Capital Reduction in a Turkish Joint Stock Company: Resolution, Creditor Call, Security and Registration (TCC 473-475)

How does a Turkish joint stock company (anonim şirket) reduce its share capital? Under Article 473(1) of 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), if the company reduces its capital and does not issue new shares, whose prices will be paid in full, to replace the reduced part, the general assembly resolves to amend the articles of association, and under TCC 473(3) and 421(3) that resolution needs the positive votes of the holders or representatives of shares representing at least 75% of the capital. The board of directors then calls the creditors under TCC 474(1), unless, where the capital is reduced to close a deficit formed in the balance sheet as a result of losses and in proportion to that deficit, it waives the call and the payment or security of the creditors' rights under TCC 474(2), and under TCC 475(1) the capital may be reduced only after the period given to creditors has ended and the declared claims have been paid or secured. Below: the disclosure and board report, the voting majority, the statutory limits, the creditor call, reductions to cover losses, registration and the remedies of creditors and shareholders, with a comparison table and a checklist for foreign shareholders.

1. How Does a Turkish Joint Stock Company Reduce Its Capital? (TCC 473)

The direct answer. Under TCC 473(1), if a joint stock company reduces its capital and does not issue new shares, whose prices will be paid in full, to replace the reduced part, the general assembly resolves to amend the articles of association as required. Under TCC 473(3), the resolution shows how the capital reduction is to be carried out. Article 473 sits under the heading “Reduction of the basic capital” (esas sermayenin azaltılması), followed by TCC 474 on the call to creditors and TCC 475 on implementing the resolutions.

Disclosure before the meeting. In the call announcements, letters and website notice for the general assembly meeting, the reasons for the capital reduction, its purpose and the way it will be carried out are explained in detail and in line with the principles of accountability (TCC 473(1)). In addition, the board of directors submits a report containing these matters to the general assembly, and the report approved by the general assembly is registered and announced (TCC 473(1)). A foreign shareholder can therefore expect the reasons and the method to appear in the meeting call itself, not only at the meeting.

Related capital-protection rules. Shareholders cannot demand back what they gave to the company as capital; their rights relating to the liquidation share are reserved (TCC 480(3)). General assembly resolutions that are contrary to the provisions on the protection of capital are null and void (batıl) (TCC 447(1)(c)).

Where the same rules apply. TCC 473, 474 and 475 apply by analogy to the reduction of the issued capital in the registered capital system (TCC 473(6)). The joint stock company provisions on reducing the basic capital apply by analogy to limited liability companies; a limited company's capital may be reduced to improve an over-indebted balance sheet only if the additional payment obligations in the company agreement have been paid in full (TCC 592(1)). Where the capital of a transferring company is reduced because of a demerger, TCC 473, 474 and 592 do not apply (TCC 162(1)). Shares that could not be disposed of under TCC 384 and 385 are destroyed at once by way of capital reduction (TCC 386(1)).

2. What Majority Does a Capital Reduction Resolution Need? (TCC 473(3) and 421)

The direct answer. Under TCC 473(3), the first sentence of TCC 421(3) applies to the general assembly's resolution. That sentence requires the positive votes of the holders or representatives of shares representing at least 75% of the capital (TCC 421(3)). The threshold is counted against the capital, whereas the general rule in TCC 421(1), which applies unless the law or the articles of association provide otherwise, counts the majority of the votes present at a meeting where at least half of the capital is represented.

Repeat meetings. Under the general rule in TCC 421(1), if the meeting quorum is not reached at the first meeting, a second meeting may be held within one month at the latest, at which at least one third of the capital must be represented. TCC 473(3) refers only to the first sentence of TCC 421(3). For the quorums provided in TCC 421(2) and (3), TCC 421(4) provides that if they are not reached at the first meeting, the same quorum is sought at the following meetings as well.

What the resolution contains. The resolution shows how the capital reduction is to be carried out (TCC 473(3)). In 2012, Law No. 6335 (Article 41) removed from TCC 473(3) the words requiring the conclusion of the transaction auditor's report to be explained, and removed from TCC 473(2) the words “with the transaction auditor's report”.

For a minority investor. A shareholder holding more than 25% of the capital can prevent the 75% threshold in TCC 421(3) from being reached by not voting in favour. A shareholder below that level can rely on the disclosure in TCC 473(1) and, where a resolution breaches the law or the articles, on the remedies discussed in section 7.

3. Limits on Any Reduction: Creditor Coverage, Book Profit and the Statutory Minimum (TCC 473(2), (4), (5) and 332)

Assets that cover the creditors. Under TCC 473(2), no decision to reduce the capital may be taken unless it has been established that, despite the reduction, assets in an amount fully covering the rights of the company's creditors exist in the company. As amended by Law No. 6335 in 2012, the paragraph no longer names the transaction auditor's report as the document by which this is established.

Book profit from the reduction. Book profit arising according to the records because of the reduction of the basic capital may be used only for the destruction of shares (TCC 473(4)).

The statutory minimum. The capital can in no way be reduced below the minimum amount set under TCC 332 (TCC 473(5)). TCC 332(1) sets the minimum basic capital and, for non-public companies that have adopted the registered capital system, the minimum initial capital, and provides that the President may increase these minimum amounts. A footnote to TCC 332 in the official text records that the amounts were increased by Presidential Decision No. 7887 of 24 November 2023; the figure in force should be checked at the time of the reduction.

The three limits side by side:

• Coverage test: assets fully covering the creditors' rights must remain despite the reduction (TCC 473(2)).
• Use of book profit: only for the destruction of shares (TCC 473(4)).
• Floor: in no way below the minimum set under TCC 332 (TCC 473(5)).

Listed and capital markets companies. TCC 332(4) reserves Article 12 of Capital Markets Law No. 2499. This article does not cover capital markets rules; a company subject to them needs a separate review.

4. How Are Creditors Called and Protected? (TCC 474)

The direct answer. Under TCC 474(1), if the general assembly resolves to reduce the basic capital, the board of directors posts the resolution on the company's website and also announces it three times, at seven-day intervals, in the gazette referred to in TCC 35 and in the manner provided in the articles of association. The gazette referred to in TCC 35 is the Turkish Trade Registry Gazette (Türkiye Ticaret Sicili Gazetesi) (TCC 35(4)).

What the announcement tells creditors. Creditors may, within two months from the third announcement in the Turkish Trade Registry Gazette, declare their claims and request payment or security (TCC 474(1)). The announcement must state this. Call letters are also sent to the creditors known to the company (TCC 474(1)).

The sequence in TCC 474(1) and 475(1):

1. The general assembly resolves to reduce the capital (TCC 473(1) and (3)).
2. The board posts the resolution on the company's website and announces it three times, at seven-day intervals, in the Turkish Trade Registry Gazette and as the articles of association provide (TCC 474(1)).
3. Known creditors receive call letters (TCC 474(1)).
4. Creditors declare their claims within two months from the third announcement in the Turkish Trade Registry Gazette and request payment or security (TCC 474(1)).
5. The period given to creditors ends and the declared claims are paid or secured; only after both may the capital be reduced (TCC 475(1)).

No reduction before the period ends. The capital may be reduced only after the period given to creditors has ended and the declared claims have been paid or secured (TCC 475(1)). Judicial recourse is also open where the security is insufficient (TCC 475(1)).

5. Can Capital Be Reduced to Cover Losses Without Calling Creditors? (TCC 474(2) and 376)

The direct answer. Under TCC 474(2), if the capital is to be reduced in order to close a deficit formed in the balance sheet as a result of losses, and in proportion to that deficit, the board of directors may waive calling the creditors and paying or securing their rights. The verb is permissive: the statute says the board may waive these steps.

Two conditions in the text. TCC 474(2) ties the waiver to a purpose, namely closing a deficit formed in the balance sheet as a result of losses, and to an extent, namely in proportion to that deficit. TCC 474(2) speaks only of the call to creditors and the payment or security of their rights; it does not mention the general assembly resolution in TCC 473, the floor in TCC 473(5) or the documents required for registration in TCC 475(4).

Capital loss is a separate provision. TCC 376 governs capital loss and over-indebtedness. Under TCC 376(1), if the last annual balance sheet shows that half of the total of the capital and the legal reserves is left uncovered because of losses, the board of directors calls the general assembly to a meeting immediately and submits the remedial measures it considers appropriate. Under TCC 376(2), if according to the last annual balance sheet two thirds of that total is left uncovered because of losses, the company ends automatically unless the general assembly, called to a meeting immediately, decides to content itself with one third of the capital (sermayenin üçte biri ile yetinme) or to replenish the capital. TCC 376(3) adds a separate procedure, with an interim balance sheet, where there are signs giving rise to a suspicion that the company is over-indebted.

Practical point. A board facing a TCC 376 situation should read TCC 376 and TCC 473-475 together and document which provision each step relies on, because TCC 474(2) uses its own wording and its own conditions.

6. Implementing the Reduction: Share Certificates and Registration (TCC 475(2)-(4))

Share certificates. Where, to implement the reduction resolution, the number of share certificates must be reduced by exchange, stamping or otherwise, the company may cancel the certificates that are not returned despite a warning given for this purpose (TCC 475(2)). The notice states that certificates not returned to the company will be cancelled (TCC 475(2)).

Fractions. If the share certificates that shareholders return to the company for exchange are not enough for the exchange under the resolution, those certificates are cancelled, the new certificates to be given in return are sold, and the amount falling to the shareholders is kept at the company (TCC 475(3)).

Registration. Unless documents showing compliance with the conditions in TCC 475(1)-(3) and in TCC 473 and 474 are submitted, neither the resolution on reducing the basic capital nor the fact that the capital has actually been reduced can be registered in the trade registry (TCC 475(4)). The board's report approved by the general assembly is also registered and announced (TCC 473(1)). Registered matters are announced unless the law or the regulation issued under TCC 26 provides otherwise (TCC 35(3)), and the announcement is made in the Turkish Trade Registry Gazette (TCC 35(4)).

What this means for planning. The registry file should document each step: the meeting call with the disclosure, the board report, the resolution adopted with the required majority, the three announcements, the creditor letters and the payment or security of declared claims. Under TCC 474(2), where the capital is reduced to close a deficit formed in the balance sheet as a result of losses and in proportion to that deficit, the board may waive both calling the creditors and paying or securing their rights; the file should then record that waiver.

7. What Can Creditors and Shareholders Do If the Rules Are Not Followed? (TCC 475(1) and 445-447)

The direct answer for creditors. Under TCC 475(1), the capital may be reduced only after the period given to creditors has ended and the declared claims have been paid or secured; otherwise, creditors may file an action for annulment of the capital reduction before the commercial court of first instanceAsliye ticaret mahkemesiCommercial court of first instanceThe specialised first-instance court that hears commercial cases — and, unless the law says otherwise, it hears them whatever the amount in dispute.Glossary → (asliye ticaret mahkemesi) at the company's seat within two years from the announcement of the registration of the capital reduction. Under the same paragraph, judicial recourse is also open where the security is insufficient.

Shareholders: annulment. Under TCC 445(1), the persons listed in TCC 446 may, within three months from the date of the resolution, file an action for annulment before the commercial court of first instance at the company's seat against general assembly resolutions contrary to the law or the articles of association and in particular to the rule of good faith. Under TCC 446(1), they include shareholders present at the meeting who voted against the resolution and had their dissent recorded in the minutes; shareholders, whether or not they attended the meeting or voted against, who allege that the call was not made properly, the agenda was not announced properly, persons without authority to attend, or their representatives, took part and voted, or attendance and voting were unjustly refused, and that these breaches affected the adoption of the resolution; the board of directors; and each board member where carrying out the resolution would make them personally liable.

Shareholders: nullity. General assembly resolutions that are contrary to the provisions on the protection of capital are null and void (TCC 447(1)(c)). TCC 447 does not attach the three-month period of TCC 445 to nullity.

Evidence. For a foreign shareholder, the meeting call, the board report under TCC 473(1), the attendance list and the minutes recording a vote against are the documents to keep from the outset.

8. Ordinary Reduction or Loss-Cover Reduction? A Comparison and a Checklist

The table below sets the statutory rules for the two situations side by side.

Checklist for foreign shareholders and boards:

1. Check whether new shares, whose prices will be paid in full, will replace the reduced part; the first sentence of TCC 473(1) is framed around the case where they will not.
2. Draft the meeting call, letters and website notice with the reasons, purpose and method of the reduction, and prepare the board report (TCC 473(1)).
3. Count the votes against the 75% threshold of the capital in TCC 421(3), applied by TCC 473(3).
4. Document that assets fully covering the creditors' rights remain despite the reduction (TCC 473(2)), and check the minimum capital in force under TCC 332 (TCC 473(5)).
5. Plan the three announcements at seven-day intervals, the website notice and the letters to known creditors, then the two-month period from the third announcement (TCC 474(1)); if the reduction closes a deficit formed in the balance sheet as a result of losses and is in proportion to that deficit, record whether the board waives calling the creditors and paying or securing their rights under TCC 474(2).
6. Reduce the capital only after the creditors' period has ended and the declared claims have been paid or secured (TCC 475(1)), and assemble the documents required for registration (TCC 475(4)).

Frequently asked questions