ABSTRACT
In this article, firstly, the types of incorporation of joint stock companies are mentioned, and then the incorporation with capital in kind and the valuation of capital in kind are explained.
I. INTRODUCTION
Joint stock companies, which constitute one of the keystones of today’s commercial life, are subject to several procedures prior to their incorporation. In order for joint stock partnership, which is aimed to be incorporated by bringing the capital, to acquire legal personality, the completion of the incorporation procedures is required in accordance with Turkish Commercial Code numbered 6102 (“TCC”) and Trade Registry Regulation published in the Official Gazette dated January 27, 2023 and numbered 28541 (“TRR”) and other legislative provisions. The main type of incorporation of joint stock companies is immediate incorporation. Immediate incorporation can be realized in two forms, simple immediate incorporation and qualified immediate incorporation, depending on the type of capital brought to the company. One of the most important elements of a qualified immediate incorporation is the capital in kind brought to the company as capital. Since the capital in kind consists of non-cash assets, the appointed experts by the commercial court of first instance in the jurisdiction where the company’s headquarters will be located should value the aforementioned non-cash capital. In this context, assets, including intellectual property rights and virtual platforms, can be contributed as a capital in kind to a joint stock company, provided that there is no limited real rights, attachment or interim injunction on them, and that they can be utilized and transferred in cash. Capital in kind to be brought to the joint stock company must be secured. Therefore, if immovable property is intended to be brought as capital in kind, it should be registered with the land registry; intellectual property rights and other assets, if any, should be recorded in their respective special registries; if movable property is being brought as capital in kind, it should be entrusted to a trusted person. On the other hand, if receivables are to be brought as capital to the company, the maturity of the said receivable must have been reached.
In today’s world, the incorporation, management, operation, and liquidation of joint-stock companies, which are of great importance in terms of bringing capital together and building up the main capital accumulation for the stable continuation of partnerships, are regulated under the TCC, the TRR, and other relevant legislation. The elements that can be brought to joint stock companies as capital in kind are also included in the TCC. In this article, firstly, the types of incorporation of joint stock companies are mentioned, and then the incorporation with capital in kind and the valuation of capital in kind are explained.
II. INCORPORATION OF JOINT STOCK COMPANY
A. Types of Immediate Incorporation
Immediate incorporation, which is determined as the main procedure for incorporation of joint stock companies pursuant to Article 335 of the TCC, is carried out in two ways, namely simple immediate incorporation and qualified immediate incorporation, depending on the type of capital brought to the company1. Article 335 of the TCC stipulates that the entire capital must be subscribed by the founders (natural and legal persons who sign the articles of association by subscribing for shares pursuant to Article 337 of the TCC), since there cannot be a capital that remains deficit and by whom it will be paid cannot be determined. An incorporation where the capital consists of cash and there is no capital in kind is called a simple immediate incorporation; whereas an incorporation that is qualified by means of partial or full capital in kind, the acquisition of businesses and real estate during incorporation, or the provision of special benefits to the founders from the profits of the joint stock company is called a qualified immediate incorporation2.
B. Incorporation Procedures
As set forth in Article 355 of the TCC, a company acquires legal personality upon registration and announcement in the trade registry. In this context, in order for a joint stock partnership to acquire legal personality; the articles of association of the company must be prepared and the subscription of the entire capital of the company by the founders of the joint stock company must be made; the signatures of the founders must be notarized or the signatures of the founders must be executed in the presence of the trade registry director/assistant director; if the company capital is committed in cash, at least one quarter of the nominal value of the shares subscribed must be paid; in case of a qualified incorporation, the value of the real property recorded in the articles of association as a result of the expert valuation made during the preparation phase of the articles of association must be secured; companies, whose incorporation and amendments to the articles of association are subject to the permission of the Ministry of Trade, must obtain the necessary permissions; the entire articles of association must be registered with the trade registry and the entire registered articles of association must be announced in the Turkish Trade Registry Gazette3.
C. Incorporation in Cash
In the event that the consideration for the shares of the company is subscribed and paid in cash, it is referred to as capital in cash4. Since the value of cash capital does not need to be determined in any way and has the same value for everyone, transactions can be carried out more easily in the stages of subscription and fulfilment of capital in cash5.
Pursuant to Article 99/1 of the Turkish Code of Obligations numbered 6098 (“TCO”), unless otherwise stipulated in the articles of association of the company, a shareholder who makes a capital subscription in cash for the capital of a joint stock company must pay in the national currency of the country where the company’s headquarters is located6. In accordance with Article 99/2 of the TCO, in circumstances where payment in a currency other than the national currency is agreed upon, the debt may also be paid in the national currency based on the market value on the payment date, unless expressly provided otherwise in the articles of association or an equivalent provision7. Article 345/1 of the TCC describes the place where the payment shall be made. As a result, the cash payment must be transferred to a specific account that the company will open in a local bank in its name. Pursuant to Article 344 of the TCC, at least one-fourth of the nominal value of the subscribed shares in a joint stock company must be paid before registration, and the remaining portion must be paid within twenty-four months following the registration of the company. In the articles of association, it can be decided to make an upfront payment exceeding one-fourth of the nominal value of the subscribed shares8. While it is possible for the articles of association to grant the authority to determine the payment dates and installment amounts for the remaining capital, excluding the portion already paid upfront, to the board of directors, such authority should be exercised by the board of directors in accordance with the principles of equality and good faith9.
III. INCORPORATION WITH CAPITAL IN KIND
The capital elements that can be contributed to commercial companies are listed as capital in cash and capital in kind, without limitation as to their types10. However, since the shareholders of capital companies are not liable for the debts of the company, except for the special cases regulated by the law, the structure and protection of the capital in capital companies have a particular importance for the creditors11. Therefore, the legislator has imposed certain limitations on the elements that may be provided as capital in kind for joint stock companies under Article 342/1 of the TCC and for limited liability companies under Article 581 of the TCC12.
As mentioned above in the definition of the type of qualified immediate incorporation, incorporating the company by subscribing capital in kind is one of the elements that make the incorporation qualified13. Article 128/3 of the TCC stipulates that provisions in the company agreement, which involve the obligation to contribute immovable property or establish or place an existing or future real right on immovable property as capital, shall be valid without requiring a specific official form. However, in accordance with Article 128/5 of the TCC, in cases where the ownership of immovable property or any other real right is contributed as capital, the registration of these elements in the land registry is necessary for the company to have the power to dispose of them.
Pursuant to Article 342 of the TCC, assets, including intellectual property rights and virtual media, on which there are no limited real rights, seizure and injunction, which can be valued in cash and transferred, may be contributed as capital in kind. However, performance of a particular service, personal effort, commercial reputation and undue receivables cannot be included as capital in order to ensure that the capital is real and its material existence is secured due to the principle of protection of capital14.
Article 128 of the TCC has also introduced certain safeguards regarding the contribution of capital in kind. If specific assets registered in their respective registries are subscribed, registration in the relevant registry is required, and if an immovable property is subscribed, it must be annotated to the title deed. These registrations to be made to the special registries, as stipulated by the provision, will remove the good faith of third parties15, thereby eliminating potential issues that the company may encounter regarding its capital during the incorporation phase16. Due to the mandatory nature of the regulation, in the event that no annotation or registration is made in the relevant registries, the said immovable properties or assets will not be deemed as capital17. At this point, it is particularly important to determine the moment at which the company acquires the immovable properties. Article 128/5 of the TCC regulates that registration in the land registry is required for the company to dispose of any real rights. Once the joint stock company acquires legal personality, a request can be made for the transfer of ownership of the immovable property intended to be contributed as capital in kind to the company; in other words, the debt will become due upon registration18. The fulfillment of the due debt will be possible through registration in the land registry for immovable properties19.
A. Prohibition of Contribution of Undue Receivables as Capital
Although Article 127 of the TCC states that receivables may be contributed in the company as capital, Article 342 of the TCC stipulates that receivables that are not due cannot be contributed in capital in kind. Under the Turkish Commercial Code numbered 6762 (Former TCC), there was a controversy as to whether it was possible to include deferred receivables as capital in capital companies20. In the current era of the TCC (TCC numbered 6102), there is no consensus in the legal doctrine with regard to the positive reception of the prohibition stated in Article 342 of the TCC concerning the contribution of outstanding receivables as capital in kind21.
According to a view in legal doctrine, in the event that allowing a deferred receivable to be contributed as capital to the company, the capital of the company will remain uncertain during the period until the maturity22.
According to another approach, since the idea that the prohibition of contribution of undue receivables as capital would be incompatible with the principle of the due receivables becoming due upon registration would not be appropriate, there is no justification for the prohibition of contribu tion of deferred receivables as capital to the company23. Furthermore, Article 130/2 of the TCC explicitly states that, unless otherwise agreed, if the maturity of a receivable has not yet been reached, it must be collected by the company within one month from the due date, or if it is due, from the date of the company agreement or articles of association. However, if the receivable cannot be collected when it becomes due, the risk of non-collection of the receivable when due is not significantly sufficient to justify the prohibition in Article 342 of the TCC, due to the existence of Article 130 of the TCC, since the guarantee liability of the person who contributed the receivable as capital will be in question pursuant to Article 130 of the TCC24.
According to a third opinion, under the current TCC and positive law, deferred receivables may be contributed as capital in a joint stock company25. However, according to this opinion, in the event that a deferred receivable is allowed to be contributed as capital in a joint stock company, for example, the long maturity date of the receivable may cause inequality among the shareholders, and this may constitute a violation of the principle of equal treatment26.
B. Contribution of Movables as Capital in Kind
Movables may also be brought to the joint stock company as capital; however, pursuant to Article 128/2 of the TCC, movables may be accepted as capital in kind provided that they are entrusted to a trusted person. With this provision, it is aimed to facilitate the disposal of the movable property more easily after the acquisition of legal personality by the company, by transferring the possession of the said movable property from the undertaking shareholder to a trusted person27. Although there is no legal impediment to appointing one of the founding partners or a founding member of the board of directors of the joint-stock company as a trusted person, it can be argued that it is also a more economically favorable approach28. It is of great importance that this situation is recorded in a report in case the movables are entrusted to one of the founding partners or a third party as a trusted person, because since it is stated in the justification of Article 128 of the TCC that the movable shall not be accepted as capital in kind if it is not entrusted to a trusted person and that the requirement is within the scope of the examination authority of the registry director, the company shall be registered after the registry directorate has seen the report, if there is no inconsistency due to other issues29.
IV. VALUATION OF CAPITAL IN KIND
A. Valuation of Capital in Kind by an Expert
After specifying the assets that can be used as capital in kind in Article 342 of the TCC, Article 343 of the TCC explains how the value of capital in kind to be contributed to a joint stock company will be determined. In this context, an expert will be appointed by the commercial court of first instance in the place where the company headquarters will be located. The valuation report prepared by an expert shall include information stating that the valuation method applied is the most fair and appropriate choice for everyone in terms of the characteristics of the concrete case, and that the receivables contributed as capital are indeed exist and valid30. The report shall also state that the said capital in kind provides the conditions specified in Article 342 of the TCC31. The values of the elements put as capital in kind in the valuation report shall be explained in Turkish Lira equivalent with satisfactory justifications and in compliance with the requirements of the principle of accountability. The appraised value shall be included in the articles of association of the joint stock company in accordance with Article 128/2 of the TCC.
B. Objection to the Expert Report
Pursuant to Article 382/2/e/5 of the Code of Civil Procedure numbered 6100, obtaining an expert report and obtaining the court’s permission for the contribution of capital in kind to a joint stock company are considered as non-contentious proceedings in commercial law. Although the expert report is a non-contentious proceeding, it is possible to object to the expert report under Article 343 of the TCC. According to aforementioned provision of Article 343 of the TCC, the founders and stakeholders of the joint stock company may object to the expert report regarding the valuation of the capital in kind.
There are different opinions in the doctrine regarding the time limit for objecting to an expert report32. Tekinalp argues that objections to the expert report can be made until registration and announcement33. Manavgat, by stating objections to the expert report are not possible after the registration and announcement of the articles of association, agrees with Tekinalp’s view34. Karaman Coşgun, on the other hand, expresses that objections to the expert report should be made, at the latest, before the court approves the report35.
The procedure to be followed by the court upon objection to the expert report is not explicitly stated in the provision; however, it is possible for the court to request an additional report from the expert on the objected issues or to appoint a new expert36. The founders and stakeholders have the right to object to the report prepared by the expert, and the expert report approved by the court is definitive37. It should also be noted that according to the reasoning of Article 343 of the TCC, the expeditious resolution of objections to the expert report by the court is required in accordance with ratio legis38.
V. CONCLUSION
The fundamental method determined for the incorporation of joint stock companies is the immediate incorporation. Depending on the sort of capital invested in the company, immediate incorporation can take either one of two forms: simple immediate incorporation or qualified immediate incorporation. If the capital contributed to the joint stock company consists of cash and there is no capital in kind, this incorporation is referred to as a simple immediate incorporation. However, if capital in kind is contributed to the joint stock company during its incorporation, if a business and assets are transferred during the incorporation process, or if special benefits are provided to the founders from the profits of the joint stock company, then such incorporation will be considered as a qualified immediate incorporation. In accordance with the principle of capital maintenance, capital must be guaranteed. Therefore, if immovable property is to be contributed as capital in kind, it should be registered with the land registry. In the case of intellectual property rights, they should be recorded in the special registries for these rights, and movable assets should be entrusted to a trusted person. In order to contribute capital in kind to a joint stock company, an expert appointed by the commercial court of first instance where the company’s headquarters is located will first conduct a valuation for the assets in question. After reflecting the value of the assets in the articles of association and completing the relevant other incorporation procedures, the intended joint stock company will acquire legal personality through registration and publication in the commercial registry.
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FOOTNOTE
1 Reha Poroy/ Ünal Tekinalp/ Ersin Çamoğlu, Ortaklıklar Hukuku, 15th Edition, İstanbul 2021, p. 334.
2 Poroy/ Tekinalp/ Çamoğlu, p. 335.
3 Poroy/ Tekinalp/ Çamoğlu, p. 338.
4 Celal Göle, Anonim Ortaklıklarda Nakdi Sermaye Koyma Borcu ve Bu Borcu İfada Temerrüt, Ankara 1976, p. 11.
5 İsmail Kırca/ Feyzan Hayal Şehirali Çelik/ Çağlar Manavgat, Anonim Şirketler Hukuku, V. 1, Ankara 2013, p. 345.
6 Mehmet Özdamar, “6102 Sayılı TTK Hükümleri Çerçevesinde Anonim Şirketlere Ayni Sermaye Konulmasına İlişkin Çeşitli Sorunlar”, Ticaret ve Fikri Mülkiyet Hukuku Dergisi, V. 1, Iss. 1, 2015, p. 145.
7 Afra Ece Kaya, Anonim Şirkete Sermaye Koyma Borcu ve Bu Borcun Yerine Getirilmemesinin Hukukî Sonuçları, Ankara Üniversitesi, Sosyal Bilimler Enstitüsü, Master’s Thesis, Ankara 202, p. 18.
8 Kırca/ Şehirali Çelik/ Manavgat, p. 346.
9 Kırca/ Şehirali Çelik/ Manavgat, p. 346.
10 Poroy/ Tekinalp/ Çamoğlu, p. 338.
11 Kırca/ Şehirali Çelik/ Manavgat, p. 344.
12 Kırca/ Şehirali Çelik/ Manavgat, p. 344.
13 Poroy/ Tekinalp/ Çamoğlu, p. 335.
14 Emek Toraman Çolgar, Şirkete Borçlanma Yasağı, İstanbul 2019, p. 89.
15 Toraman Çolgar, p. 222.
16 Hasan Pulaşlı, Şirketler Hukuku Şerhi, V. 1, 4th Edition, Ankara 2022, p. 217.
17 Pulaşlı, Şerh 1, p. 217.
18 Toraman Çolgar, p. 222-223. Also see. Erdoğan Moroğlu, Makaleler, İstanbul 2010, p. 53
19 Toraman Çolgar, p. 225.
20 Mehmet Fatih Arıcı, “Sermaye Şirketleri Hukukunda Vadeli Alacağın Sermaye Olarak Konulması Yasağı”, İstanbul Üniversitesi Hukuk Fakültesi Dergisi, V. 73, Iss. 1, 2015, p. 321.
21 Arıcı, p. 322.
22 Kırca/ Şehirali Çelik/ Manavgat, p. 352.
23 Abuzer Kendigelen, Yeni Türk Ticaret Kanunu Değişiklikler, Yenilikler ve İlk Tespitler, İstanbul 2011, p. 197.
24 Necla Akdağ Güney, Anonim Şirketlerde Kuruluş, İstanbul 2014, p. 105-106.
25 Hasan Pulaşlı, Şirketler Hukuku Genel Esaslar, 2. Baskı, Ankara 2013, p. 552.
26 Arıcı, p. 322.
27 Pulaşlı, Şirketler Hukuku Şerhi, V. 3, 4th Edition, Ankara 2022, p. 2133.
28 Pulaşlı, Şerh 3, p. 2133.
29 Pulaşlı, Şerh 3, p. 2133.
30 Poroy/ Tekinalp/ Çamoğlu, p. 340.
31 Poroy/ Tekinalp/ Çamoğlu, p. 340.
32 Akdağ Güney, p. 111.
33 Ünal Tekinalp, Sermaye Ortaklıklarının Yeni Hukuku, 3rd Edition, İstanbul 2013, p. 158.
34 Akdağ Güney, p. 111.
35 Karaman Coşgun, “Anonim Şirketlerde Sermaye Kavramı ve Ayni Sermaye Değerinin Belirlenmesi”, Marmara Üniversitesi Hukuk Fakültesi Hukuk Araştırmaları Dergisi, V. 18, Iss. 2, 2012, p. 341.
36 Coşgun, p. 341.
37 Kemal Şenocak, Şirketler Hukuku Şerhi, Volume 1, Ankara 2022, p. 381.
38 Reasoning of Article 343 of the TCC. https://www.ticaretkanunu.net/ttk-madde-343/.
