A Limited Company is established by one or more real or legal persons under a trading name, and its basic capital is determined and this capital consists of the sum of basic capital shares. A limited company can be established by a single person or the company can have more than one partner. In this case, the partners of the company own a certain share of the company’s capital.
It is possible to transfer capital shares in limited companies. Share transfer can be realized with a Share Transfer Agreement or a decision to be taken between the partners. However, during this transfer, the transferor cannot transfer its shares freely, on the contrary, the existence of strict form conditions is sought.
TERMS OF TRANSFER OF THE PRINCIPAL CAPITAL SHARE
Article 595 of the Turkish Commercial Code regulates the conditions under which the basic capital share can be made in a Limited Company.
1-) Rule of to be Written
In order to be able to talk about the transfer of a valid capital share, the primary condition is that the transactions that will ensure the transfer of the capital are made in writing. A transaction not made in writing will have no legal validity. The declaration of intention of the person who wants to transfer the capital share and the person who takes over must be in writing. The parties can write down these declarations of intention into the Articles of Association.
It is also possible for the transferor and the transferee to be partners of the company. In practice, the transferor and the transferee often are partners and own a certain part of the capital.
2-) Notarization of Signatures:
The signatures under the document (Articles) reflecting the intention of the transferor and the transferee of the capital share must be approved by the notary public. The transferor and the transferee must acknowledge the signatures under the transfer statement prepared by them in the presence of a notary public, and the notary public must approve these signatures. No further action is taken by the notary at this point.
3-) Obligations that can be added to the Transfer Agreement:
If additional payment and ancillary performance obligations are extended to aggravate and to cover all partners, with the transfer agreement made by the transferor and the transferee, this issue is stated in the conditions regarding the right to be the subject of a proposal, preemption, redemption and purchase rights and contract penalty.
The absence of these conditions in the Articles does not invalidate the contract. With this provision, the parties of the transfer agreement have a right to bind the transfer to additional obligations, however, the parties are limited to claim that the transfer cannot be made conditional. However, if there is no such restrictive provision both in the articles of association of the company and in the transfer agreement, the parties will not be able to demand ancillary performance from each other after the transfer. If it is desired to prevent the transfer of shares in the establishment of the company; or to be subject to special conditions, it is possible to add this with the Articles of Association or with the amendment to be made in the Articles of Association later.
4-) Approval of the General Board :
In order for the basic capital share to be valid, the General Board of the Limited Company must approve the transfer of the capital share, unless otherwise envisaged in the company’s Articles of Association. This condition is extremely important. Since Limited Companies may have less capital and partners than Joint Stock Companies, the Law aims that the General Board of the Limited Company will make the final decision about the new partner to enter the company. Since Limited Companies are mostly established between family members as well as commercial relations, it is also appropriate for the ordinary flow of business life to subject a foreign person who can take over shares from the Limited Company to the approval of the General Board.
One of the common cases seen in practice is the approval of the General Board in the form of a decision of the Board of Shareholders. Since there was no meeting in the form of a General Board meeting at the time of the old law, the decision specified as the meeting of the Shareholders’ Board is considered to be the General Board meeting. In practice and in some legislations other than the Turkish Commercial Code, the concepts of “Board of Shareholders” for the General Board of Limited Companies and “Decision of the Board of Shareholders” for the General Board Resolution are still used. These concepts are included in the old Commercial Code. In the new Turkish Commercial Code, the concept of “General Board” is included as in Joint Stock Companies. There is no longer a legal phrase as a decision of the Board of Shareholders. It is a requirement of equity that the title of the resolution taken for this purpose-written as the Board of Shareholders’ resolution is accepted as the General Board resolution. Because a malevolent person who transfers its shares can demand the cancellation of the share transfer because this decision is taken by the Board of Shareholders.
Another issue is the nature of the resolution of the Board of Shareholders of a limited company consisting of two persons. In that case, if a separate body has not been established, we believe that the presence of these two persons in the transfer of shares of a limited company consisting of two persons, either in person or by proxy, also have the quality of the approval of the General Board.
Does the approval of the General Board have to be gotten in all cases?
In cases where the Limited Company has one partner or two partners, the transfer of the capital share can be carried out with the participation of these two partners or their representatives. A partner can transfer all of its shares to the other partner or some of them. Since there are no partners other than the two partners who decided the two partnerships Limited Company, there is no obstacle to accept that this decision was taken as the decision of the General Board. Because, apart from two partners, there is no General Board to approve this decision. Accordingly, the evaluation of Dr. Hami Şener based on a Supreme Court Decision is as follows; In some exceptional cases, even if the partnership agreement does not specify that there is no need for approval, it may still not be necessary to get an approval decision from the General Board. Indeed, for example, if all the partners have participated in the share transfer agreement and if claiming the fact that there is no consent is a behavior that necessitates the abuse of the right, then there is no need to decide on approval.
In this case, the subject that is frequently disputed is the qualification of the Board of Shareholders’ resolution of a limited company consisting of two people. If a separate body has not been established, the presence of these two persons in the transfer of shares of a limited company consisting of two persons, either in person or by proxy, also has the quality of the General Board approval.
5-) Unrestricted Share Transfer and Failure of the General Board to Approve:
– With a provision to be added to the Articles of Association of the company, the transfer of the capital share can be blocked.
– Unless there is a contrary provision in the Articles of Association of the company, the General Board may reject the approval without stating any reason.
What will happen if the transfer of the company’s capital share is blocked or the General Board rejects the approval without stating any reason? In this case, the partner of the company has the right to leave the company rightfully. The company partner may leave the partnership based on these reasons.
– If additional payment or ancillary performance obligations are envisaged in the Articles of Association, the General Board may reject the approval, even if there is no provision in the Articles of Association if the security deposit demanded from the transferee is not given as a result of its doubtful solvency.
The General Board may reject the approval regardless of whether there is a provision in the company’s Articles of Association if it considers the solvency of the person who will take over the capital share questionable and the transferee fails to provide the demanded security deposit.
– If the General Board does not reject it within three months from the application, it is deemed to have given its approval.
The purpose of this regulation is to ensure that the share transfer is not delayed and that the General Board makes a decision on this issue. Also, failure to make a decision on this request by malicious persons may violate the rights of the transferor and the transferee.
REGISTRATION OF TRANSFER AND ENTRY IN COMMERCIAL REGISTER
1-)Registration of Share Transfer in the Trade Registry
The conditions of form for the transfer of capital shares are determined in the 595th article of the Turkish Commercial Code, and there are procedures for registering the transfer to the shareholder’s register and notifying it to the trade registry, although it is not a founder.
The registration of the share transfer to the trade registry is an explanatory process, not a founding one. If the Trade Registry Officer determines that the legal elements that we have mentioned above are present, the transfer is registered in the trade registry. “As a matter of fact, since the registration to the share register is not a founding one, but only explanatory, the registry manager is obliged to examine whether the legal conditions sought for the registration process exist.”  The officer cannot comment on the situations in which he/she hesitates in the registration. The transfer of shares registered in the Trade Registry is published in the Turkish Trade Registry Gazette and announced to the relevant parties. As a result, the transfer becomes valid with the approval of the General Board.
The registration of shares to the commercial register is not a founding action. Companies with a corporate structure ensure that their actions are clear and visible. Registering the transactions made in the company in the corporate register, and the transparency of the accounts and registers ensures the trust of the third parties to the company. Registering the transfer in the commercial register also aims at this objective. Failure to register the share transfer in the company’s commercial register does not invalidate the share transfer. Because the transfer becomes valid with the approval of the General Board.
2-) Is there a legal regulation on the status of the transfer in case the share transfer is not registered?
We have stated that the registration of the share transfer in the trade registry is not a founding action. Therefore, it is sufficient to get the approval of the General Board for the share transfer. The regulation published by the Ministry of Finance on this issue is as follows:
COMMUNIQUÉ NO 5, SERIES A, published by the Ministry of Finance: Transfer of partnership share; Although not registered and announced, the notarized transfer agreement becomes effective after the approval of the Shareholder’s Board resolution or following three months of the notarization if such approval is not available unless otherwise stipulated in the articles of association. In this case, the date of the notarized transfer agreement should be taken as a basis as the date of transfer of the partnership share.
3-) Registration of Share Transfer-Transactions in Commercial Register
Limited Companies are required to register a general journal, general ledger, inventory register share register, the Board of Shareholders register or General Board meeting, and negotiation register.
Limited companies have a register containing the capital shares. It is named as the Stock Register. In case of a share transfer, the register in which the transfer will be registered in the Stock Register. The entity of the Stock Register provides proof for those who own company shares. In other words, the persons registered in the Stock Register have the title of a company partner. Share transfer can only be registered in the Stock Register if it is approved by the General Board. Registering the share transfer in the Stock Register is not the founding element of the transfer.
One of the problems frequently encountered in practice is how to take the share transfer decision and register in the registers if the company’s commercial registers cannot be accessed. Due to the conflicts between the partners of the company, the partner holding the commercial registers may not be returning these registers. Also, registers may be lost or stolen. In this case, if the registers are not available, will the transfer be considered invalid? The answer to this question is no. Undoubtedly, in this case, the person who took over the shares should be protected if the commercial registers are lost, or against the partner who does not return the commercial registers in bad faith.
4-) If the commercial registers are not available, how will the transfer decision and registration be made?
According to the 11th article of the Communiqué on Commercial Books, if the decisions requiring the transfer of shares and the transfer cannot be registered the commercial registers for one of the stated reasons, the following provision can be exercised: ”In limited companies, the decisions taken by the manager or the board of directors regarding the company management can be registered in the General Board meeting and negotiation register, or a separate Board of Directors’ resolution register can be kept. In case the board of directors’ resolution register is kept, the provisions regarding the Board of Directors’ resolution register, including the opening and closing approvals, are applied. In case the resolutions are registered in the General Board meeting and negotiation register, it is obligatory to write the issues specified in the second paragraph of Article 10. If a separate Board of Directors’ resolution register is kept, the resolutions of the manager or the board of directors cannot be registered in the General Board meeting and negotiation register.
According to this provision, if the share transfer decision regarding the company management cannot be registered in the General Board meeting and negotiation register, it is envisaged that this register can be executed by keeping a separate Board of Directors’ resolution register. With this provision, objections of the malicious partner who does not return the commercial registers to invalidate the transfer will be prevented.
Additionally; It is also possible to reissue the Stock Register. Since the purpose here is publicity and registration, we believe that the registration of the share transfer will be possible by annotating the new Stock Register.
5-) Can Share Transfer Be Made by Proxy?
One of the frequently asked questions is whether the transferor of the shares has to participate in the share transfer decision. This question also includes the question of whether the share transfer can be made by proxy (representation). First of all, we would like to point out that, according to article 617 of the Turkish Commercial Code; ”The provisions regarding joint-stock companies on convocation, minority’s right to call and propose agenda, proposals, General Board without convocation, preparatory measures, minutes, unauthorized participation, except those pertaining to the Ministry representative, are applied mutatis mutandis. Each partner can have himself represented in the General Board through a partner or a non-partner.” Thus, the partner may have himself represented at the General Board meeting by a person who is or is not a partner.
In accordance with the provision of the article, the transferor or transferee partner may allow a shareholder or non-partner to conclude a share transfer agreement with a power of attorney, have him/her represented in the General Board and have him/her voted on his/her behalf.
In this direction, Prof. Dr. Oruç Hami Şener thinks that “It is undoubtedly possible to make a share transfer agreement by proxy with the power of attorney given. If the transfer agreement is not made in the manner stipulated in the aw, in this case, the transferee of the so-called share, which has performed anything, may demand back what it has given on the basis of unjust enrichment.” 
6-) What Are the Consequences of a Transfer Violating the Form?
The conditions specified in Article 595 of the Turkish Commercial Code are the founding elements of the share transfer. In case of violation of any of these elements, the share transfer is deemed invalid. However, in practice, even if the share transfer is invalid, it is seen that the parties give something to each other for performance purposes. In cases where the share transfer is invalid due to non-compliance with the condition of form, it is doubtless to ensure that the things given by the parties to each other can be taken back. One of the ways to achieve this is the unjust enrichment lawsuit.
“If the transfer is not done in accordance with the form, the transaction will not be valid. In this case, if the parties have given something to each other for the purpose of performance, for example, if some payments have been made, especially if they believe that they have taken over the share, in this case, the money they have given can be taken back according to the principles of unjust enrichment (TCO 77 et al). The Supreme Court has also pointed to this issue in some of its decisions. These decisions will continue to be valid for the New TCC as well.” 
In our article, we tried to explain the Share Transfer and Conditions in Limited Companies, the Registration of the Transfer and its registration in the Commercial Registers. We would like to emphasize that although the Transfer of Shares in Limited Companies may seem like a simple process at first glance, it contains very detailed and delicate actions.
Yargıtay Kararları Işığında Limited Ortaklıklar Hukuku, p. 307-308 Şener, Prof. Dr. Oruç Hami.1.
Pulaşlı, Prof. Dr. Hasan. Şirketler Hukuku Genel Esaslar Kitabı 5th Edition p. 800.
Şener, Prof. Dr. Oruç Hami. Yeni TTK Döneminde Anonim ve Limited Ortaklıklara İlişkin Verilen Yargıtay Emsal Kararlarının Değerlendirilmesi, p. 140-141
Prof.Dr. Oruç Hami Şener, Yargıtay Kararları Işığında Limited Ortaklıklar Hukuku, p. 292-293