How to Transfer Shares in Turkey — Differences Between Limited Liability and Joint-Stock Companies

Share transfer is the assignment, in part or in whole, of an ownership interest in a company to another person; significant differences arise depending on the company type, particularly regarding the form of the transfer, the requirement for general assembly approval, and registration.

Share Transfer in a Limited Liability Company

Under Article 595 of Turkish Commercial Code No. 6102 (TTK), for a share transfer agreement in a limited liability company to be valid, it must be executed in writing and the parties' signatures must be notarized; a transfer that does not comply with this form requirement is void.

General Assembly Approval in a Limited Liability Company

Unless otherwise provided in the articles of association, the shareholders' general assembly must approve a share transfer in a limited liability company for it to be valid; a transfer made without this approval has no effect, even between the parties. Following the transfer, the transaction is recorded in the share ledger and registered and announced in the trade registry.

Share Transfer in a Joint-Stock Company

Share transfer in a joint-stock company is subject to much more flexible rules than in a limited liability company; the transfer of registered shares generally takes effect against the company only once recorded in the share ledger, while for bearer shares, transfer of possession is sufficient. Notarization or registration in the trade registry is generally not required for share transfers in a joint-stock company.

Transfer Restrictions in the Articles of Association

In both company types, the articles of association may contain provisions conditioning a share transfer on specific requirements, or granting other shareholders a right of first refusal; before any transfer, it must be checked whether the articles of association contain such restrictions.

The Tax Dimension

Share transfer transactions can give rise to income or corporate tax liability depending on the nature of the transferred share and the holding period; setting the transfer price at its true value is important both for tax purposes and as protection against allegations of a sham transaction.

Practical Recommendations

Before a share transfer, carefully review the articles of association and any shareholders' agreement; in a limited liability company, ensure the transfer is executed before a notary and general assembly approval is properly obtained, and in a joint-stock company, ensure the entry in the share ledger is complete.

This article is for informational purposes only and does not constitute legal advice. Please contact our team regarding your specific situation.