"The articles of association which are contrary to the Amending Law shall be amended to comply with the said Law until 12.10.2011"
The Law No. 6216 Amending Several Laws ("Amending Law", which includes provisions amending the current Turkish Commercial Code No. 6762 ("TCC"), has been published in the Official Gazette dated 12.04.2011. We would like to bring to your attention below, the significant amendment related to restriction of privileged shares in joint stock companies where Government, special provincial administrations, municipalities and other public legal entities, trade unions, associations, foundations, cooperatives and their parents ("Public Legal ") hold shares.
According to Article 15 of the Amending Law, the following two paragraphs written in bold letters have been added to Article 401 of TCC. Article 401 currently reads as follows;
"Privileges on distribution of profit or assets of a company in liquidation and on other matters can be granted to some of the share [certificates] by providing for them in the articles of association.
No privileges regulated under this Law, other than the privileges to be granted to shareholders, which are public legal entities, associations and foundations working for public interest, can be granted in favor of any one or more of the other shareholders in joint stock companies and their affiliates whereby the Government, special provincial administrations, municipalities and other public legal entities, trade unions, associations, foundations, cooperatives and their parents are among the shareholders.
The articles of association, which are contrary to the second paragraph, shall be amended to comply with the mentioned paragraph within six months following the effective date of this article. In case the necessary amendments and modifications to the articles of association are not realized within the indicated period, the related provisions in the articles of association shall become null and void automatically following the expiry of such period and all privileges regulated in the articles of association shall terminate by operation of law."
According to the report of the Commission of the Parliament, which has prepared and submitted the Amending Law for approval to the General Assembly, there are joint stock companies which are incorporated with the major contribution of the Public Legal Entity and which are major shareholders in such companies. However, due to privileges granted in favor of the other shareholders (i.e. minority shareholders) under the articles of association of such companies, the Public Legal Entity shareholders are being suspended from the administration and management of the company. The amendment aims to eliminate these situations and also to prevent the potential damages that Public Legal Entity shareholders and third parties may incur due to privileges granted beyond the purposes of the law.
In order to comply with such amendments, the articles of association of the relevant companies that are contrary to the second paragraph of Article 401 must be amended until 12.10.2011.
This new regulation may cause many arguments and application problems due to "vested rights" of the shareholders to whom privileges had been given in the past under the then current and valid articles of association of such companies.
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