Company structuring in Turkey mainly focuses on two types; joint stock and limited liability companies. Alteration in partnership structure or share transfer of these kinds of companies shall be subject to commercial legislation.
Electricity generation companies which are established in form of limited liability or joint stock company shall carry out assignment of share transactions under Electricity Market Law as well as Turkish Commercial Code, which means that this kind of transactions shall be executed in certain circumstances as regulated in energy legislation. Assignment of shares is more restrictive as compared to joint stock companies. Assignment of share and the related transactions shall be made in written form and parties’ signatures shall be certified by public notary. The company managers shall apply to the trade registry for registration of assignment of shares. In case that the application has not been made within thirty (30) days, the outgoing partner can apply to the trade registry to erase his/her name with regard to these shares.
There are mainly two types of shares in joint stock companies which are “bare shares” and “issued shares”. Bare shares are the shares which are not certificated by the company. For the transactions of these shares transfers, parties must sign an assignment of claims contract and assignment of liability agreement as occasions requires. Besides, both assignment of claims and liability contracts should be signed while transferring the unpaid shares under the Turkish Commercial Code. Fully paid shares can be assigned without company’s approval except the mentioned limitation and restrictions in law or article of association.
A joint stock company may also issue bearer or registered shares. Registered share certificate can be assigned by an endorsement without any limitations except as otherwise provided by law or in article of association however for unpaid registered share certificates, above mentioned conditions are applied (e.g. assignment of claims and liabilities). There could be several limitations or restrictions by law regarding share assignment in order to maintain company’s capital in case of nonpayment of shares, which aims to eliminate the risk of collection of share price by way of transferring it to third parties.
By the registry to shareholders’ stock register of assigned shares the assignment process is completed and only persons who are on the registry list are regarded as a shareholder and third parties who obtain the registered shares quoted on the stock exchanges must be registered to share holders’ stock register as well. Transfer of possession is sufficient for assignment of bearer shares.
Given that the commercial law perspective above, the companies operating in energy industry are also subject to Commercial Code yet transfer of shares of these companies is dependent on several conditions foreseen in Electricity Market Law. In this regard, share transfer restrictions can vary depending upon license status of a company.
As is known energy generation are required to hold a license after meeting several conditions required by primary and secondary legislations. License type varies by operation type of the company, which means that companies which intend to operate in electricity generation, transmission, distribution, wholesale and retail trade must hold different kind of licenses and apply to different public authorities as well. Since regulatory authority is keen on corporate structures to license persons and during the operations , it is not allowed to act freely in corporate and share structuring for persons operating in energy without approval of Energy Market Regulatory Authority (EMRA).
Moreover, the electricity generation legislation strictly restricts companies to transfer shares in pre-license phase that the contrary may result with revocation of the pre-licenses.
However after the pre-license phase, shares of license holder company can be transferred under several circumstances. Share transfers exceed 5 % in public companies and 10 % in non-public companies and other transactions which cause control change in company management shall be subject to EMRA’s approvals.
In case of failure to comply or nonfulfilment of conditions mentioned above, revocation of license, pre-license or administration fine come to the fore.
Herdem Law Firm, Istanbul Turkey
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