What is Registered Stock?

What Is Registered Stock?

In article 484 of the Turkish Commercial Code (TTK) numbered 6102, “Share certificates shall be registered or bearer. Bearer share certificates cannot be issued for those shares which have not been fully paid. Those issued in violation of this provision are void. Compensation rights of beneficiaries are reserved.” has been called.

The shares of the joint stock company should be either bearer or registered. Registered share certificate, as the name suggests, is a negotiable security that the owner can easily be identified from the content of the certificate. To define it briefly, a registered share certificate, is a type of security issued on behalf of a certain real or legal person and represents the shares of that person in a joint stock company. In Turkey, the shares and share certificates of joint stock companies are generally registered.

Obligation to issue registered shares

In the repealed Turkish Commercial Code No. 6762, the obligation to issue stock certificates was not imposed on joint stock companies. Therefore, before the Law No. 6102, most of the companies didnt issue share certificates, except for those companies which were aware of the tax advantages provided for gains arising from share transfer based on issued share certificates.

However, the Turkish Commercial Code (TTK) numbered 6102, which entered into force on 1 July 2012, obliges joint stock companies to issue registered shares in case the necessary condition is met.

Condition of obligation to issue registered shares

Turkish Commercial Code No. 6102 compels joint stock companies to issue registered share certificates under one condition. This condition is the minority shareholders’ request for issuing the registered share certficates. Because, in the third paragraph of Article 486 of the TCC; “If the minority makes a request, the registered share certificate is issued and distributed to all registered share holders.” has been called. What is meant by minority is the shareholders who constitute at least one tenth of the company’s capital.

For this reason, in the case of minority shareholders’ request, the company should issue registered shares certificates and distribute them to all shareholders. Another point to be considered here is that, upon the request of the minority, registered shares must be printed not only for the minority but also for all registered shareholders.

Thus, shareholders who hold at least one tenth of the company’s capital and want the registered share certificates to be issued – either a single shareholder or more than one shareholder can provide this proportion– should apply to the board of directors and request the issuance of registered shares.

Is it possible to issue registered share certificates without minority shareholders request?

Upon the request of the minority, registered share certificates are printed for all of the registered shares, not only fort he minority, distributed to all of these shareholders. If the minority does not make such a request, there is no legal obligation to issue registered share certificates. However, the law-maker authority aimed to prevent unfair methods such as placing pressure on shareholders by not issuing and distributing share certificates, depriving shareholders from the titles of proof and limiting the ways of share transfers, especially in family owned companies,.

The doctrinal comment on the question “Can registered share certificates be issued even if there is no request of the minority?” is affirmative. In the justification of the third paragraph of Article 486 of the TCC, “With this provision, the possibility of issuing registered share certificates has been opened. Pursuant to the provision, if there is a minority request, registered share certificates will be issued and distributed to all registered share holders. Thus, unlawful methods such as pressure by not issuing and not distributing the shares in closed joint stock companies, especially family companies, depriving the shareholders of proof of their qualifications, and limiting the transfer opportunities have been prevented.” has been called.

Thus, the Legislator grants the minority with the right to make such a request in case the company does not agree to issue shares and makes it possible to apply to the court in case of rejection of the request. However, even there is no such request coming from the minority, if the company issues registered share certificates and distributes them to all shareholders, this means that the company is issuing registered share certficates voluntarily, not obligatorily, and this is the main purpose of the Legislator to introduce the aforementioned provision. In addition, there is no restriction in the TCC that registered share certificates cannot be printed without the request of the minority.
Therefore, even if the minority doesnt request, the BOD (Board of Directors) of the joint stock company can issue registered share certificates and distribute them to all shareholders.

Board of directors decision to issue registered share certificates

In the second paragraph of Article 486 of the TCC, “The decision of the Board of Directors regarding the issuance of bearer share certificates shall be registered and announced, and also posted on the company’s website.” has been called. Due to this aforementioned provision, BOD must take a written decision, have it registered and announced before issuing bearer share certificates.

However, no provision has been made that the board of directors’ decision will be taken, registered and announced for issuing registered shares. Therefore, it is not obligatory for the board of directors of the joint stock company to take, register and announce a decision on issuing of registered share certificates. However, the board of directors may take a decision to issue registered share certificates upon the request of the minority, without registering and announcing it.

Time to issue and not issue registered share certificates

Registered shares can be issued at any time according to the request of the minority or the decision of the board of directors. In this regard, a specific period is not foreseen, such as the three-month period for bearer share certificates.

However, there is a time when registered stock should not be issued. That is, in the first paragraph of Article 486 of the TCC, “The shares issued before the registration of the company and the capital increase are invalid; however, the obligations arising from the commitment of participation remain valid.” It is stated, in the fourth paragraph of the same article, “The person who issues a share certificate before registration is liable for the losses arising from it.” provision is included.

For example, if the registered shares committed in cash during the establishment of the company or during the capital increase have been paid in full, but the establishment or the capital increase transaction has not yet been registered in the trade registry, the board of directors should not issue registered share certificates and wait for the registration. Otherwise, the issued registered share certificates will be invalid.
Which information should be stated in the registered share certificate

The registered share certificates issued by the joint stock company must be in the form and content sought by the TCC. According to Article 487 of the TCC, registered share certificates must contain;

  • the name of the company,
  • the amount of capital,
  • date of establishment,
  • the capital amount on this date,
  • the arrangement of the issued share certificate,
  •  the date of its registration,
  •  the type and nominal value of the certificate,
  • number of shares included,
  • the name and surname or trade name of the owner,
  • owner’s place of residence,
  • the paid amount of the share’s nomianl value

and must be signed by at least two of those authorized officials to sign on behalf of the company.

At least, the above-mentioned information should be included in the registered share certificates to be issued by the board of directors.

Conversion of Registered share certificates to Bearer share certificates

Some joint stock companies may want to convert their shares into registered form in order to avoid the obligation to issue bearer shares, while some companies may want to convert their registered shares into bearer so that their partners are not clearly known.

The TCC stipulates that the type of share can be changed by conversion. In this regard, registered shares can be converted into bearer shares. For this, the company’s articles of association must be amended.

In addition, according to Article 485 of the TCC, in order for the registered shares to be converted into bearer shares, the price of the shares must be fully paid. Otherwise, the conversion will be invalid.

Worn or misprinted registered share certificates

If the registered share is so worn out or misprinted that it cannot be used, a new registered share should be issued.
How are registered share certificates transferred?

Article 490 of the TCC titled “Principle in the transfer of registered shares and share certificates” states that “Unless otherwise stipulated in the law or in the articles of association, registered shares can be transferred without any limitations. Transfer by legal action can be made by transferring the possession of the endorsed registered share certificate to the transferee. provision is included. According to this provision, for the transfer of registered shares, the certificate must be endorsed and delivered to the transferee.

How are registered shares transferred?

In both the repealed Turkish Commercial Code numbered 6762 and the Turkish Commercial Code (TCC) numbered 6102, the transfer of shares are handled only in terms of share certificates – registered and bearer-written ones, and there was no regulation regarding the transfer of bare shares independent of shares. has not been introduced. Thus, the TCC remained silent on the issue of “transfer of the undocumented share (bare share)”, just like in the ETK.

However, there may be cases where the share is not linked to the promissory note, in other words, the stock is not issued.