any of these turns out to be untrue.

Frequently asked questions