Bearer Shares and Bearer Share Certificates in Joint-Stock Companies

Under the Turkish Commercial Code, bearer shares and bearer share certificates are defined as negotiable instruments where the holder of the certificate is considered the rightful owner. This classification applies if it is clear from the document or its form that whoever holds the certificate is deemed the rightful shareholder.

Bearer share certificates cannot be issued for shares that have not been fully paid. Any bearer shares issued in violation of this provision are considered invalid. In such cases, bona fide holders retain their rights to compensation, which can be claimed from the joint-stock company, board members, or managers if their legal and contractual obligations have been violated due to fault.

Unless otherwise stipulated in the articles of association, the type of share may be converted through amendments to the articles. For conversion of registered shares into bearer shares, it is essential that the shares are fully paid.

For fully paid bearer shares, the board of directors must issue share certificates within three months of full payment. The decision for issuance must be registered and announced and posted on the company’s website. Information about bearer shareholders and their shares must be reported to the Central Securities Depository (MKK) before distribution. Until the share certificate is issued, a provisional document may be provided, subject to the provisions for registered shares.

The transfer of bearer shares becomes effective against the company and third parties only after the transferor notifies the MKK of the transfer by delivering the share certificate. If the transfer is not reported to the MKK, the holder cannot exercise shareholder rights until the notification is made.

The date of notification to the MKK is essential for asserting the rights associated with bearer shares against the company and third parties. Records maintained by the MKK may also be shared with authorized entities as stipulated by relevant legislation.

For bearer shares, pledging requires only the delivery of the certificates to the pledgee. However, the right to represent the pledged shares in the general assembly remains with the shareholder, not the pledgee. If income-generating assets like dividends or interest are pledged, only those not yet due fall within the pledge scope unless agreed otherwise.

To establish a usufruct right on bearer shares, the possession of the certificate must be transferred to the usufructuary. Voting rights associated with these shares are then exercised by the usufructuary.

Attorney Hüseyin BAYAR provides an in-depth analysis of bearer shares in joint-stock companies, explaining the conditions for issuance, transfer, pledging, and the establishment of usufruct rights as per the Turkish Commercial Code.

Legal Notice: This article was written by Attorney Hüseyin Bayar and belongs to Bayar Law Firm. Unauthorized use or copying is prohibited.