Type vs Kind

Race To The Bottom Vs Race To The Top Type - they include private and public
corporations, as well as banking,
corporations, family, corporations, financial
Basically, in the USA, there are multiple federal acts. This situation may corporations, financial leasing, they all serve
either lead to race to the bottom where states prioritize attracting a specific purpose.
businesses instead of protecting the interests of shareholders and
stakeholders which basically leads to the weakening of the protection for Kind - deals with the nature of the company
like general, partnerships, cooperative, etc.
investors because they want to maximize profits at the expense of other
considerations. However, in race to the top, they believe if there are multiple
federal acts, it will increase competition leading to positive changes.

Limited Liability

There’s an individual owner of a sole proprietorship. He decides to have co-owners in order to collect
more capital and gain more knowledge and a better reputation. This trader has personal assets as well
Case (1) as assets which belong to his commercial enterprise. If he does transactions with third parties, the
creditors or the third parties can apply to the soul trader because it’s a sole proprietorship here the
limited liability principle doesn’t work so the third-party can apply to both personal assets and
commercial enterprises assets, because the commercial enterprises assets aren’t protected

As we know under the Turkish commercial code, join stock, companies, Limited, liability, companies, etc.
may be established by one person. in this case, the soul trader decides to establish a company or a legal
Case (2) entity, which has a legal personality. Let’s say he wants to establish a corporation here the trader decides
to transfer the commercial assets to the corporation X however of course he doesn’t transfer his
individual assets so because it’s a corporation and it has a legal personality, limited liability principal
works here and in case the company goes bankrupt the creditors apply to the sole trader. He no longer
owns the corporation as a legal entity. He only owns the shares. The direct party is X corporation. The
soul, trader indirectly benefits, so he kind of becomes like an investor and only the corporation is
liable for the debts. ( Unless - Corporate Veil is pierced)

How Many Persons Are Needed To Form a Company ?

In simple partnerships --> at least two persons

Corporations or limited liability companies --> one person + can only have a maximum of 50 shareholders
Cooperatives --> at least seven persons - they can be established by natural and legal persons. Their purpose is to
serve the economic interest of partners.

Which May Be Established By Legal Persons and Which May Be Established By Natural Persons?

General partnerships and limited partnerships --> natural person ( because personality is dominant )

Limited liability companies, corporations, p--> Natural Persons + Legal Persons ( because they are capital dominant)

Purpose
What are the indicators
of a company? 1. General partnerships can only be established by natural persons
Agreement, no vet, co- to operate a commercial enterprise so there must be a specific
reason.
management, profit, 2. Joint stock companies and corporations can be established for
sharing, law sharing, any economic purpose or field of activity, not prohibited by law.
co-determination. 3. Limited liability companies can be established by both natural
and legal persons for any economic purpose, not prohibited by law.
 Conflict Of Interest - Legal Nature Of The Company

1. The Nexus of Contracts Theory

The Nexus of Contracts Theory views a company as a network of agreements among shareholders,
directors, and third parties, emphasizing its contractual foundation, whether written or oral.

2. The Organization Theory

Conversely, the Organization Theory sees a company as a distinct legal entity separate from its
shareholders, focusing on its management and operational activities as an independent organization.

Why Do We Need Companies?

collection
Capital Collection: Companies allow for the pooling of more capital to achieve economic objectives.

Knowledge and Reputation: Companies benefit from collective expertise and established reputations.

Limited Liability: Unlike sole proprietorships, companies provide limited liability to owners, meaning
they are only liable for the company's debts up to the amount they invested.

Risk Distribution: In companies, the risk is distributed among owners, who share in both profits and
losses.

Effective Management: Companies can have professional management, improving the governance
and handling of assets. This is especially evident in capital companies, where structured governance
(like a general meeting) allows for collective decision-making and appointing professional managers.

Simple Partnerships

Definitions Selected From Different Codes Swiss Code of Obligations Art. 530/1

"A partnership is a contractual relationship in which two or more persons agree to combine their efforts
or resources in order to achieve a common goal. A simple partnership within the meaning of this Title
is any partnership that does not fulfil the distinctive criteria of any of the other types of partnership
codified herein."

Turkish Code of Obligations Art. 620/1 "A simple partnership contract is a contract in which two or
more persons agree to combine their efforts and assets in order to achieve a common goal. If a
company does not fulfill the distinctive criteria of a specific company codified by law, it shall be
presumed to be a simple partnership subject to this section."

Capital companies like corporations and limited liability companies the organ structure is seen. For
example a general meeting where all shareholders decide to incorporate a corporation / establish other.

German Civil CodeArt. 705 "By a partnership agreement, the partners mutually put themselves under a
duty to promote the achievement of a common purpose in the manner stipulated by the contract, in
particular, without limitation, to make the agreed contributions.
 Characteristics of a Company
1. Association of Persons: A company must be an association of persons, which can include
individuals, other companies, or legal entities. This association forms the basis of the company’s
structure and operation.
2. Contractual Basis: The formation and operation of a company are grounded in contracts, which
outline the rights and obligations of the parties involved. However, certain structures do not form a
contractual basis
3. Contributed Capital (Labor Force): Capital is essential for starting and running a business. This
capital can be in the form of financial investments or labor contributions. The pooling of resources,
including the labor force, is critical for the company's operations and growth.
4. Pursuit of a Joint Purpose: A company is established to achieve a common goal or purpose. This
purpose unites the members and directs their efforts toward achieving the company’s objectives.
5. Affectio Societatis: This term refers to the mutual consent and commitment of the partners to form
and manage a company. It implies that partners must contribute effort and resources, and actively
participate in the management and operations of the company to ensure its success.

Contribution in Cash vs Contribution in Kind

Noncash contributions have an assigned value, typically based on fair market value, which is used for
accounting and reporting purposes. In-kind contributions specifically refer to donations made in the
form of goods or services, rather than monetary funds

Form of the Company Contract

1. Commercial Companies (TCC Art. 124)

For commercial companies, the contract must be prepared in writing, and the signatures must be
notarized.

2. General Partnership (TCC Art. 212):

The general partnership contract must be prepared in writing. The signatures therein must be notarized.
A simple written contract agreement is insufficient.

3. Corporation (TCC Art. 335):

The company is deemed established once the founders declare, in the duly drafted and notarized
articles of association, their desire to form a joint stock company.

4. Limited Liability Company (LLC) (TCC Art. 575):

The contract must be in writing and notarized.

5. Simple Partnership - Code of Obligations

For simple partnerships under the Code of Obligations (CO), there is no specific rule for the formation
of the contract:

Lex Generalis (CO Art. 12):

There is freedom of contract, allowing parties to determine the form of the contract.

"The validity of contracts is not dependent on any form, unless otherwise stipulated by law. The form
stipulated for contracts in the law is the form of validity as a rule. Contracts concluded without
complying with the prescribed form shall not be valid."

The declaration of intention can be explicit or implicit and may be oral, written, or special written.

Exception for the Simple Partnership Art. 17:

If the parties voluntarily choose a specific form, they must adhere to that form. If the law stipulates a
specific form for the transfer of capital shares brought to the ordinary partnership, the related clause in
the partnership agreement must comply with that form.

 In the case of a simple partnership contract, where movable property (such as machinery) is
contributed, there may not be a specific form required to transfer property rights. However, it's
essential to clearly document the contribution of movable property in the partnership agreement
to avoid any ambiguity or disputes.
 If a partner promises to contribute immovable property as capital to operate the business, the
partnership agreement must include provisions specifically addressing the transfer of property
ownership. This ensures that the terms and conditions of the contribution are properly
documented and agreed upon by all parties involved.
 The Code of Civil Procedure Art.706/I specifies that if the ownership of immovable property is
to be brought as a capital share, the capital clause of the partnership agreement must comply
with the necessary legal form requirements outlined by law. This ensures that the partnership
agreement is legally binding and enforceable.

6. Limited Liability Companies

The company contract must be made in writing and signed by the founders in the presence of
authorized personnel in the trade registry directorate

"Purpose" vs. "Field of Activity"

In Swiss law, the "purpose" of a company aims for profit through specific business activities, while the
"field of activity" outlines these activities in the object clause. Turkish law similarly distinguishes
"amaç" (ultimate purpose) as any economic goal for profit and "konu" (field of activity) as specific
operational areas like running a factory or airport.
 Types Of Shareholders

We have two types of shareholders one is Dominant shareholder and other Minority shareholders.

1) Minority shareholders aim to gain profits & for those profits to be distributed to them, whereas
dominant shareholders want to invest.

2) Dominant shareholders may prefer for profit to be kept in the company, to not be distributed so the
goals between them may differ according to the situation. In joint stock companies, they make
decisions regarding shareholders, where to distribute the profits, etc.

Contributed Capital

Contributed capital, also known as share capital, refers to the amount of money or assets that each
partner commits to the company to achieve its common purpose. This can include various types of
contributions such as cash, receivables, shares of companies, intellectual property, movable and
immovable property, among others, as specified by law.

However, there are restrictions on certain types of contributions. For instance, personal efforts and
commercial reputation cannot be contributed to corporations or limited liability companies because
they cannot be quantified and shown on a balance sheet. Additionally, in limited partnerships, limited
partners are prohibited from contributing their personal efforts and commercial reputation as capital.

Classification of Companies

1. Legislation to Which They Are Subject: Companies may be regulated by different laws such as
the Code of Obligations, Turkish Commercial Code (TCC), Code of Commerce (CO), Law on
Cooperatives, Attorneyship Law, Banking Law, or Capital Markets Law. For example, publicly
held joint stock companies are regulated under both the TCC and the Capital Markets Law.

2. Legal Personality: Some companies have legal personality, meaning they can enter into contracts,
own property, and sue or be sued in their own name. Examples include corporations and limited
liability companies. Others, like simple or ordinary partnerships, do not have legal personality, and
the rights and debts of the company are directly linked to the partners.

3. Dominant Element - Capital or Personality of Partners: Companies can also be classified based
on whether the capital element or the personality of the partners is dominant. In capital-dominant
companies, such as corporations, the focus is on capital contributions, while in personality-
dominant companies, such as simple partnerships, the focus is on the characteristics and efforts of
the partners.

What’s a merger?

Merger refers to the process in which companies combine their assets and operations, resulting in the
dissolution of one company and the transfer of its assets to another. Here's a summary of the general
provisions regarding mergers:
Principle of Merger:

 Companies can merge through "merger by acquisition" or "merger as a new organization."

 In merger by acquisition, one company acquires another, while in merger as a new organization,
both companies come together to form a new entity.
 During a merger, the shares of the transferee company are acquired by the partners of the
transferred company, based on an exchange rate, in exchange for the assets of the transferred
company.
 The transferee company takes over the assets of the transferred company as a whole, and the
transferred company is dissolved and removed from the trade registry.

Valid Mergers:

 Capital companies, sole proprietorships, and cooperatives can engage in mergers with certain
restrictions.
 Capital companies can merge with other capital companies, cooperatives, collective, and
commandite companies.
 Sole proprietorships can merge with other sole proprietorships, capital companies (as the transferee
company), and cooperatives (as the transferee company).
 Cooperatives can merge with other cooperatives, capital companies, and sole proprietorships (as the
transferee company).
 Companies in liquidation can participate in mergers if their asset distribution has not commenced
and they are the transferred company.

Merger Agreement:

 The merger agreement must be in writing and signed by the management bodies of the merging
companies.
 The agreement requires approval by the general assemblies of the merging companies.

What’s Division or Demerger?

Division refers to the process where a company splits its assets and operations, either completely or
partially, transferring them to other existing companies or new entities. Here's a summary of the
general provisions regarding division:

Principle of Division:

 A company can undergo full division, where all its assets are divided and transferred to other
companies, or partial division, where only certain parts of its assets are transferred.
 In full division, all assets of the company are divided into sections and transferred to other
companies. The partners of the demerged company acquire shares and rights in the acquiring
companies.
 In partial division, one or more parts of a company's assets are transferred to other companies. The
partners of the demerged company acquire shares and rights in the acquiring companies, or the
 demerged company acquires shares and rights in the acquiring companies in return for the
transferred assets.

Procedure for Division:

 If a company transfers parts of its assets to existing companies through division, a division
agreement is made by the management bodies of the participating companies.
 If a company transfers parts of its assets to companies to be established through division, the
management body draws up a division plan.
 Both the division agreement and the division plan must be in writing and approved by the general
assembly of the companies involved.

Companies have the option to change their legal form, with the converted company continuing the
legacy of the original entity. Here's a summary of the provisions regarding valid type substitutions:

What’s Conversion?

Permissible Type Substitutions:

 A capital company can convert into another type of capital company or into a cooperative.
 A collective company can convert into a capital company, cooperative, or limited partnership.
 A limited partnership can convert into a capital company, cooperative, or collective company.
 A cooperative can transform into a capital company.
 A limited liability company can convert into a limited partnership under certain conditions, such as
the departure of all commandiers.

Protection of Company Shares and Rights:

 Shares and rights of partners are safeguarded during the conversion process.
 Holders of shares lacking voting rights are provided shares of equal value or shares with voting
rights.
 In return for privileged shares, shares of the same value or appropriate compensation are provided.

Preparation of Written Report:

 The governing body of the company prepares a written report detailing the conversion process.
 The report includes information on the purpose and consequences of conversion, fulfillment of
establishment provisions for the new type, new company contract, changes in share ownership after
conversion, additional payments or personal performance obligations arising from the change, and
any new obligations for partners under the new type.

General partnerships, limited partnerships --> dominated by personality

Joint stock companies , limited liability companies, and corporations -- > dominated
by capital
4) According to its dominant element: Capital? Personality of partners? Regulatory
Framework - specific consequences:

The unanimous decision is required Only decisions requiring unanimous voting

for the amendment of partnership or relocation of company registered
agreement office to another company or imposing
obligations on shareholders to recoup
balance sheet losses
5) According To Its Partners'/Shareholders' Liability

The companies in which the shareholders are not liable for companies' debts

Limited liability companies, such as corporations, provide shareholders with a key advantage: limited
liability. In these companies, including joint stock entities, shareholders are only liable for the debts of
the company up to the extent of their capital contributions.

This principle shields shareholders from personal liability beyond their investment in the company,
fostering investor confidence and encouraging participation in corporate ventures.

Shareholders' obligations are primarily directed towards the company itself, rather than creditors or
third parties, ensuring that their exposure to financial risk is contained within the parameters of their
investment.

However, the concept of limited liability is not absolute. In certain circumstances, the corporate veil
may be pierced, exposing shareholders to personal liability for the company's debts. This typically
occurs when shareholders blur the boundaries between corporate and personal assets or when the
company is inadequately capitalized.
If shareholders misuse the corporate structure or fail to maintain a clear separation between corporate
and personal affairs, courts may lift the corporate veil, making shareholders personally liable for the
company's obligations. This serves as a safeguard against abuse of the corporate form and reinforces
the importance of upholding the integrity of the corporate structure.

6) Classification According To The Capital Structures

Simple Partnership - General Partnership:

 Simple partnerships do not necessitate a fixed capital for establishment. While there may be capital
involved, it's not mandatory for incorporation.
 Capital in these partnerships, if present, is not fixed on the balance sheet and does not serve as a
protective measure for creditors.
 Creditor protection in such partnerships may be limited due to the absence of stringent capital
requirements.

Corporation (Joint Stock Companies) - Limited Liability Company (LLC):

 Corporations and LLCs operate with fixed capital, often referred to as share capital or legal capital.
 Traditionally, there's been a minimum capital requirement for incorporation; however, recent trends
suggest a shift away from this requirement, viewing it as merely a formal necessity rather than a
protective measure for creditors.
 Creditor protection mechanisms in corporations and LLCs may be influenced by the sufficiency of
legal capital.
 Alteration of capital in corporations and LLCs typically requires amendments to the articles of
association, allowing for increases or decreases in capital.

Public Corporation (Regulated by the Law on Capital Markets):

 Public corporations often operate under an authorized capital system, with registered share capital.
 The authorized capital system grants flexibility for capital adjustments within specified limits,
providing a balance between regulatory oversight and operational agility.

Cooperative (Open Membership) - Exception: Housing Cooperatives:

 Cooperatives, with open membership structures, may operate with variable capital.
 Similar to the legal capital regime, cooperatives may implement capital structures that adhere to
specific regulations, ensuring stability and accountability.
 The International Cooperative Alliance provides guidelines and standards for cooperative entities
worldwide, emphasizing cooperative principles and sustainable development.

SIMPLE AND GENERAL PARTNERSHIPS:

There's no rules in simple or general partnerships regarding minimum share capital and that's because
in simple partnerships the partners are held jointly Liable for their debts
1. Simple and general partnerships don’t
require fixed capital
2. Corporations and joint stock companies
have a minimum requirements.
3. Corporations have authorized
capital systems
4. Cooperatives have variable capital.

Why is it a Fixed Term ( the share capital) ? Why are Fixed Capitals shown under Share
Holder Equity? In order to change the Fixed Capital shown in the Balance Sheet, it doesn’t mean that
it cannot be altered, but we need to take a general meeting in order to amend the articles of association
by either increasing or reducing the capital. Article 456 TCC. This fixed capital is a hypothetical
number shown in the Shareholders Equity Side.
Why does it show equity under liabilities side in the blue balance sheet? Because after
dissolving the company ( winding up procedure) if you have a remaining amount in your assets you
should give it back to the shareholders because they have contributed this capital when the company
was established so after paying the debts and liabilities to the company if you have a remaining amount
in your assets you have to give it back to your shareholders. Because its deemed that that asset group is
representing the ‘equity (the share capital)

7) According to their establishment procedures, there are three distinct systems:

A) Normative System: Under this system, a company is established by registering the company
contract with the trade registry, thereby acquiring legal personality. This process ensures public
announcement and verifies the legality of establishment through examination by the registry officer.

B) Free Establishment: In this system, a company can be formed solely through the agreement of its
founders, without the requirement of registration. While this facilitates company formation, it raises
concerns about transaction security, as third parties may question the existence and regulatory status of
the company.

C) Concession System: Here, the establishment of a company requires permission from the relevant
governmental authority. However, this permission is not based on legal compliance but rather on
considerations of expediency, leading to risks of arbitrariness.’

8) Structures of Companies

A) Atypical Structures: Some companies deviate from typical structures due to specific
characteristics or ownership arrangements. For instance, close corporations, often family-owned, have
a limited number of shareholders confined to family members, resulting in less formal corporate
governance and a lack of separation between ownership and control. In contrast, public corporations,
regulated under capital markets law, have numerous shareholders, leading to a clear separation of
ownership and control. Additionally, partnerships with numerous partners are atypical, as partnerships
typically involve fewer individuals.

B) Numerus Clausus: In company law, the principle of numerus clausus dictates that only specific
types of companies enumerated in the law are permissible. While Turkish law allows for the formation
of anonymous contracts, it does not permit entrepreneurs to establish company types not explicitly
outlined in the law. This restricts the creation of sui generis (unique) company structures outside the
established legal framework.

Simple Partnerships

Composition: They consist of a group of individuals or legal entities.

Participants: Both natural persons and legal entities can be partners.

Legal Personality: Partnerships do not possess legal personality distinct from their members.
Ownership: Partners are co-owners of partnership property, sharing assets as outlined in the
partnership agreement.

Liability: Partners have unlimited liability for the partnership's obligations, unless otherwise agreed.

Joint Liability: Partners are jointly and severally liable for obligations undertaken by the partnership
or its representatives.

Agreement: The joint liability cannot be omitted solely through agreements among partners; it also
extends to third parties.

Purpose: Partnerships must have a lawful purpose and be established for the mutual benefit of the
partners.

Joinder of Parties: Legal actions involving a simple partnership require the joinder of all partners as
parties to the lawsuit. This is known as the joinder of parties, where multiple individuals are combined
as either claimants or defendants in a single legal action. Similarly, claims against a simple partnership
must be made collectively against all partners involved. This is known as the joinder of offenses, where
multiple persons are combined in a single claim.

Dissolution: In the event of dissolution, gains from unlawful partnerships are allocated to charitable
institutions. The impossibility of achieving the purpose stipulated in the partnership agreement (CO
Art. 639/1) or justified reason (CO Art. 639/7) “If one of the partners wants to quit based on the
provision in the articles of association or files a lawsuit for justifiable reasons, the manager or
managers shall inform the other partners without delay.”

Establishing a partnership involves several key steps and considerations:

1. Declaration of Intention: Partners agree to combine their efforts and assets to achieve a common
goal, as outlined in Article 620/1 of the Turkish Code of Obligations (CO). While there's no
need to agree on every detail initially, certain organizational aspects such as management,
representation, and relations with third parties should be addressed. These can be governed by
complementary rules unless otherwise agreed.

2. Intention to Establish: If a partnership does not meet the specific criteria of a legally defined
company, it is presumed to be a simple partnership as per CO Art. 620/2.

3. Form: There's no specific rule regarding the formation of the partnership contract. Partners have
freedom of contract, allowing them to choose the form of the contract, whether oral or written,
unless stipulated otherwise by law. However, contracts must generally adhere to prescribed
forms to be valid.

4. Explicit/Implicit Declaration: Partners may voluntarily choose a specific form for their contract
(CO Art. 17), unless a specific form is stipulated by law for the transfer of capital shares. In the
latter case, the partnership agreement must adhere to the required form.

Contributions of Capital:
 1. Each partner is obligated to contribute to the partnership, whether it's money, receivables, goods,
or labor (CO Art. 621/1).

2. Contributions should be suitable for achieving the partnership's common purpose (CO Art.
621/1 and 620/1). The contribution shares must be of equal importance and quality, unless
otherwise agreed.

3. Failure to Perform Contributions: In multilateral contracts like partnership agreements, the

defense of non-performance of obligations cannot be invoked by other partners. However,
partners failing to contribute may be grounds for dissolution if it makes achieving the
partnership's common goal impossible.

4. Profit Sharing: Partners are obligated to share all profits that naturally belong to the partnership
(CO Art. 622).

5. Equal Share by Default: Unless otherwise agreed in the partnership contract, partners have an
equal share in profits and losses, irrespective of the value and nature of their contributions (CO
Art. 623). However, partners can agree on different profit-sharing arrangements.

6. Agreement on Profit Sharing: The partnership contract determines each partner's share in profits
or losses. If only one partner's share is specified, it applies to all partners. An agreement
allowing a partner to participate only in profits may only apply if that partner's contribution
consists solely of labor.

7. Internal vs. External Relationships: Agreements regarding profit sharing apply internally among
partners. For instance, a partner who contributes only labor may not be liable for losses
internally, but this agreement does not affect their liability in external relationships.

8. Accounting and Distribution: Managing partners must provide an account of the partnership's
affairs and distribute profits to partners at least once a year (CO Art. 630/3). Any extension of
the accounting period agreed upon is deemed invalid.

Scope of Administrative Power:

 Ordinary business activities can be managed by any partner, but transactions exceeding this
scope require unanimous consent (TCO Art. 625/3).

 The distinction between ordinary and extraordinary transactions depends on the kind, scope, and
volume of the transaction (TCO Art. 630/1).

Duties of Managers:

 Partners must conduct partnership affairs with due diligence and care, similar to how they would
handle their own affairs (TCO Art. 628/1).
 Partners receiving remuneration for management services are held liable according to agency
contract provisions (TCO Art. 628/3).
  The responsibility of a manager arises from the duty of care, which requires prudent behavior
consistent with similar fields of work (TCO Art. 506/3).

 Non-partner managers are subject to contractual obligations regarding diligence and fidelity,
similar to employees (CO Art. 396/1

Liability for Damages:

 According to TCO Art. 628/2, each partner is liable to other partners for damages caused by
their negligence. Importantly, partners cannot offset these damages against benefits provided to
the partnership from their other activities. This provision ensures accountability for negligence
within the partnership.

Responsibility for Dividends and Accountability:

 TCO Art. 630/3 mandates that managing partners must provide an account of partnership affairs
and distribute profits to partners at least once a year. Any agreement to extend the accounting
period is deemed null and void. This obligation extends to non-partner managers as well,
ensuring transparency and regularity in financial matters within the partnership

Managers of a partnership have several rights, including:

A) Compensation: If a partner incurs expenses or liabilities related to partnership affairs or suffers

losses due to management activities, the other partners are liable to compensate them.

B) Interest for Lending: Partners lending cash advances to the partnership can claim interest
accumulated since the date of lending.

C) Equitable Fee: Partners who exert personal effort for the partnership, although not obligated to do
so, may claim an equitable fee or remuneration.

D) Managers have the right to withdraw and restrict their management authority under specific
circumstances such as death, loss of legal capacity, expiration of the term in temporary appointments,
or during the liquidation of the company. Dismissal or discharge of management authority by other
partners requires a justified reason.

Commercial Companies (Art. 124 TCC

Establishing a company involves two phases: foundation and legal recognition. Initially, the corporate
charter is prepared and signed, but the company lacks legal status. Legal personality is acquired
through registration in the trade registry, granting official recognition.

Legal personality - Art. 125.1 TCC Capacity - 125.2 TCC : they all have legal personality so when they
have legal personality they also have a legal capacity.

Article 127 of the law outlines the permissible forms of capital investment for commercial companies.
These include various assets such as money, receivables, intellectual property rights, movable and
immovable property, personal labor, commercial reputation, enterprises, electronic media rights, and
mining licenses, among others.

Premium Shares Vs Preferred Shares : premium shares are issued above their nominal value,
reflecting the company's increased worth due to good performance; new investors pay more than the
nominal value, with the excess boosting the company's reserves. Preferred shares, on the other hand,
grant special privileges such as higher dividends, priority in asset distribution, and sometimes enhanced
voting rights.

This contribution of capital is completed in two phases :

1) Promising to contribute ( Promissory Transactions) in the articles of association, we’re just

promising we haven’t contributed yet

. 2) Dispositive Transaction by transferring ownership. Promissory acts isn’t enough, the capital must
actually be paid

ARTICLE 342 – Elements Of Assets That Can Be Capitalized In Kind

(1) Elements of assets, including intellectual property rights and virtual environments, which do not
have limited real rights, liens and measures, which can be evaluated and transferred in cash, can be put
as capital in kind. Acts of service, personal labor, commercial reputation and undue receivables cannot
be capital.

The process for termination for just cause in a company

1. Shareholder Rights: Shareholders representing at least one tenth of the capital and one twentieth of
publicly traded companies can request the dissolution of the company from the commercial court of
first instance.

2. Court Decision: Instead of termination, the court may decide to pay the plaintiff shareholders the
actual value of their shares at the closest date to the decision date. Alternatively, the court may
order the expulsion of the plaintiff shareholders from the company or propose another acceptable
solution.

3. Minority Shareholders' Rights: The TCC grants special rights to minority shareholders with at least
10% of the share capital. These shareholders can request the dissolution of the company if they
have objective reasons to do so and own at least 10% of the share capital.

4. Technical Minority: In public companies, the term "minority shareholder" is understood as having
at least 5% of shares due to the large number of shareholders. However, in private companies, the
minimum is 10% of shares.

5. Last Resort: Dissolution of the company should be considered as the last option or "ultima ratio."
Minority shareholders may seek dissolution if they believe there are significant issues in the
company, such as the majority shareholder's failure to distribute profits for an extended period.
1. Registered shares : the mirror possession is not enough for it to be deemed as a shareholder. It
must be formally registered as a shareholder in the company records.

2. Bearers shares : no restrictions, it provides a high degree of anonymity and flexibility in

transferring the ownership. Ownership is established by possession alone, so there’s no need to register
it with the company.

Protection of Share Capital

Limited liability principle is necessary in Corporations because we have to protect the legal capital, this
share / legal capital is protected with special regulations.

1. Nominal value. : it’s basically the face 2. Real value. : it’s dynamic and can fluctuate based
value or the par value to an asset. It’s on the on changes in the market it equals to enter scenic
face of the financial instruments value basically changes on supply and demand, etc..
 There’s a limitation of assets that can be contributed in kind for a corporation which also in a way
protects creditors.
 Shares cannot be issued at a price lower than their nominal value.
 Article 478 allows for the creation of preferred shares within a company's structure. These shares
can be granted certain advantages, such as priority in receiving dividends, liquidation proceeds,
voting rights, or other rights not explicitly outlined in the law.
 Based on the annual financial statement of the company, if half of the overall capital and legal
reserves are depleted due to the company's losses, and if half of the total share capital along with the
legal reserves becomes uncovered as a result, this serves as the initial warning sign utilizing the
share capital. If half of the share capital is lost in conjunction with the legal reserves, the board of
directors will promptly convene a shareholder meeting to propose solutions aimed at addressing this
loss.
 The only obligation of the shareholders is to pay the subscription fee of the shares issued by the
company. This is called “tek borç ilkesi” the shareholder has one obligation and it’s to pay the
subscription fee to the share that he promised to pay to the company.
 If shareholders meeting and board of directors takes decisions that don’t protect share capital or
those not in compliance with basic essentials of a corporation, these decisions are null and void.
 Shareholders cannot claim back what they have contributed to the capital
 An interest shall not be paid for the capital
 The company is required to maintain legal reserves to protect creditors and strengthen its capital
structure. Legal reserves are created annually from the company's profits. This measure aims to
bolster the equity structure of the company.
In commercial companies, such as corporations and limited
liability companies, we cannot contribute personal effort and
reputation. In case they do contribute something in kind it
Organization Of The Corporation must be transferable to cash however it will not be shown in
the balance sheet.

There are two mandatory organs in the corporation, the Board of Directors as well as the General
Meeting (Shareholders Meeting).

Who selects / appoints the members of this board? We as shareholders select them. Economic members
of the company ( shareholders) will appoint them in the shareholders meeting

The Powers and Authorities of General Meetings

In Article 407, the general meeting is a platform for the shareholders to exercise their shareholders
rights, they will vote and speak in this meeting and decide on company’s issues

ARTICLE 408- Duties and authorities

(1) The general assembly takes decisions in cases expressly stipulated in the law and the articles of
association.

(2) Without prejudice to the non-assignable duties and powers stipulated in various provisions, the
following duties and powers of the general assembly cannot be transferred:

a) Changing the articles of association.

b) Election of the members of the board of directors, determination of their terms, wages and their
rights such as attendance fee, bonus and premium, decision on their release and dismissal.

d) Making decisions regarding the use of financial statements, the annual report of the board of
directors, savings on annual profit, determination of dividends and profit shares, including the
participation of the reserve fund in the capital or the profit to be distributed. e) Dissolution of the
company, except for the exceptions stipulated in the law

f) Wholesale of substantial company assets.

(3) In joint stock companies with one shareholder, this shareholder has all the powers of the general
assembly. Decisions to be taken by the sole shareholder in the capacity of the general assembly must be
in writing in order for them to be valid.

Involuntary Vs Voluntary Dissolution of The Company

ARTICLE 531- Termination for just cause

 (1) In the presence of justified reasons, the owners of the shares representing at least one tenth of the
capital and one twentieth of the publicly traded companies may request the dissolution of the company
from the commercial court of first instance in the place where the head office of the company is
located. Instead of termination, the court may decide for the plaintiff shareholders to be paid the actual
value of their shares at the closest date to the decision date, and for the plaintiff shareholders to be
expelled from the company, or for another acceptable and appropriate solution.

Wholesale of a Substantial Part of The Company’s Assets - Who will decide the wholesale of the
company’s assets?

ARTICLE 374

(1) The board of directors and the management in the area entrusted to it are authorized to take
decisions on all kinds of business and transactions necessary for the realization of the company's
business subject, except those left under the authority of the general meeting in accordance with the
law and the articles of association.

ARTICLE 408 - Duties and authorities of the General Meeting

f) Wholesale of substantial company assets.

 A third party while doing such transactions cannot know what’s actually happening how will they
know if the sale is a substantial part of that assets or not. That’s why this article contradicts with
legal certainty principle.

ARTICLE 409 - Meetings

(1) General assemblies are held ordinarily and extraordinarily. The ordinary meeting is held within
three months from the end of each activity period. At these meetings, negotiations are held and
decisions are made regarding the election of the organs, the financial statements, the annual report of
the board of directors, the use of the profit, the determination of the proportions of the profit and
earnings shares to be distributed, the release of the members of the board of directors, and other matters
that are relevant to the activity period and deemed necessary.

(2) If necessary, the general assembly is called for an extraordinary meeting.

(3) Unless there is a provision in the articles of association to the contrary, the general assembly
convenes at the place where the head office of the company is located

What kinds of general meetings are there in a corporation?

There are ordinary and extraordinary meetings. Ordinary meetings are held within three months
from the end of the annual fiscal year. Extraordinary meetings are geld if there’s a need for extra
capital. In order to make this meeting happen we have to invite shareholders
ARTICLE 410 - Authorized and assigned bodies

(1) Even if the general assembly has expired, it may be called by the board of directors.
Liquidators may also call the general assembly meeting for matters related to their duties.

(2) In cases where the board of directors cannot convene continuously, the meeting quorum is not
possible or does not exist, a single shareholder may call the general assembly meeting with the
permission of the court. The court's decision is final.

ARTICLE 411 - Scarcity

(1) Shareholders constituting at least one-tenth of the capital and one-twentieth of the publicly traded
companies may request the board of directors to call the general assembly meeting or, if the general
assembly is already to be convened, to put on the agenda the issues they want to be resolved, by stating the
necessary reasons and the agenda in writing. With the articles of association, the right of call may be
granted to the shareholders with a smaller number of shares.

(2) The request to put an item on the agenda must have reached the board of directors before the payment
of the announcement fee for the publication of the call notice in the Turkish Trade Registry Gazette.

(3) The request for the call and adding an item to the agenda is made through the notary public.

(4) If the board of directors accepts the call, the general assembly is called for a meeting to be
held within forty-five days at the latest; otherwise, the call is made by the claimants.

ARTICLE 414 - Form of the call

(1) The general assembly is called to the meeting as indicated in the articles of association, by an
announcement published on the company's website and in the Turkish Trade Registry Gazette. This call is
made at least two weeks before the meeting date, excluding the announcement and meeting days. The
day of the meeting and the newspapers in which the announcement is or will be published are notified by
registered letter with return receipt.

ARTICLE 416 - Uncalled general assembly

(1) The owners or representatives of all shares may convene as a general assembly and take decisions as
long as the quorum for this meeting exists, without observing the procedure regarding the call, provided
that the provisions regarding participation in the general assembly and holding the general assembly
meetings are reserved, unless one of them objects.

 There must be a unanimous decision! The quorum for the meeting is unanimity. As long is unanimity
is kept they can take any decision with this meeting.
 There are two types of quorum, want to start the
ARTICLE 418 - Meeting and decision quorum meeting and one for a resolution

(1) General assemblies are held with the presence of the owners or representatives of the shares that meet at
least one fourth of the capital, except for the cases where a heavier quorum is stipulated in this Law or the
articles of association. This quorum must be maintained throughout the meeting. If the mentioned quorum
is not reached in the first meeting, the quorum is not sought for the second meeting to be held.

(2) Decisions are made with the majority of the votes present at the meeting.

(2) The following resolutions on amendments to the articles of association are taken unanimously by
the owners or representatives of the shares constituting the entire capital:

a) Decisions placing liability and subsidiary liability to cover balance sheet losses.

b) Decisions regarding the relocation of the company's headquarters abroad.

(3) The following resolutions on amendments to the articles of association are taken with the
affirmative votes of the owners or representatives of the shares constituting at least seventy-five
percent of the capital:

a) Changing the business subject of the company completely.

b) Creation of privileged shares.

c) Limitation of the transfer of registered shares.

(6) Registered shareholders who voted negatively for the general assembly resolution regarding the
change of the subject of the business completely or the creation of privileged shares are not bound by
the restrictions on the transferability of the shares for six months following the publication of this
resolution in the Turkish Trade Registry Gazette.

ARTICLE 425 – Personal rights of the shareholder - Attending the general assembly Principle

(1) The shareholder may attend the general assembly himself, in order to exercise his rights arising
from his shares, or he may send a shareholder or non-shareholder to the general assembly as his
representative. The articles of association stipulating that the representative be a shareholder is invalid.