Last updated on 18 April 2026.
The two most common types of private companies in Turkey are limited liability companies and joint stock companies. This article covers share transfers in joint stock companies. The general principle for joint stock companies is that their shares are freely transferable. The exceptions to this principle depend on the type of share.
Practical Side of the Share Transfer in a Turkish Joint Stock Company
The Turkish Joint Stock Company is a type of company that is essentially anonymous. This means that the shareholders of a Turkish joint stock company are supposed to be anonymous; hence, the original Turkish name for this type of company is “anonim şirket,” with “anonim” meaning “anonymous” in Turkish.
This anonymity as a shareholder of a joint stock company in Turkey also defines the nature of share transfers and the related rules governing the Turkish joint stock company. First of all, it eliminates the need to register the share transfer with the Trade Registry after it is completed. This is, in fact, contrary to the rules on share transfer in limited companies in Turkey (see our guide on the differences between limited and joint stock companies in Turkey). Secondly, there is no requirement for the share transfer agreement to be in written form or notarised. This is also a huge difference compared with the procedures for limited company share transfers in Turkey. Therefore, it is safe to say that the overall procedure for share transfers in Turkish companies is relatively straightforward.
Restrictions on the Anonymity Principli in Turkish Joint Stock Companies
It is also worth noting that the principle of anonymity has its limits. First of all, the shares must at least be registered with the company’s books to practice shareholder rights, such as attending the general assembly. Furthermore, the new requirements of the KEP system make complete anonymity virtually impossible in the current era. KEP is a government database maintained mainly for security reasons. Finally, the share structure of a joint stock company in Turkey is actually publicly accessible in the trade gazette for the incorporation stage. Thus, in practice, the anonymity applies after incorporation.
What are the different types of shares for Turkish private companies?
The two types of shares in a Turkish private company are nominative shares and bearer shares. The person who holds the physical share certificate of a bearer share is the owner. In nominative shares, the share certificate lists the owner’s name. The main difference between the two types is that nominative shares are more difficult to transfer, whereas bearer shares can be transferred with few restrictions. This article mainly focuses on nominative shares because their transfer is subject to stricter rules.
I. Transfer of Nominative Shares in Joint Stock Companies and Potential Restrictions
There are several types of restrictions on share transfers under Turkish law. The primary restrictions arise from explicit provisions in the Turkish Commercial Code (“TCC”). For example, such a “legal restriction” applies when the share price for the sold shares is not fully paid. Secondly, restrictions also arise from the provisions of the articles of association of the company. The articles of association that set out specific rules on transfer may also impose restrictions on nominative shares.
Legal Restrictions
Legal restrictions are set out in Art. 491 of the Law. This article allows the board of directors to avoid approving the transfer without relying on an explicit provision in the articles of association. The condition for such legal restrictions is doubt as to whether the shares are fully paid or whether the transferee has the necessary purchasing power.
Restriction by Articles of Association
Restricting share transfers by incorporating provisions in the articles of association under TCC Art. 492/1 is categorised as “restricted by articles of association”. This type of restriction is repeated in the provisions of Art. 493/1 and requires the articles to include important reasons for refusal.
The company’s power to reject share transfers under the TCC by relying on provisions of the articles of association also has certain limits. This issue arose in a dispute before the Court of Cassation, which examined a case in which the company relied on the provisions of its articles of association to refuse registration of the transfer. The Court decided that in the specific case, reliance on the articles of association was against the good faith principle in Art. 2 of the Turkish Civil Code and the principle of equal treatment in Art. 357 of the TCC.
In the same Court of Cassation judgement, a dispute over share ownership was not deemed a sufficiently vital reason to constitute a valid basis for rejecting the transfer under Art. 493. Finally, the company’s failure to provide an alternative by offering to purchase the transferor’s shares also meant that the transfer could not be refused.
Restrictions in the Absence of Explicit Terms in the Articles of Association
In principle, joint stock company shares can be transferred freely. Yet, the transfer of nominative shares can be prevented even when there are no legal restrictions or restrictive provisions in the articles of association. This third possibility arises by using the “escape clause”.
The Escape Clause
The previous section discussed refusing the transfer on the basis of essential reasons in the company’s constitution, per TCC Art. 493/1. The same TCC article also allows the company to deny the transferor’s request for approval. The proposal must be for buying the shares at the market price.
The company’s rights arising from the escape clause are subject to the principle of equal treatment and another Turkish law principle called “not using legal rights for harmful purposes”. As discussed above, the Court of Cassation held that such limitations apply even when relevant transfer-restriction articles are in the company’s constitution.
The escape clause provides an alternative to the restrictions imposed by the articles of association and allows the company to avoid unwanted individuals. It should be emphasised that the transferring shareholder is not obliged to accept the company’s offer to purchase shares. A final condition of the escape clause is that the company must make an offer for the total number of shares the transferor intends to sell.
Escape Clause in the Turkish Case Law
The escape clause under Art. 493, which allows refusing the transfer despite the absence of restricting provisions in articles of association, constitutes the legal grounds in the Court of Cassation judgements. According to the Court of Cassation, the purpose of the escape clause is to act as a precaution to protect the company from losing its identity and essential characteristics.
Art. 493/1 states that only the company can reject the transfer of shares. The Court of Cassation emphasises this rule and rejects shareholder lawsuits seeking annulment of the share transfer.
Another Court of Cassation judgement ruled that the offer to purchase under the escape clause can be made only between the company and the transferor. Furthermore, the Court highlighted that determining the value of the shares subject to the offer is not an exclusive right of the transferee. Accordingly, the transferor also has the right to request that the share value be determined by the Court. Under the next heading of this article, further details on the transferor’s right to apply to the Court are discussed.
Other Reasons for Refusing the Transfer
The transferee must declare that he is purchasing the shares for himself and under his name. Otherwise, the company may refuse to register the transfer.
There is a specific rule for “transfers resulting from the law”, which includes acquisition by inheritance, marital property distribution, and enforcement proceedings. The company may refuse approval to acquire shares resulting from transfers under the law, according to Art. 493/4.
Art. 493/5 provides the right to apply to the Court to determine the share price in cases where transfers result from the law. Although this application right could be associated with paragraph 1 of the same article (the escape clause), the Court of Cassation judgments refuse such a connection. This judicial approach is also mentioned above concerning the case law on the escape clause.
The Court of Cassation does not completely dismiss the right to apply to the Court for the determination of share price outside the scope of share transfers resulting from the law under Art. 493. According to the Court, there is a right to apply to the Court for transactions under Art. 493/1. However, this is based on the existence of “legal interest” and the right to a trial under the Turkish Procedural Code.
II. Transfer of Bearer Shares in Joint Stock Companies
Contrary to nominative shares, bearer shares can be freely transferred. It is, therefore, essential to act with caution when creating bearer shares. The transfer restrictions examined above cannot be applied to bearer shares, and neither are the restrictive provisions in articles of association are not valid for bearer shares. In terms of the transfer procedure, being in possession of the bearer share is sufficient for the transfer of these shares. However, rights arising from ownership of bearer shares cannot be used unless registered at the Central Securities Depository as promulgated by the Communique on the Notification and Registration of Bearer Shares to the Central Securities Depository.
III. Share Transfer Agreements in Turkey
Share transfers of nominative and bearer shares in joint stock companies are regulated by TCC Art. 489 and the following provisions, as discussed above. On the other hand, there are no specific legal provisions regulating share transfer agreements for joint stock companies. Therefore, share transfer agreements for joint stock companies need not be in any particular legal form to be valid and enforceable. The overarching principle of freedom of contractual “form”, stated in Art. 12 of the Turkish Code of Obligations, applies to share transfer agreements.
Is notarising the share transfer agreement of joint stock company shares mandatory?
The legal requirements for a valid share transfer agreement for limited liability company shares are explicitly provided in the Law: “Transfer of principal capital share and the transactions giving rise to transfer obligations shall be made in writing, and parties’ signatures shall be certified by a public notary.” (Art. 595/1). However, there is no such provision for share transfers in joint stock companies. Therefore, it is not mandatory to have the share transfer agreement of a joint stock company notarised under the freedom of contract principle.
References
- Court of Cassation 11. Department of Civil Law, No: 2015/8218 Decision No: 2016/3239 Decision date: 23.03.2016
- Court of Cassation 11. Department of Civil Law No: 2014/17122 Decision No: 2015/2152 Decision date 18.02.2015
- Court of Cassation 11. Department of Civil Law, No: 2016/4923 Decision No: 2017/6892 Decision date: 05.12.2017
- Court of Cassation 11. Department of Civil Law, No: 2020/338 Decision No: 2021/5306 Decision date: 22.06.2021
