ABSTRACT
In accordance with the precedents of the Court of Appeal, wholesale of substantial amount of joint stock companies’ assets has been considered as the non-delegable duties and authorizations of the general assembly by the Turkish Commercial Code numbered 6102 (“TCC” or “Code”) which are regulated under sub-clause (f) of sub-section 2 of Article 408 thereof. In this article, it shall be discussed that whether the transfer of the shares of closed joint stock companies should be considered within the scope of the sub-section 2, sub-clause (f) of Article 408 of the TCC. Accordingly, legal character of wholesale of substantial amount of the joint stock companies’ assets shall be explained; then “assets of companies”, “substantial amount” and “wholesale” concepts and the potential problems that may arise due to the lack of regulations regarding the mentioned subject shall be exam-ined. Finally, the issue of whether the transfer of the shares of closed joint stock companies should be considered within the scope of the sub-section 2, sub-clause (f) of Article 408 of the TCC shall be discussed.
1. INTRODUCTION
General assembly is an oblıgatory body of joint stock companies which adopts substantial regulations of the company upon the convening of the shareholders in accordance with Article 407 and the following articles of the TCC. Resolutions of the general assemblies are considered as legal transactions since they are deemed to be the declarations of intent that give rise to legal consequences. This qualification of the general assembly resolutions is considered decisive within the Turkish-Swiss laws and German legal2 doctrines.
General assembly may only adopt resolutions on matters that are explicitly set forth under the TCC and Articles of Association (“AoA”) of the company. In this regard, the general assembly has some non-delegable duties and is obliged to adopt resolutions on its own on the matters within the scope. Non-delegable duties of the general assembly are explicitly stipulated under sub-clause (f ) of sub-section 2 of Article 408 of the TCC and “wholesale of substantial amounts of the company’s assets” has been set forth as one of the non-delegable duties of the general assembly thereunder.
2. LEGAL CHARACTERISTIC OF THE GENERAL ASSEMBLY RESOLUTIONS REGARDING THE WHOLESALE OF SUBSTANTIAL AMOUNT OF THE COMPANY’S ASSETS WITHIN THE SCOPE OF THE TCC
The non-delegable duties of the general assembly stipulated in the Sub-section 2 of Article 408 of the TCC are mandatory provisions, meaning that the transactions which are not concluded in accordance with the provisions shall be deemed null and void in accordance with the sub-clause (d) of Article 391 of the TCC. Therefore, board of directors resolutions regarding issues “that are within the scope of non-delegable duties of the other bodies and assignment thereof” shall be also deemed null and void as well. As the concepts of “assets of companies”, “substantial amount” and “wholesale” are not defined within the sub-clause (f ) of sub-section 2 of Article 408 of the TCC, it may give rise to problems in practice with regards to the identification thereof. Within this context, aforementioned concepts that are regulated under Article 408 of the TCC will be discussed separately below.
3. CONCEPT OF THE ASSETS OF THE COMPANY
Concept of “assets of the company” which is stipulated within the sub-clause (f ) of sub-section 2 of Article 408 of the TCC is known as a controversial topic, mainly because Article 538 of the TCC sets the title of liquidation of joint stock companies, which states that “general assembly shall adopt a resolution for the wholesale of substantial amount of the company’s actives” and the concepts of “assets” and “actives” do not differ much as stated in Article 408 and Article 538 of the TCC and are used interchangeably3.
There are various opinions regarding the meaning of the concept of “assets of the company” in the literature. According to Domaniç, the concept of assets should be interpreted restrictively. According to the author, the concept of “assets” is comprised of various types of items including all uncollectible, realizable, and non-pecuniary receivables and other items such as movable, immovable and share certificates4. However, as Tekinalp, suggests on the other hand, the concept of assets contains only of long term assets5. Long term assets denote those assets that cannot be liquidated in the specific periods of time. In other words, it refers to assets that are retained in the business continuously. Immovable, facility machine and devices, vehicles and fixtures can be exemplified as long term assets6. In our opinion, Tekinalp’s definition of assets is more in line with the provisions of the TCC.
4. CONCEPT OF SUBSTANTIAL AMOUNT
As stated above, the TCC does not regulate any criteria defining the concept of “substantial amount”. Hence, it is essential to determine the amount of the company assets that should be considered as a “substantial amount” for each company, since this may give rise to controversies in practice.
It would be beneficial to consider the underlying reason of the enactment of the provision in order to evaluate such concept. The legislative body’s aim is to prevent the recession of the operation areas or cessation of operations of the company due to misconduct of the shareholders by stipulating a general assembly resolution in order to sell the “substantial amount” of company assets. In this respect, it shall only be construed as a sale of substantial amount of company assets, only if it significantly limits the operations of the company or restricts the transaction volume of the company compared to previous years. According to Altaş, similar provisions regarding the publicly held joint stock companies should also be set forth for closed joint stock companies and substantial amount to be sold should be determined in accordance with the latest financials of the company7. On the other hand, Teoman has stated in one of his legal opinion8 that, sales corresponding to 84% of the total turnover of the companies should be construed as an elementary transaction, i.e. it should be considered as a sale of “substantial amount” of company assets.
We therefore hold that, since the legislative body did not define the concept of “substantial amount” and stipulate any standards or criteria for the mentioned concept, negative outcomes with regard to legal protection of the third parties and the company could be considered.
5. CONCEPT OF WHOLESALE
The concept of “Wholesale” refers to the actives or the assets as a lump sum, while “partial (separately) sale” can be considered as antonym of “wholesale”. Although in partial sales, it is not obligatory that the buyers should be different; when the company gains the same results of the prevented wholesales through selling its assets partially, the transactions of the board of directors might be deemed as invalid since the mentioned transaction aims to overcome a mandatory provision of the TCC through fraudulent action. Therefore it should be determined whether or not the actions of the board of directors fall within the scope of the above mentioned law. Within this scope, it should be determined whether the main reason of the board of directors can be construed as fraud against the law or not. However, each case should be evaluated within its own conditions, since there are no certain criteria regulated on the mentioned subject.
6. MEETING AND DECISION QUORUMS OF GENERAL ASSEMBLY FOR THE WHOLESALE OF SUBSTANTIAL AMOUNT OF THE COMPANY ASSETS
Pursuant to Article 408 of the TCC that regulates the wholesale of substantial amount of company assets as a non-delegable duty of the general assembly, there is not any aggravated quorum stipulated for such issues, since the quorums are only set forth in Article 421 of the TCC. However, there are some uncertainties in the practice since the second sub-section of Article 538 of the TCC titled as the liquidation of joint stock companies states that: “General assembly shall adopt a resolution for the whole sale of substantial amount of actives. Provisions of the third and fourth sub-sections of Article 421 shall be implemented for this resolution”. Second sub-section of Article 538 shall not be applied to the companies which are not going through liquidation process; as such article is stipulated only for joint stock companies that are going through liquidation. Hence, general assembly can adopt a resolution in order to wholesale of the substantial amount of company assets upon the existence of the shareholders or their representatives, corresponding to 25% of the capital of the company and majority of the votes of those are present, as long as the AoA of the company does not stipulate an aggravated quorum in this regard.
Decisions that have a significant importance for the company’s existence and shareholders’ interests should be adopted with an aggravated quorum. The aggravated quorums might seem to hinder the operations of the company; however, considering the severity of the consequences that may arise due to sale of substantial amount of assets, the importance of an aggravated quorum9 shall be recognized more clearly.
7. WHOLESALE OF SUBSTANTIAL AMOUNT OF THE COMPANY ASSETS AND ITS EFFECTS ON SHARE TRANSFER
It is of great importance whether the transfer of the shares of the joint stock company in any other company shall be evaluated within the scope of the wholesale of substantial amount of the company assets or not. First of all, it requires to be clarified whether the shares of the company in any other companies should be deemed as the company’s “actives” or “assets”. As the shares in any other companies are10 considered within the scope of the “assets of the company”, referring to our previ-ous explanations in this article, general assembly might need to adopt a resolution in order to realize the transfer of the mentioned shares, if those shares constitute a substantial amount of company assets. Determination of whether the shares to be transferred constitute a substantial amount of company’s assets should be made in accordance with our explanations stated above and by analyzing the financials of the company as well.
8. RULINGS OF THE COURT OF APPEALS REGARDING THE WHOLESALE OF SUBSTANTIAL AMOUNT OF THE COMPANY ASSETS
Court of Appeals has rulings regarding the wholesale of substantial amount of company assets within the scope of the former Turkish Commercial Code numbered 6762 (“fTCC”). In this regards, according to the ruling of Civil Chamber of the Court of Appeals numbered 2010- 4-650/67, dated April 6th, 2011; it is stated that: “According to the second sub-section of Article 443 of the fTCC, an activity or legal transaction that is not within the scope of the objective and practice areas of the company can only be realized by board of directors or representatives upon the special authorization provided by the general assembly. Moreover, pursuant to the aforementioned provision, the general assembly must adopt a resolution in accordance with the meeting and decision quorums set forth under the third and fourth sub-sections of Article 388 of the fTCC in order to grant an authorization to sell the sole immovable of the company. Even the purchasing and sale of immovables are stipulated under the title of “objective and subject” within the articles of association of the company, the subject matter immovables are related to the ordinary field of business and operations of the company and the sale of the immovable that the company conducts its’ operations cannot be construed within this scope. In the light of the events above, as the sale subjected to the case is regarding the sale of the land which is the sole asset of the limited company and the land which the gas station is located on…… it clearly represents a breach of the provisions of the second subsection of Article 443 of the fTCC...”
Likewise, according to the ruling of the 11th Civil Chamber of the Court of Appeals, dated February 13th, 2006 with the docket number of 2005/1362, decree number 2006/1253, it is stated that: “According to the articles of association of the company and the aforementioned provisions, in principle, the manager who has been authorized to represent the company has the right of disposal on the assets of the company. However, in case it is determined that the aforementioned assets are the only assets of the company or have a significant importance for the company in order to maintain its assets, the shareholders’ assembly must adopt a resolution upon the majority of the votes, pursuant to second sub-section of article 443 of the fTCC that stipulates the inability to make the transfer without a special authorization of the shareholders’ assembly resolution for limited liability companies as well, in order to consider the undertaking regarding the trademark transfer as valid. Considering that the transfer of the trademark is a significant transaction and in accordance with the aforementioned provisions and the characteristics of the principal transaction, the case should be concluded upon the consideration that transfer cannot occur without a special authorization granted through a resolution of the shareholders’ assembly.”
9. CONCLUSION
Non-delegable duties and authorizations of the general assembly are stipulated under Article 408 of the TCC. Within the scope of the aforementioned provision, since the wholesale of substantial amount of company assets is set forth as a mandatory provision, the general assembly of the joint stock company should adopt a resolution to sell the assets in order that such transaction shall be deemed legally valid.
In our opinion, share transfers of the joint stock companies might be considered within this scope. With regard to the subject matter, in the event that shares to be transferred constitutes as a substantial amount of the company assets by determination of the same in the as sets of the company, it can be concluded that the general assembly should adopt a resolution regarding the share transfer in accordance with sub-clause (f ) of sub-section 2 of Article 408 of the TCC.
In accordance with sub-clause (f ) of sub-section 2 of Article 408 of the TCC, wholesale of substantial amount of company assets is stipulated as one of the definite authority of the general assembly and it is set forth as a mandatory provision. Hence, in the event of a wholesale of substantial amount of company assets or transfer of the shares that constitutes substantial amount without a general assembly resolution, a court action regarding the detection of the nullity or invalidity of the board of directors resolutions can be brought against the sale transaction by each of the shareholders11. In order to eliminate the aforementioned risk, the joint stock companies, prior to the transfer of shares, should adopt a general assembly resolution regarding the approval of the share transfer upon the determination of the ratio and position of the shares within the assets of the company in accordance with the explanations we have stated above.
As there is no provision to specify the concepts stipulated within Article 408 of the TCC, controversies may arise in practice due to the determination of the “substantial amount of assets of the company”. We believe that the legislative body should ensure the enactment of secondary legislation in order to eliminate the uncertainties that may arise in practice.
BIBLIOGRAPHY
Altaş, Soner, Anonim Şirketlerde Önemli Miktarda Şirket Aktifinin Toptan Satışı Sorunu, Mali Çözüm Dergisi, May-June, 2014
Domaniç, Hayri, Anonim Şirketler Hukuku ve Uygulaması, Türk Ticaret Kanunu Şerhi –II, Istanbul 1988
Eriş, Gönen, Anonim Şirketler Hukuku, Ankara, 1995
Haftacı, Vasfi, İşletmelerde Finansal Çözümleme, Kocaeli, 2013
Tekinalp-Poroy-Çamoğlu, Ortaklıklar ve Kooperatif Hukuku, Istanbul 1997
Teoman, Ömer, Bir Ticaret Ortaklığının Faaliyetlerini Bölünme veya Ayrılma Sureti ile Başka Ortaklara Devretmesi Yaşayan Ticaret Hukuku, Hukuki Mütalaalar, V.II 1992- 1999, Istanbul 2011
Ulaş Kısa, Seda, Anonim Ortaklıklarda Yaşanan Çıkar Çatışmasının Azınlıkta Kalanlara Zarar Vermemesi için Öngörülen Önleyici Hukuk Araçları, Bilgi Toplumunda Hukuk, Ünal Tekinalp’e Armağan, V. I, Istanbul, 2003
Kazancı Mevzuat Bankası
FOOTNOTE
1 Relevant issues discussed in the Article herein are examined within the scope of the closed joint stock companies.
2 Pulaşlı, Hasan, Şirketler Hukuku Şerhi Vol. 1, 2. Edition, Ankara 2014, p.709
3 Haftacı, Vasfi, İşletmelerde Finansal Çözümleme, Kocaeli, 2013, p.29 ff
4 Domaniç, Hayri: Anonim Şirketler Hukuku ve Uygulaması, Türk Ticaret Kanunu Şerhi-II, İstanbul, 1998, p.1480
5 Tekinalp-Poroy-Çamoğlu, Ortaklıklar ve Kooperatif Hukuku, İstanbul 1997, p. 1595
6 Haftacı, Vasfi, İşletmelerde Finansal Çözümleme, Kocaeli, 2013, p.29 ff.
7 Altaş, Soner, Anonim Şirketlerde Önemli Miktarda Şirket Aktifinin Toptan Satışı Sorunu, Mali Çözüm Dergisi, May-June 2014 p.98
8 Teoman, Ömer, Bir Ticaret Ortaklığının Faaliyetlerini Bölünme veya Ayrılma Sureti ile Başka Ortaklara Devretmesi Yaşayan Ticaret Hukuku, Hukuki Mütalaalar, C.II 1992-1999, İstanbul 2011, (Tek Kişilik Ortaklık) p.2470, 2471
9 Ulaş Kısa, Seda, Anonim Ortaklıklarda Yaşanan Çıkar Çatışmasının Azınlıkta Kalanlara Zarar Vermemesi İçin Öngörülen Önleyici Hukuk Araçları, Bilgi Toplumunda Hukuk, Ünal Tekinalp’e Armağan, V. I, İstanbul, 2003, p.512
10 Domaniç, Hayri, Anonim Şirketler Hukuku ve Uygulaması, Türk Ticaret Kanunu Şerhi –II, Istanbul 1988, p.1480
11 Yargıtay 11.HD.5.4.1993 E.1379/K.2195 (Eriş, Gönen, Anonim Şirketler Hukuku, Ankara, 1995, p.270)
