Authors: Corporate Law Department, Atty. Mustafa Şahin

I. Introduction

Although the limited liability company (limited şirket) is regulated under the Turkish Commercial Code as a capital company, it possesses a distinct character compared to the joint stock company due to the significance attributed to the personal identity of the shareholders and the element of mutual trust among them. This hybrid structure is particularly reflected in the legal regime governing the transfer of capital shares. Rather than adopting a system of unrestricted transferability of capital, the legislator has preferred a framework prioritising the preservation of the company’s shareholder structure.

The Turkish Commercial Code No. 6102 (“TCC”) subjects the transfer of capital shares in limited liability companies to a detailed procedural regime. The transfer is not treated merely as a contract producing effects between the parties; instead, it is structured as a multi-stage legal transaction completed through both internal and external corporate mechanisms, including the approval of the general assembly, registration in the share ledger, and registration with the trade registry.

This study systematically examines the transfer of capital shares in limited liability companies within the framework of the relevant provisions of the TCC.

II. Legal Nature of the Capital Share

Pursuant to Article 573/1 of the TCC, a limited liability company is a capital company with a fixed principal capital, consisting of the aggregate of capital shares. A capital share constitutes an asset element representing shareholder status, possessing economic value, and, as a rule, being transferable.

However, the transfer of shares in a limited liability company is not considered merely as a disposition of an asset right. It is also regarded as a transaction affecting the corporate structure and the personal nature of the company.

A capital share may exist as an uncertificated share (bare share), or it may be evidenced by an instrument serving as proof or by a registered share certificate (TCC Art. 593/2). Nevertheless, the issuance of a share certificate does not render transfers freely executable in the same manner as in joint stock companies, since the mandatory transfer regime set out under Article 595 of the TCC remains applicable in all circumstances.

III. Transfer of Capital Shares and Formal Requirements

A. Share Transfer Agreement (TCC Art. 595/1)

Under Article 595/1 of the TCC, the transfer of capital shares in a limited liability company, as well as transactions giving rise to an obligation to transfer, must be executed in written form and the signatures of the parties must be notarised. This provision is mandatory in nature, and notarisation constitutes a validity requirement for the transfer. Share transfer agreements executed merely in ordinary written form or lacking notarised signatures are null and void.

A valid share transfer agreement must include, at a minimum, the identities of the transferor and transferee, the company’s trade name, the nominal value of the transferred capital share, and an explicit declaration of intent regarding the transfer. In the absence of such essential elements, no legally valid transfer may be deemed to exist.

Furthermore, Article 595/1 requires that the agreement specify provisions relating to additional payment obligations and ancillary performance duties, any aggravated or extended non-compete obligations applicable to all shareholders, as well as pre-emption rights, call and put options, repurchase rights, and contractual penalties. According to the legislative reasoning, the absence of such clauses does not generally invalidate the agreement, but it may give rise to liability on the part of the transferring shareholder.

B. Assignment of Uncertificated Shares

Where capital shares are not represented by certificates, they are legally characterised as proprietary rights and may, in principle, be assigned by way of receivables assignment under Article 183 of the Turkish Code of Obligations (“TCO”).

However, the existence of an intention to assign within the meaning of Article 183 of the TCO does not eliminate the formal and approval requirements prescribed by the TCC for share transfers in limited liability companies. In other words, assignment is possible, but for the transfer to produce legal effects vis-à-vis the company and other shareholders, the written form, notarisation, and general assembly approval requirements under Article 595 must all be fulfilled.

In this respect, the provisions of the TCO do not override the special regime of the TCC but rather complement it.

IV. General Assembly Approval and the Mechanism of Implied Consent

A. Legal Nature of General Assembly Approval (TCC Arts. 595/2, 616/1-g)

Pursuant to Article 595/2 of the TCC, unless otherwise provided in the articles of association, the transfer of capital shares is subject to the approval of the general assembly of shareholders. This authority is expressly listed among the non-delegable powers of the general assembly, meaning that the approval of share transfers falls exclusively within its competence (TCC Art. 616/1-g).

Until such approval is granted, the notarised share transfer agreement remains in suspense. During this period, all rights and obligations attached to the share continue to belong to the transferring shareholder. General assembly approval constitutes a constitutive element completing the transfer and granting it legal effect.

B. Implied Approval (TCC Art. 595/7)

In order to prevent share transfers from being left unresolved for indefinite periods, the legislator introduced a mechanism of implied approval. Under Article 595/7, if the general assembly does not adopt an explicit rejection decision within three months from the date the transfer is notified to the company, the transfer is deemed approved automatically.

Accordingly, even in the absence of an express approval resolution, the transferee acquires shareholder status upon expiry of the three-month period. Implied approval is a statutory legal consequence arising directly from the law without requiring an explicit declaration of intent.

V. Restrictions on Share Transfers and the Role of the Articles of Association

Restrictions on share transfers in limited liability companies may be analysed under two categories: statutory restrictions and contractual restrictions.

Statutory restriction arises primarily from the requirement of general assembly approval, whereas contractual restriction is shaped through additional limitations introduced in the articles of association.

Pursuant to Article 595/4, the articles of association may completely prohibit the transfer of capital shares. They may also restrict transfers to certain persons, impose temporal limitations, or require the provision of security by the transferee. Nevertheless, such restrictions are limited by the principle of good faith and may not be applied arbitrarily.

Even where transfers are prohibited or approval is denied, the shareholder’s right to exit the company for just cause remains reserved (TCC Art. 595/5). This provision aims to balance the preservation of the corporate structure with the shareholder’s economic freedom.

VI. Approval of Share Transfers Without Holding a General Assembly Meeting (TCC Art. 617/4)

Article 617/4 provides that, unless a shareholder requests oral deliberation, general assembly resolutions may be adopted without convening a meeting, through written approvals of the shareholders.

Approval decisions regarding share transfers adopted through this method produce the same legal effects as resolutions passed in a formal meeting. In such cases, there is no need for a meeting call, physical assembly, or preparation of an attendance list.

In practice, such resolutions are commonly referred to as “shareholders’ written resolutions” and significantly facilitate share transfer procedures, particularly in closely held limited liability companies.

VII. Registration in the Share Ledger and Trade Registry (TCC Art. 598)

Following general assembly approval, the share transfer must be recorded in the share ledger. The share ledger constitutes an official internal record reflecting the company’s shareholder structure. Registration therein is declaratory rather than constitutive in nature.

Registration of the transfer with the trade registry is, however, crucial in terms of enforceability against third parties. Pursuant to Article 598/3, the reliance of good-faith third parties on registry records is protected. Therefore, registration and announcement play a decisive role in determining the external effects of the transfer.

VIII. Conclusion

The transfer of capital shares in limited liability companies is governed under the TCC by a detailed and balanced legal regime. The written and notarised share transfer agreement, general assembly approval, implied consent mechanism, registration in the share ledger, and registration with the trade registry constitute complementary elements required for the transfer to produce legal consequences.

Accordingly, share transfer transactions in limited liability companies must be assessed not solely on the basis of the parties’ intentions, but together with the institutional mechanisms prescribed by law. In particular, careful consideration of general assembly approval requirements and restrictions arising from the articles of association is of paramount importance in preventing disputes in practice.