HOW TO CHANGE THE LIMITED COMPANY’S ARTICLE AGREEMENT?

As in every company agreement, important issues such as the basic structure and functioning of the company, its capital, partnership rights and obligations and management are regulated in the articles of association of limited companies. The articles of association for a company are almost like the constitution of the company. For this reason, the articles of association of the company must be prepared in accordance with a certain procedure, and it is required by law that the contract contain certain records. After the company’s articles of association are prepared and signed by the founders and their signatures are approved, the processes of registration and announcement of the agreement in the trade registry must be completed. Just like the procedure for the preparation of the articles of association, the amendment of the articles of association of the company is subject to certain rules of form and decisions and transactions made compulsory by the company.

In this bulletin, explanations are given regarding the situations that require amendments to the articles of association in limited liability companies, the legal procedure to be applied in changing the articles of association, the internal decision-making process and finally the registration and announcement processes of the amendments to the articles of association.

1) What should be understood from the Amendment of the Company’s Articles of Association?

Changing the articles of association of the company; It may be in the form of removing one or more of the existing clauses in the contract, adding new clauses replacing them, changing the content of the clause or the words and expressions used in the clause, or adding a new clause to the contract on a subject that did not exist before. Updating only the parts that do not bring a change in terms of meaning and scope, and that are in contradiction with the spelling errors and spelling rules, are not within the scope of the amendments to the articles of association.

2) What are the Matters Requiring Amendment of the Company’s Articles of Association?

According to the Turkish Commercial Code, it is necessary to amend the articles of association of the company, especially regarding the changes to be made regarding the capital of the company. For example;

• Increasing or decreasing the capital of the company,
• Establishing privileged basic capital shares in voting,
• Limitation or removal of the priority right,
• Prohibition, limitation or facilitation of the transfer of basic capital shares,
• Changing the business subject of the company,
• Changing the company headquarters or trade name,

In order to regulate the issues, it is necessary to amend the articles of association.

3) Law Systematics in Changes to the Company’s Articles of Association

The amendments to be made in the limited company articles of association in the Turkish Commercial Code are arranged in a way that will be examined by making a double distinction. The fact that a quorum for meetings and resolutions to be sought in the general assembly is made according to the subject of the amendment to be made in the articles of association of the company necessitates such a distinction. Accordingly, the amendments to the articles of association of the company will be examined in two groups as general and specific changes.

3.1) Amendments to the General Characteristics of the Company’s Articles of Association

According to TTL article 589, “Unless otherwise stipulated in the articles of association, the articles of association can be changed by the decision of the partners representing two-thirds of the basic capital.” The provision generally determines the quorum to be sought in amendments to the articles of association of the company. In the continuation of the article, “621. The phrase “Provisions of the article are reserved” regulates the contract amendments that require special quorums. Accordingly, it is appropriate to amend the articles of association in accordance with this general provision, except in cases where another quorum is required in Article 621 or the Law.

To explain a little, first of all, a general assembly resolution is required in order to amend the company’s articles of association in limited companies. However, the general assembly cannot make changes in the articles of association with a decision to be taken by absolute majority. Because the legislator considers the amendment of the company contract to be important for a company, he sees the vote of more partners to take this decision. Although a meeting quorum is not sought as a rule in the amendments to be made in the company’s articles of association, an aggravated decision quorum has been introduced. Accordingly, if it is not specified in the articles of association that a heavier quorum is required, amendments may be made in the articles of association with the votes of the partners representing 2/3 of the capital. It is clear that a higher rate than this rate can be determined by a provision to be included in the company’s articles of association. If there is such a determination, a contract change is possible if the quorum in the contract is met.

3.2) Amendments of a Special Character to the Articles of Association of the Company

The Law has determined more severe quorums for some amendments to be made in the company’s articles of association.

3.2.1) Amendments to the Articles of Association that require at least two-thirds of the votes represented in the General Assembly

 According to Article 621 of the TCC, if the articles of association are to be amended regarding the following matters, at least two-thirds of the votes represented in the general assembly and the absolute majority of the entire share capital with voting rights must be present;

• Changing the business subject of the company.
• Estimation of privileged basic capital shares in voting.
• Limiting, prohibiting or facilitating the transfer of basic capital shares.
• Increasing the basic capital.
• Limitation or removal of the priority right.
• Change of company headquarters.
• Approval by the general assembly for the directors and partners to act contrary to the obligation of loyalty or the prohibition of competition.
• Applying to the court for the dismissal of a partner from the company for justified reasons and expulsion of a partner from the company for the reason stipulated in the articles of association.
• Dissolution of the company.

Here, it is possible to say that the law determines both a meeting quorum and a decision quorum. Because the absolute majority of all the basic capital shares to be present at the meeting is necessary for the formation of the quorum for the meeting, and 2/3 of the votes represented for the resolution is required.

In the 10th article of the Articles of Association of the plaintiff  company, “For the capital increase, the company’s capital can be increased with the decision of the company shareholders representing 72.5% of the company’s capital in the same direction. 

It is understood that the existing capital cannot be increased unless the shareholders representing 72.5% of the company’s capital make a decision.

Although  it was mentioned in the reasoning of the decision that the company’s articles of association did not include an aggravated quorum regarding the amendment of the articles of association, qualified majority was included as a special case within the scope of Article 10 of the articles of association, limited to capital increase, and the validity of the decisions taken without complying with the said ratio was not mentioned. possible is not possible. Because, if the provision of the mentioned article can be exceeded with the amendment of the articles of association, it will in itself render the aggravated quorum in the capital increase ineffective. 

In this case, considering that the  aggravated quorum is included within the scope of the plaintiff company’s articles of association and the said quorum cannot be exceeded by the general article regarding the amendment of the articles of association, the court should have decided to reject the case, but it was not considered correct to accept it with a written justification, the judgment had to be overturned. [1] ”

3.2.2) Amendments to the Articles of Association Requiring Unanimity

It is stated in the Law that the approval of all partners is required in order to amend the articles of association in some matters. These issues are; These are the cases of additional or side performance obligations to the shareholders of the company, other than the capital investment debt.

In the law, there are a limited number of situations in which additional performance obligations may be imposed on the shareholders of the company. Accordingly, adding an additional performance obligation to the partners,

• The total of the company’s basic capital and legal reserves cannot cover the loss of the company,
• It is not possible for the company to continue its business as required without these additional tools,
• It is possible in cases where another situation, defined in the articles of association and which creates a need for equity, has taken place (TCC art. 603).

According to Article 607 of the TCC, general assembly resolutions can only be taken with the approval of all relevant partners in the amendments to the articles of association that impose additional payment obligations on the partners or increase the existing obligations.

Just like in additional payment obligations, general assembly resolutions envisaging new ancillary performance obligations or increasing existing ancillary performance obligations can only be taken with the approval of all relevant partners.

4) Registration and Announcement of the Amendment to the Articles of Association

It is obligatory to register the articles of association with the Trade Registry at the establishment. The amendments to the articles of association to be made after the postponement for the first time must also be registered in the trade registry and announced in the trade registry gazette. As a matter of fact, the provision of Article 589/2 of the TCC is as follows;

“Every change made in the company agreement is registered and announced.”

The general assembly decision regarding the amendment of the articles of association must be registered by the directors in the registry of the place where the head office of the company is located (TSY m.92/2). It is especially important in terms of relations with third parties outside the company that the decision taken by the general assembly regarding the amendment of the articles of association is registered and announced by the managers in the trade registry of the company headquarters and branches within fifteen days from the date of the decision. Because the changes made in the contract will only be put forward after registration on the assumption that they will be aware of it after registration.

The following documents must be submitted to the directorate in the application for the registration of the amendment of the articles of association of the company.

• Notarized copy of the general assembly resolution regarding the amendment of the articles of association.
• The new text of the changed articles of the company agreement.

CONCLUSION

In limited companies, it may be necessary to amend the company’s articles of association, which regulates the most important issues in terms of the company’s legal personality, partners and managers. It cannot be expected that the contract will always remain the same since its establishment, and since it is not desired to change the contract frequently, contract amendments are subject to certain conditions and procedural rules. You can contact our team for more information about the amendments to the articles of association.

Regards,

Solmaz Law and Consultancy Team.

REFERENCES

ALTAŞ, Soner, (2016), Limited Companies According to Turkish Commercial Code , Seçkin Publishing, Ankara, pp.405-410.

YAVUZ, Mustafa, “ The Procedure for Amending the Company Agreement in Limited Companies”, Tax Report , number: 190, July 2015, pp.211-217.

11th Civil Chamber of the Supreme Court, 2013/15219 E., 2014/5024 K.

Turkish Commercial Code.

Trade Registry Regulation.