The New Turkish Code of Commerce        Rules regarding the corporations        in a nutshellOctober 2011
Content          Introduction                                        1          Enterprise law                            ...
Message of the president         Following the global crisis, paradigm of         competition is changing. We observe that...
Message of the CEOChallenges regarding corporate governance hasencouraged the Turkish lawmaker to introducea new progressi...
Introduction         The new Turkish Commercial Code (hereinafter          New Company Law involves a comprehensive       ...
Enterprise lawPreserving the characteristics of the current           Commercial Registry Establishing an electronicallyTC...
Some examples for unfair competition are as           The most remarkable points of the new rules arefollows :            ...
Another new dimension of agency contracts isportfolio management. In spite of the lack ofregulation, Turkish Higher Court ...
Company law       General aspects                                         The new system implements special liability     ...
Renouncing the “Ultra Vires” principle                   Registered share capital TCC allows the jointAccording to Art. 13...
Challenges to the decision mechanism of                   • Delegation of powers TCC enacts a detailedjoint stock corporat...
Even in case that all the members of the board         Information Technology Services Joint stockshall function as non-ex...
General assembly :                                     Quorums in respect with the statutory amendmentsA shareholder-orien...
Representation of the shareholder in the                TCC In the light of corporategeneral assembly For achieving a more...
• Besides the concept of shareholder, the concept     • Committee for Early Inspection of Risks Listed  of stakeholder is ...
Persons holding shares at the corporation or at          The board of directors is bound to support andaffiliated companies...
On the other hand, the approval may be limited ormay contain certain drawbacks. In the event thatthe auditor declares an a...
5. TCC furnishes the minority shareholders with a      Mergersnew category of shareholder rights. In the event offair reas...
Fundamental changes referring the capital                 TCC renews the system referring the termination ofaugmentation o...
Limited Liability Companies (LLC)LLC is a hybrid company, which harbors several          Capital structure In the new syst...
As of the validity of general assembly resolutions,    Accessory obligations and obligation ofthe rules relating to joint ...
Securities lawTCC preserves the legal regime of TCC in respectwith the securities to a large extent and does notenact an e...
Transportation law         Regulating Transportation Law as an independent       The definition of the carrier reflects a wi...
Transportation of goods                                 TCC equivalently regulates the legal situations                   ...
Multimodal transportation                              Transportation of passengersThe articles of this chapter originate ...
Maritime commercial law        Throughout TCC, Turkish maritime law faces            The ship        a challenging reform....
Property rights The rules regarding the                 Art. 948 of the former TCC, regulating theproperty rights on ships...
Maritime commercial agreements                            Certain reforms may be enumerated as follows:                   ...
On the other hand, certain issues which are not         Accordingly, the rules of TCC, restricting thetreated in York Antw...
New turkish code of commerce
New turkish code of commerce
New turkish code of commerce
New turkish code of commerce
New turkish code of commerce
New turkish code of commerce
New turkish code of commerce
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New turkish code of commerce

  1. 1. The New Turkish Code of Commerce Rules regarding the corporations in a nutshellOctober 2011
  2. 2. Content Introduction 1 Enterprise law 2 Company law 5 Limited liability companies (LLC) 16 Securities law 18 Transportation law 19 Maritime commercial law 22 Insurance law 26 Conclusion 28 How Deloitte can help 29 Contributers Dr. S. Anlam Altay (LL.M, University of Galatasaray, Faculty of Law) Dr. Serap Amasya (LL.M, University of Galatasaray, Faculty of Law)1
  3. 3. Message of the president Following the global crisis, paradigm of competition is changing. We observe that the countries adapting to this new environment develop more quickly and get richer. In this regard, quality of regulations will be more decisive. Turkey is one of the most favoured investment destination for emerging markets investors. Because it is one of the few remaining markets in the world with solid growth potential, thanks to the stable political and economic environment of the last eight years. Investment friendly environment of Turkey is further strengthening with the new Commerce Code, which will start a new era in the Turkish economy. International standards will rule the business life. Therefore we are urging companies, especially SMEs to act now and start preparing for the new code. Otherwise, they will have difficulty in global competition. Rifat Hisarcıklıoğlu President, Foreign Economic Relations Board (DEİK) and Union of Chambers and Commodity By publishing this book, we aim to help companies Exchanges of Turkey (TOBB) adapt to the legislative changes. Also we are Vice President, Eurochambers organizing series of conferences all around Turkey to inform the businesses on this issue. As Foreign Economic Relations Board (DEIK), we In cooperation with Deloitte, one of the most are the leading business agency in Turkey that prestigious consulting agencies in the world, we brings together foreign and domestic companies. also aim to inform the foreign companies that have already made or plan to make investments in We organize investment conferences in New York, Turkey during this period. London, Madrid, Dubai, Abu Dhabi and Mumbai as a prominent agency that opens its doors for every local and foreign company. We have the largest business network with 33 founding members, 103 business councils and 108 chamber representatives worldwide. I would like to address the foreign companies that have made or plan to make an investment in Turkey: the new Turkish Code of Commerce will rebuild the business life. Should you want to expand your business, you need to start preparing today. Don’t forget the fact that luck comes along when you are prepared for it. 1
  4. 4. Message of the CEOChallenges regarding corporate governance hasencouraged the Turkish lawmaker to introducea new progressive commercial law system. Thenew Turkish Code of Commerce, reflectingthis approach harbors new rules for traditionalinstitutions as well as new institutions, such asscission, companies with a sole shareholder, groupof companies, auditing, IFRS, proxy, cumulativevoting and information society issues. Suchinstitutions, which have been already settled inTurkish legal practice without legal regulationsin the codes, have been regulated in TCC with amodern perspective. On the other hand traditionalinstitutions such as unfair competition, agencycontract, shareholders’ rights and mergers havebeen reformed with respect to new challengesbrought by European and Swiss Law. Hüseyin GürerTCC announces two cardinal reforms for Managing Partner & CEOTurkish Law : 3) A Code which may answer crucial legal1. Turkish Commercial Law practice until the questions raised by current conflicts thanks to itspreparation of this Code has not been put aside, comprehensive reasoning,whereas concrete solutions have been developedfor prevailing legal problems. 4) A Code which constitutes the main discipline of Economic Law, particularly with its complementing2. Turkish Commercial Law has been harmonized regulations.with Swiss Law as well as EU Law. Viewed from these characteristics and itsIn this context, certain legal institutions deprived comprehensive reasoning, TCC is a distinguishedof any legislative regulation have been appraised in Code, which reflects the tendency of Turkishthe Code, whereas inadequate norms have been lawmaker to harmonize its own legal system withreplaced by modern rules. modern Law. The enforcement of TCC will set out a legislation, which may propose dynamicPrincipal characteristics of TCC mechanisms in line with international law and economics.1) A Code which considers current commercial andeconomic developments and mechanisms, Hence, that the Turkish business atmosphere is surrounded by the urgency of TCC. Accordingly,2) A Code which conforms with several disciplines the new Code necessitates the companiessuch as Banking Law, Securities Law, Competition to adapt reform regarding the structure andLaw as a part of Economic Law, the transactions of the enterprise. Companies effectuating this reform will enjoy many opportunities engendered by the new TCC in order to become more competitive by using the international business language. It is an accepted fact, that willing companies will acquire great efficiencies from this permanent adaptation of corporate governance rules.2
  5. 5. Introduction The new Turkish Commercial Code (hereinafter New Company Law involves a comprehensive “TCC”or “the new TCC”) fosters new dimensions reform by TCC. First of all, the new system and perspectives for Turkish law as well as for the attaches great importance to restructuring integration of Turkish legal system to the European mechanisms such as fusions, scissions and Union. The new TCC shall enter into force as of transformations. On the other hand, one man 01.07.2012, whereas certain rules regarding new companies and group of companies appear as accounting standards and auditing shall take effect new figures of the Code. Particularly, joint stock as of 01.01.2013 and whereas the obligation to companies face a broad new legal regime, which operate a web site shall inure as of 01.07.2013. implements modern rules of Company Law and Thus, the current TCC is in force until the new TCC which regulates certain new legal institutions. On shall come into effect. the other hand, the equity character of limited liability companies is reinforced thoroughly. TCC consists of six main chapters: Enterprise Law, Company Law, Securities Law, Transportation In addition, Transportation and Maritime Law Law, Maritime Commercial Law and Insurance rules have been reformed in line with international Law. Compared with the current TCC, the new agreements relating to these disciplines. TCC treats Transportation Law with a separate Particularly, the chapter of Insurance Law has been chapter. Reviewing the characteristics of each revised taking into account the actual problems of chapter, it is very evident, that TCC challenges to Turkish insurance sector and new developments put a comprehensive law reform into practice. as well as new institutions of Modern Insurance The current TCC, enforced fifty years ago and Law. In this framework, each chapter of TCC has formulated taking into account the modern been demonstrated with its main characteristics developments in German and Swiss law, has not below. Regarding the scope and the concept of been mainly reformed within fifty years, despite this research, each chapter may not be analyzed many developments in European Law. As a by all of the legal problems and institutions of the consequence of this, Turkish Ministry of Justice related chapter but a general view and a focus on has formed a commission for the preparation of new institutions has been aimed. a new TCC Code. This commission, consisting of academics, judges, attorneys, bureaucrats and experts, has carried out a in depth research on the European Economic Law doctrine and jurisprudence. In this research, solely main characteristics of the new legal regime shall be reviewed in brief. 1
  6. 6. Enterprise lawPreserving the characteristics of the current Commercial Registry Establishing an electronicallyTCC, TCC is orientated to harmonize the Turkish based registry system is one of the most crucialEnterprise Law with European Law. Main points concerns of TCC. Electronic registry will serve toregarding this reform refer to accounting principles implement the principle of “ true and fair view”.for enterprises, commercial books, commercial Through the electronic registry, the transparencyregistry, unfair competition and further to agency of the enterprise records will be reinforced,contract. whereas positive and negative functions of the regi stry system shall be conducted in a moreNew Accounting Principles and Commercial efficient manner. In addition, the State and theBooks Chamber of Commerce, which shall hold the commercial registry, are successively responsibleOne of the most remarkable reforms of the TCC for the damages arising from the transactionsis enforcing modern accounting rules and new carried out by the registry holder (Art. 25/2 TCC).norms for commercial books. In this framework, With a global approach, the rules regarding theTCC prescribes that all the accounting systems electronic registry and the rules in respect with theof Turkish enterprises shall be arranged in information technologies shall serve for a betterconformity with Turkish accounting standards, implementation of the transparency.which have been and will be further enforcedaccording to internationally accepted financial Business name The rules referring to the businessstandards (IFRS). In addition to that, the enterprise name have been reformed in order to enable ashall document and file all of its commercial transparent and reliable system. In this system,transactions, if necessary electronically, which the lawmaker aims to enable third parties to getmeans that electronic registry mechanisms shall proper information about the legal situation ofbe integrated within the accounting system of an the enterprise. Particularly, the TCC underlines theenterprise (Art. 64/2 TCC). On the other part, any principles of transparency and true and fair viewrecords to appear in the commercial books of a (Art.39 TCC ff.) In addition to that, Art. 39 TCCmerchant shall be complete, correct, on time and evidently demonstrates the correlation betweensystematic ( Art. 65/2 TCC). The most distinctive the legal regime surrounding the business nameaim of the lawmaker is, as reflected in the Code, and the rules related to information technologies.“to enable an expert to achieve a proper pictureof the operations and of the financial situation Unfair competition Competition law and theof the enterprise within a reasonable period". In regime concerning unfair competition are twoconnection with this hypothesis, rules referring disciplines, which are continuously treatedto commercial books, accounting systems and with a modern view in European and Swissauditing shall be regarded as a whole and the law systems. The new legal regime concerningpractice shall be conducted in a manner to enable unfair competiton defines the concept of unfairtransparency and reliability. competition and demonstrates the connection between this legal regime and the competition law. Other dimensions of the reform shall be mentioned as the enumeration of several versions of unfair competition and further more efficient rules for the compensation of the damages arising from unfair competition. The Code enumerates and classifies many trade practices as unfair competition cases in conformity with the decisions of the European Court of Justice.2
  7. 7. Some examples for unfair competition are as The most remarkable points of the new rules arefollows : as follows: The rule for the unauthorized agency has changed in a manner, that in the event that a• Fraudulent sale and advertisement practices contract has been concluded by an unauthorized• Procuring a person to invade or dissolve his agent and further in the event that the mandator contract. does not assume this contract at once after he• Benefiting from other’s products in an has been informed of the conclusion of this inequitable manner agreement, the unauthorized agent is responsible• Acquiring and declaring other’s business secrets. to fulfill this agreement (Art. 108 TCC).• Invading certain rules enforced for a certain branch of profession On the other hand, TCC reinforces the agent’s• Utilizing inequitable general terms and right to acquire the agency fee. Accordingly, conditions, the agent shall deserve a fee for each of his transactions, equivalently for the transactions notTCC pays special attention to preserve the Turkish implemented by the agent but implemented in hisjurisprudence evolved by the Turkish Court of geographic area. Art. 113 TCC preserves the rightCassation up to date. Despite adopting the Swiss of fee, even in the case that the agency contractlaw reform in respect with unfair competition, has been terminated. The agent deserves the claimthe lawmaker intends to maintain the formation for fee for the transactions started before theof Turkish law in this discipline. New rules for termination of the contract.unfair competition distinguish themselves bysafeguarding consumer rights. In spite of the The obligations of the mandator have beenexistence of special regulations for consumer equivalently enumerated in TCC, whereas TCCprotection, TCC equivalently elevates the consumer demonstrates which obligations shall be fulfilledvalue, since competition restrictions invade by the mandator in order to urge the agent tothe consumer’s legal status. The core of unfair effectuate his obligations (Art. 120 TCC). Ascompetition law is orientated to protect all the mentioned in the preamble, TCC characteristicallymarket participators. safeguards the rights of the agents, since Turkish enterprises appear as agents rather thanAgency contract mandators. As a consequence of this, the parties to an agency contract are deprived of replacingAs the focal point of foreign investment, the the rules in TCC to the disadvantage of the agent.agency contract is very common in practice.For this reason, the legal regime concerning theagency contract faces an extensive legal reform.On the contrary, other similar agreements such asfranchising agreement and exclusive sales agencyagreement are not treated by TCC. Apparently,TCC seems to restrict the practice of theseagreements solely with general principles of lawand with certain regulations of Competition Law. 3
  8. 8. Another new dimension of agency contracts isportfolio management. In spite of the lack ofregulation, Turkish Higher Court has implementedportfolio compensation for the agencyagreements dissolved without the fault of theagent. Taking into consideration the regulationin Swiss Law and the decisions of Turkishjurisprudence, TCC enforces a specific norm forportfolio compensation, namely Art. 122 TCC.According to this regulation, in the event that1. the agency contract has not been dissolvedon the basis of the fault of the agent, 2. thatthe mandator acquires eminent benefits fromthis dissolution 3. that the agent is deprived ofputting forward a legal claim, which he is entitledto put forward under normal circumstances and4. finally that the principle of equity necessitatesthe payment of such a compensation, the agentmay ask for a portfolio compensation, which shallbalance the enrichment of the mandator thanks tothe clients acquired by the agent for the mandatorand the loss faced by the agent because of thedissolution of the contract without the fault of theagent. TCC advances to release a concrete normwhich allows the portfolio compensation for othersimilar types of agreements such as exclusive salesagency agreements.4
  9. 9. Company law General aspects The new system implements special liability regimes for parent companies. Such liability Through TCC, Turkish company law experiences grounds on the misuse of the control or on the a comprehensive reform. In this research, we will confidence restored by the parent company in the solely focus on the reforms referring to general view of third parties. principles of company law as well as to joint stock companies and limited liability companies. Reforms on joint stock companies The first chapter of Company Law is dedicated Foundation Existing rules related to the foundation to general principles. Considering modern of the joint stock companies enable “gradual developments in European and Swiss law systems, foundation”, which means that the founders, the Code proposes to enforce many principles and undertaking a certain part of the capital, may legal institutions which are to a large extent new make announcements in order to raise capital. to Turkish law. TCC encompasses detailed rules In this alternative, the company shall be founded concerning mergers, scissions and transformations upon the collection of the whole capital. It shall of enterprises (Art. 134-194 TCC). Existing rules be recorded that this method of foundation has are inadequate to meet the needs of the practice. not gained currency in Turkish practice. As a Considering many decisions of Turkish Competition consequence of this event, TCC renounces the Authority, there is a very evident lack of rules with method of gradual foundation and replaces this material law character, subject to regulate the method with the method of public offer. In this transformation of enterprises. New rules of this new alternative, the company shall transform a discipline originate from European and Swiss law certain part of the capital into pecuniary shares systems. and execute the public offer of these shares within a period of 2 months from the foundation of the Another novelty of the TCC is the legal regime company. With this perspective, TCC elevates prescribed for the group of companies. Taking into essential characteristics of joint stock company, account the academic acquisition of the “High by raising its anonymous character. Through this Level Group of Company Law Experts”’, TCC method, even private (not listed) companies may enforces a comprehensive legal system for the benefit from the advantages of capital markets. group of companies. First of all, TCC demonstrates main elements of the group of companies and enumerates fundamental instruments of control. By the means of these instruments, TCC equivalently raises a presumption of control, this means that the rules related to the group of companies will have a critical role in Turkish Company Law. 5
  10. 10. Renouncing the “Ultra Vires” principle Registered share capital TCC allows the jointAccording to Art. 137 of the current TCC, any stock companies to adopt registered capitaltransactions of a company which fall outside (Art.332 TCC). Particularly, it shall be stated thatthe scope of the business activities prescribed in even joint stock companies which are not publicly-the articles of association are deemed as invalid. held may equivalently benefit from this system.Such transactions are named as “ultra vires” This reform reflects TCC’s tendency to diminish thetransactions, since all the transactions referring to distance and differences between several kindsthe core business activities stated in the articles of of joint stock companies. Even companies with aassociation of the company are valid and “intra limited circle of shareholders, which consciouslyvires”. In line with the 1st Company Law Directive refrain from becoming publicly-held companies,of EU, TCC renounces this principle. may need to adopt registered capital. The start-up capital for the companies, adopting the system ofJoint stock company with a sole shareholder registered capital amounts to 100.000 YTL.Considering the developments in EU Law, TCClaunches the joint stock company with a sole New rules and limitations to qualified shareshareholder (one-man company Art. 338/1 capital Any property rights and property itemsTCC). Three essential functions of this regulation may be submitted as a part of capital to a jointare 1) to reconcile the legal regime with the stock company (Art. 342 TCC). Consideringeconomic truth 2) to establish a new model the evolution of technology and implementingfor investors who require limited liability 3) to related modern rules, intellectual property rightsconstitute a model facilitating the launching are classified as a sort of qualified share capital,and the conduction of group of companies, whereas it is enabled to propose a web site as ainstitutionalization of enterprises and further the qualified capital instrument. TCC implements theestablishment of foundations. On the other hand, general principle for qualified share capital, namelythis reform enables a shareholder to buy other that the instrument shall be alienable and shallshareholders’ shares and turn the company into not be subject to any liens or legal executions.a company with a sole shareholder. In the event For preserving the assets of the corporation, TCCof such a transfer of shares to a sole shareholder, prescribes that credits which are not of due date,the board of directors is bound to register this fact may not be submitted as a part of capital to thewith the commercial registry within seven days joint stock company (Art. 342/1 TCC).from the transfer. Otherwise the board of directorsshall be liable for the damages borne by thirdparties because of this transfer.6
  11. 11. Challenges to the decision mechanism of • Delegation of powers TCC enacts a detailedjoint stock corporations legal regime for the delegation of management powers to CEO’s and directors. As usual, theBoard of directors new regime classifies management powers as the administrative powers and power of• Board of directors may be constituted solely representation (Art. 367 TCC). In the event by one member (Art. m. 359/1 TCC). that the power of representation shall be imposed on a sole person, this person shall be• Legal persons may acquire the statute of a a board member (Art. 370/2 TCC). Contrarily, board member (Art. m. 359/2 TCC). administrative powers may be delegated to a person, who is not a member at the board (Art.• The requirement to be shareholder is no 367/1 TCC). As a consequence of this, all the more a must for the board members. members of the board may function as non- executive members.• Specialization At least one fourth of the members of the board of directors shall have For the delegation of management powers, an university degrees. Evidently, this norm serves evident regulation in the statute is necessary. to the principle of corporate governance, which In case of delegation, the board of directors is raises professional skills. But paradoxically, in the obligated to release a directive of organization event that the board of directors solely consists to enforce a management regime for the of a member, such member is not bound to have corporation, which includes the powers of each the same preference. (Art. m. 359/3 TCC). administrative subject as well as the hierarchical structure between the board of directors and• Representation in the board of directors The CEO’s and other management bodies. The composition of the board of directors is normally obligation to release such a directive is in line with determined by the majority. However, despite the evolution of Modern Company Law through a lack of evident regulation, it is accepted that corporate governance principles. Through these the articles of association may furnish several mechanisms, it is possible to achieve a more groups of shares to be represented in the board effective liability regime. On the other hand, in of directors under all circumstances. Such the light of the principle of transparency, it will preferences may be attributed to several groups be more evident for third parties, through which of shares or to the minority shareholders. The management mechanisms the corporation will existing system, as well as TCC does not allow advance to achieve its own purposes. the direct appointment of the member, but the members may be nominated by a group of shares or by minority shareholders. With regard to private (not listed) corporations, there are no restrictions referring statutory representation at the board of directors, so that all the members of the board of directors may be elected through these mechanisms. On the contrary, maximally 1/2 of the directors in a public joint stock company may be elected on the basis of preference stocks (Art. 360/1). 7
  12. 12. Even in case that all the members of the board Information Technology Services Joint stockshall function as non-executive directors; TCC companies and LLCs shall arrange a web site andunderlines the need for an efficient corporation inform its stakeholders through this web site.among the management units. The statute is It is the board of director’s liability to arrangethe exact instrument to achieve this functional and conduct this web site and to renew itscooperation. Due to the management structure, content continuously. Every joint stock companyTCC enables the monist as well as the dualist and limited liability company shall announce itsstructure. In other words, the management audited statement of accounts in its web site.structure may solely consist of the board of The corporate web site shall bear comprehensivedirectors as well as of the board of directors and information for its stakeholders. Benefiting fromthe supervision board. information technologies will help the corporation to review and reflect his own corporateQuorums Art. 330 of the current TCC refers governance performance.to meeting and decision quorums of board ofdirectors. As a consequence of the insufficient Division of powers between BOD andwording of this article, the practice has faced general assemblydifficulties in determining whether a valid decisionis formed in certain cases. The new formulation of Confusion of authorities between the generalthe new TCC has a very definite and clear wording assembly and board of directors threatensand underlines the principle of majority (Art. 390 the efficient performance of the governanceTCC). mechanisms. In order to prevent such confusion, TCC advances to enumerate certain powersInvalidity of BOD decisions The current TCC of the general assembly and of the board ofdoes not include any articles referring the validity directors and to determine the mutual position ofof board of director’s decisions. The jurisprudence both decision mechanisms. According to thesehas evolved a theory of invalidity, based on the regulations,general principles of Civil Law. Regarding thisfact, TCC adopts to enact a specific article for • Absolute and inalienable powers of the board ofthe invalidity of these decisions. In this respect, directors have been enumerated in Article 375decisions invading the principle of equality, TCC.conflicting with the essential character of thecorporation, invading the fundamental rights of • Similarly, absolute and inalienable powers ofthe shareholders or further invading the definite the general assembly have been enumerated inallocation of powers between the general Article 408 TCC and in some other articles.assembly and the board of directors shall bedeemed invalid (Art. 391 TCC). • For decisions which are not within the absolute area of each organ, the statute may appointOnline BOD meetings Due to the modern needs the competent organ. In the absence of such aof business, TCC enables online meetings of board regulation, the board of directors is competentof directors (Art. 1527 TCC). to resolve the matter.8
  13. 13. General assembly : Quorums in respect with the statutory amendmentsA shareholder-oriented perspective (Art. 421 TCC).Articles 407-451 TCC, which are regulating a. As of the statutory amendments, TCC differsthe legal regime for the general assembly and between listed companies and private (unlisted)obviously preserving the essence of TCC, evaluate joint stock companies. In listed companies,shareholder’s rights much more as a central decisions such as capital augmentation,point. In TCC, shareholder is not considered as an particularly the augmentation of the authorizedobligatory body for the existence of the corporation share capital and the transformation of thebut it is evaluated as a “conditio sine qua non” for company shall be formed with usual quorumsthe effective conduction of the corporation. This (Art. 418 TCC).new characteristics of the mentioned rules may beobserved in the following mechanisms. b. Statutory amendments which impose secondary obligations or the obligation to cover theRepresentation of the management in the balance losses on shareholders may be solelygeneral assembly CEO’s, at least one member formed with unanimity (decision quorum).of the board of directors and the independentauditor appointed for the inspection of a certain c. The amendment of the subject of the company,transaction such as mergers shall participate in the the creation of preference stocks, restrictionsgeneral assembly (Art.407 / 2 TCC). This regulation referring the transfer of the shares shall beis oriented to enable an efficient coordination decided and resolved with the votes of theamong several units of the corporation and to serve shares amounting to 75 % of the whole capitalfor a better information service to shareholders. (decision quorum).By-Laws The board of directors shall arrange d. All other sorts of statute amendments shall beby-laws referring the mechanisms and the decided on a basis of 50 % of the whole capitalconduction of general assembly and register (decision quorum).these by-laws with the commercial registry ( Art.419/2 TCC). The preparation of by-laws as a e. Contrarily to TCC, in the event that the statutecomplementing source in addition to the statute of amendment shall not be decided at the firstthe corporation will serve to the establishment of a general assembly, the quorums at the secondtransparent and efficient corporate organization. assembly are the same as the ones at the first general assembly. 9
  14. 14. Representation of the shareholder in the TCC In the light of corporategeneral assembly For achieving a more efficient governance principlesparticipation, TCC appraises a comprehensiveregulation for the representation of the Corporate governance principles influence Modernshareholder at the general assembly. In this Company Law in a very efficient manner. Thesecontext, the representatives are classified principles have evident reflections in TCC. Theseas corporate representative, independent reflections may be demonstrated as follows:representative and institutional representative (Art.427 TCC). Besides efficient participation, the rules • TCC underlines an expectation upon thein respect with representation of the shareholders efficient, fruitful and responsible conduction ofequivalently aim to draw the framework of the the board of directors. The economic reality,representatives. that directors representing the interests of the controlling shareholder might participate in theRight of Information Existing rules in respect board, has been perceived in TCC, whereas thewith the information right of the shareholder is obligations of prudence and fidelity of thesenot preserved satisfyingly. Considering this fact, directors have been underlined in TCC. TCCTCC expands the scope of the information right elevates the professional management of thein a manner to restrict the exceptions solely by corporation.commercial secrets and company benefits (Art.437 TCC). • The concrete differentiation in TCC between executive and non executive directors enablesInvalidity of general assembly decisions The the corporation to establish a monist- orexisting regime referring the validity of general dualist- structured management organization.assembly resolutions has been preserved to alarge extent in TCC. However, the grounds of • Specialization At least half of the directors of theabsolute invalidity have been enumerated in order board or the sole director shall have graduated ato provide a more secure system of invalidity (Art. college (Art. 359/3 TCC). This is a clear indication447 TCC). The rules referring the invalidity of such that TCC regards generally accepted corporatedecisions are adopted from Swiss law. governance principles.General assembly online TCC enables the • Shareholders rights Shareholders rights havearrangement of online general assembly meetings, been thoroughly reinforced in TCC. Thewhere the shareholders may participate and vote participation at the general assembly and theonline. In listed companies, the arrangement of utilization of administrative rights has beenonline general assembly meetings is obligatory. facilitated through several mechanisms. The representation of the shareholder at the general assembly has been treated with an institutional view. Principle of equality has been safeguarded by an evident regulation (Art. 357 TCC).10
  15. 15. • Besides the concept of shareholder, the concept • Committee for Early Inspection of Risks Listed of stakeholder is equivalently taken into account joint stock companies whose shares have been by TCC. The rights of the stakeholders, such registered with the stock exchange, are bound as creditors, bond holders, etc. have been to constitute such a committee in order to safeguarded in TCC. detect current risks in an early stage (Art. 378 TCC). The logic of this regulation is to secure the• Enterprises and corporations are classified as existence and the development of the company small- big enterprises/ small- big corporations. by involving experts to the mechanisms of the Such a classification will determine the legal company. regime applicable to financial accounts and to the auditing process of the enterprise or Challenges for auditing companies corporation. Realizing corporate governance principles• Information Technologies Every joint stock necessitates continuous and effective auditing company is obligated to involve information of the corporation. In this regard, independent technologies in order to reflect the corporate auditing companies shall play a very efficient governance level of the company. Information part in the new system. It shall be stated, that technologies serve to the transparency of the independent auditing companies are expected to corporation, which is one of the most eminent be the real guards of corporate governance in the dimensions of corporate governance. new system.• Economic relations between the corporation Current TCC prescribes that joint stock companies and the shareholder, out of the scope of the shall be audited by one or more auditors, who shareholder status constitute an eminent shall be elected by the general assembly. It is concern. Such relations may probably invade an accepted fact, that the majority appoints the corporate governance structure of the certain persons, who are not in economic conflict corporation, since controlling shareholders with the majority. As a result of this, auditing in may misuse the assets of the company through joint stock companies is not an objective and these mechanisms. In this respect, apart from efficient process actually. Regarding this event, the contracts related with the activities of the TCC advances to abandon the institution of company, a shareholder may not benefit from internal auditing in joint stock companies. The the assets of the company. Particularly, the new system obligates the companies to involve shareholders may not borrow money from the an independent auditor to audit the financial company (Art. 358 TCC). This is a consistent structure of the company. The legal status of the reform for Turkish trade practices, which widely auditor shall be prescribed by complementing rely upon financial relations betqeen the regulations. TCC differentiates between small and company and major shareholder big joint stock companies. Such differentiation refers to the fact, whether the auditing process• Insurance Against the Damages Caused by shall be carried out by an independent auditing Directors Such insurance is not mandatory. company or by certified auditors. Principally, Despite this fact, arrangement of such insurance independent auditing companies may conduct serves to the conformity with corporate this auditing process, but small joint stock governance principles (Art. 361 TCC). companies may equivalently appoint two certified auditors in state of an independent auditing company (Art. 400/1 TCC). 11
  16. 16. Persons holding shares at the corporation or at The board of directors is bound to support andaffiliated companies, appearing as employee at facilitate the performance of thethese companies, performing for the preparation auditor (Art. 401 TCC). In this context, the boardof the financial tables or for the arrangement of shall submit all the records ofcommercial books of these companies or persons the company. This obligation serves to a carefulemployed by other persons who are deprived to conduction of the auditingserve as auditors, may not serve as auditors. activity.An auditor may serve a corporation maximally Principal rules related to the content of thesix times within a period of ten years (Art. 400/ 2 auditing report are as followsTCC). This regulation will enable the rotation of (Art. 402 TCC) :auditors, which will serve to preserve the objectivecharacter of auditing process. In this regard, a a. The auditing report shall be definite andcorporation shall be observed and reviewed by clear, whereas its content shall be express andtwo independent auditors within a certain period intelligible. The report shall contain aof time. comparison of the last two years’ financial status.The statement of accounts and annual report shall b. The auditor shall equivalently evaluate thebe audited by the chartered auditor. Statements of assessments of the board of directors andaccounts or annual reports which have not been announce its own attitude referring the currentapproved by the auditor shall be deemed as invalid situation of the company.(Art. 397/1 TCC). Any amendments referring this c. Further, the auditor shall evaluate whether thestatement and report shall similarly be audited board of directors have acted in line with law,properly. whether there were events threatening the financial situation of the corporation, whetherArticle 398 TCC prescribes the subject and the the commercial records are held in accordancescope of financial auditing. This subject and scope with mandatory rules and internationallymay be summarized as follows: settled financial standards, whether further the statement of accounts presents a true and faira. Specific Subject of Auditing: This subject view of the corporation. encompasses the inspection of the statement of accounts and the annual report of a company Obviously, the final evaluation of the auditor is of or of a group of companies. Evidently, this critical importance. Particularly, the approval or inspection equivalently covers the auditing of abstention of the auditor exercises an essential the whole accounts of the company or the function: In the event that the auditor arrives at group. the conclusion that the corporation acts in lineb. Criteria: As criteria, TCC introduces Turkish with mandatory rules, whereas the accounts of accounting standards which shall be the corporation have been held in conformity further formed in line with internationally settled with internationally settled standards, the auditor accounting standards. The auditor shall inspect shall announce an approval for the financial whether the accounts of the company or of the statement of the corporation. This approval shall group have been conducted in line with these reflect the auditor’s argumented opinion, whereby standards. the auditor shall evidently record possible risksc. Comparison: The auditor may not be satisfied threatening the corporation. solely by analyzing the statement of accounts and the annual report. Evidently, the auditor shall collect necessary data for auditing and additionally compare the results acquired by these data with the statement of accounts and annual report.12
  17. 17. On the other hand, the approval may be limited ormay contain certain drawbacks. In the event thatthe auditor declares an approval with drawbacksor an abstention and in case that these drawbacksor grounds for abstention refer for the misuse ofcontrol by the parent company on the subsidiarycompany, which results in a damage of thesubsidiary company, the commercial court maydecide for a specific auditing.Finally, auditors shall conduct a specificauditing process in case of fusions, scissions ortransformations.Shareholder rights as the central point of TCCTCC encompasses several rules reinforcing 2. Shares with restricted transfer are appraisedshareholders’ legal situation. These rules may be with a progressive view. In this aspect, TCC treatssummarized as follows : usual shares and shares with stock exchange quotation differently. In brief, TCC restricts1. TCC prescribes the right of information and the restriction of the transfer and enforces athe right to attend the general assembly in a very definite system for the restriction and itsvery efficient manner. First, several obligations of exceptions. Actually, the transfer of the filesdeclaration and reporting imposed on the board may be solely restricted for the interests andof directors serve for a functioning participation independency of the company.of the shareholders to the decision mechanismsof the company. Moreover, the representation of 3. Preference Stocks First, TCC specifies that thethe shareholder in the general assembly has been right to be represented at the board of directorstreated with detailed rules. shall no be deemed as a preference (Art. 360/2 TCC). Secondly, preference in votes is restricted to 15 votes per share (Art. 479/2 TCC). The assembly of shareholders with preference stocks has been regulated with consistent rules (Art. 454 TCC). 4. Rule of Agenda Existing law approves the principle of “rule of agenda”. This principle commands that shareholders may solely discuss certain subjects, which have been announced by the board of directors within a certain period before the general assembly, Whereas the right of objection is limited, such objections do not yield effective results in practice. TCC advances to restrict this principle with evident exceptions. Such a progress will surely serve for a more efficient general assembly. Moreover, the right to require for the appointment of a special auditor for the inspection of particular issues is reinforced (Art. 438- 440 TCC) corporation. 13
  18. 18. 5. TCC furnishes the minority shareholders with a Mergersnew category of shareholder rights. In the event offair reasons, minority shareholders may ask claim In the last decade, Turkish commercial law practicefor the dissolution of the company on fair reasons. faces a wave of mergers and acquisitions. InCertainly, the dissolution on fair grounds is a last this respect, material rules regarding the mergerresort. In case of such a claim, the judge shall process were urgently needed. In this regard, TCCattempt to find out other solutions. For instance, inaugurates a new system. First of all, the contentthe judge may ex officio decide for the discharge of the merger agreement has been formulated in aof the applicant, whereby the applicant shall be very concrete manner. The new system comprisespaid for his shares as of the actual value. In the the concept of “merger project”. The arrangementevent that no other solution shall be convenient, of this project is obligatory. In the light of thisthe judge may decide for the liquidation of the project, beneficiaries shall be enabled to observecorporation. the merger process in an efficient manner.6. Moreover, the list of shareholders’ rights has Rules referring the exchange unit in mergersbeen extended in a manner to encompass new appear for the first time in a regulation and thekinds of shareholders’ rights. Apart from the persons concerned are furnished with the rightright to claim for the dissolution on fair reasons, of objection against this unit. TCC prescribes thatthe minority shareholders are further furnished any conflict referring this unit shall be resolved byto ask the board of directors to print the shares, the court, so that any benefits of the creditors andfurther with the right to leave the corporation in shareholders shall be preserved properly. Actually,case of a merger, with option rights in the event the claim referring the revocation of the generalof conditional capital augmentation and the assembly resolutions is not a sufficient mechanismright to revoke the merger, the scission or the to achieve this result. Contrarily, the interventiontransformation. of the court is an efficient mechanism, where the corporation is bound to declare the logic of the exchange unit. In addition, the merger processStructural changes proposed for joint stock shall be audited by an independent auditor. Allcompanies these new rules are orientated to carry out a legally secure mechanism of merger.Considering the new legislation regarding thetransformations, mergers and scissions in Swisslaw, further considering the progressive legislation Scissionsin EU Law, TCC attaches importance to theselegal institutions and enforces a comprehensive Scission of corporations deprives of any legislationlegal regime for restructuring of the corporations. except from the tax legislation and certain decreesParticularly, until TCC, scissions are deprived of a enforced for covering the needs of the practice’sproper legislation. New legal regime brought by minimum needs. Taking into account EU’sTCC reflects many challenges for the commercial legislation, TCC enacts detailed rules for scissions,law practice in Turkey. whereby special attention has been paid to secure the rights and benefits of the creditors. Obviously, the role of the auditor during the division process shall be underlined.14
  19. 19. Fundamental changes referring the capital TCC renews the system referring the termination ofaugmentation of joint stock corporations the corporation considering concrete legal problems of Turkish practice, as well as the reform in SwissCapital share augmentation has caused many legal Corporation Law of 1991. Besides many newconflicts in the TCC practice. TCC advances to rules, the novelty in respect with the dissolution onfacilitate and effectuate the augmentation process fair grounds is quite remarkable. The terminationwith dependable rules as follows: rules of TCC do not allow the dissolution of the corporation on fair grounds. Contrarily, TCC releases1. According to the principle of capital a new rule (Art. 531 TCC). TCC treats the rights tomaintenance, the company may not augment its claim for dissolution on fair grounds as a minorityshare capital unless the whole capital subscriptions right. In the event that there exist certain objectivehave been fulfilled. Despite preserving this principle, grounds such as the demolition of the confidentialTCC enacts a rational exception: Minor failures in relationships between the shareholders or the factfulfillment of these subscriptions shall not deprive that the corporation is not profitable for a longthe company from augmenting the capital (Art. period may cause the dissolution of the corporation.456/1 TCC). The dissolution may be claimed through an action versus the corporation. Evaluating such an action,2. The powers of the board of directors has been the judge shall carefully examine the concretedetermined considering the fact that even private situation of the corporation. In the event that thecorporations may involve registered capital judge comes to the conclusion that there exist objective grounds enabling the dissolution of the3. The decision referring capital augmentation shall company, the judge may not immediately decidebe registered with the commercial registry within for the dissolution, but examine other alternativesfour months from the decision of the general which may replace the dissolution. The dissolutionassembly (Art. 456/3). is a “ultimo ratio”, which means that a decision for dissolution may solely be formed in the event that4. In order to implement the capital augmentation, there are no other legal alternatives. As a result, thethe auditor shall examine the conditions of the dissolution on fair grounds is an institution, whichcompany and approve the augmentation grants the judge a wide and creative area of judicial(Art. 458 TCC). discretion.5. TCC enacts a new sort of augmentation: Theshare capital may be augmented on conditions.Such an augmentation shall not exceed the half ofthe share capital (Art. 463 TCC). Conditional sharecapital augmentation serves to enable the exchangeof loan stocks issued by the corporation with theshares of the corporation. 15
  20. 20. Limited Liability Companies (LLC)LLC is a hybrid company, which harbors several Capital structure In the new system, LLC requireselements of equity corporations, as well as certain a minimum capital of 25.000 YTL. Compared tocharacteristics of other sorts of companies. the actual legal regime, the minimum standardTCC prescribes a facilitated procedure for the specified in TCC is quite high. The purpose of thisfoundation, whereas the minimum capital regulation to reinforce the warranty functions ofrequirement is quiet low. For this reason, many the share capital for the creditors of the company.undertakings have been organized as LLC, whichmay not be organized as an equity company General assembly Actual regulation due to theunder normal circumstances. On the contrary to decision making process in LLCs prescribe thatthe intention of the lawmaker, LLC has become at least more than half of the votes is necessarythe default company for any undertakings in the for forming a usual decision at the generalcourse of time. This fact equivalently means that assembly. Evidently, the articles of association mayLLC’s in the practice are deprived of a corporate prescribe a higher proportion of votes for formingorganization with efficient decision mechanisms a decision. In this context, it is an accepted factand transparent structure. that this quorum causing deadlocks in many LLC, particularly in LLCs with two equal shareholders.Taking these facts into consideration, TCC’s view Even in the absence of shareholders disposing onof LLCs is the exact opposite of the LLC in the the half of the share capital, the company mayactual practice. Obviously, TCC intends to treat LLC not conduct its own decision mechanisms andas the useful substitute of joint stock corporation. such situations result in deadlocks. TCC releasesAs a consequence of this perspective, LLC in TCC a new rule and enables that decisions in thehas been formed as a proper equity corporation. general assembly shall be formed upon more than half of the votes, which are represented in theFoundation The statute of LLC is treated as general assembly (Art. 620 TCC). It is clear, thatan essential instrument for the organization of TCC prescribes higher proportions of votes andthe LLC. Whereas the mandatory content of the that the articles of association may equivalentlystatute is regulated by TCC, the Code equivalently enforce higher proportions. Consequently, certainenumerates certain regulations, which shall appear eminent decisions may only be formed upon 2/3in the statute in order to be validly enforced in the of the votes represented in the general assembly.corporate sphere (Art. 577 TCC). Creation of new preference stocks, share capital augmentation, amendment of the commercialLLC with a sole shareholder The idea to activities of the company are examples for eminentreconcile the economic truth with the legal regime decisions ( Art. 621 TCC).equivalently plays an important role for the newlegal regime of limited liability companies. LLC witha sole shareholder is an evident reflection of thisidea. Through this mechanism, the entrepreneursshall not be bound to pick other persons in orderto fulfill the minimum number of shareholders.Secondly, the sole shareholder will act consciouslyas the sole controlling subject in order to preventthe application of the theory of “piercing the veil”.In other words, the sole shareholder shall managethe company in bona fides in order to preventthird parties to claim for the sole shareholder’spersonal liability. Thirdly, the fact that all theshares of the company shall be transferred to asole shareholder, shall no more be a ground fordissolution.16
  21. 21. As of the validity of general assembly resolutions, Accessory obligations and obligation ofthe rules relating to joint stock corporations shall additional payment LLC is not a pure equityapply (Art. 622 TCC). The new system serves for corporation. The most evident characteristics ofthe certainty and predictability of law. the LLC are that this company depends on the personal relationships between the shareholdersOrganization of LLC TCC advances to cover the and the company in most cases. Many LLCslack of a detailed organization of LLC. At the first survive and function thanks to the contributionsstep, TCC enumerates absolute and inalienable of the shareholders. Considering the practice,powers of the general assembly (Art. 616 TCC) TCC enforces a detailed regime for accessoryand equivalently of the directors (Art. 625 TCC). obligations and obligation of additional paymentIn respect with the decisions within the authority (Art. 603-607 TCC). Accessory obligations areof the directors, the directors may apply to the obligations, which may arise provided thatgeneral assembly for its approval, but such an such obligations are regulated in the articlesapplication does not exclude the directors from of association. The scope of such obligationsthe liability arising from the relevant transactions depends on the specific preferences of the(Art. 625 TCC). company. On the other hand, obligation of additional payment may arise in the event that theFinancial tables, reserves and auditing assets of the company are not adequate to coverConsidering the fact that LLCs in Turkey are to the obligations of the company (Art. 605 TCC).a large extent deprived of a systematic financial Regulating these two exceptions of the limitedstructure, TCC challenges a tough system for LLCs. liability, TCC intends to formulate a secure legalAccording to new rules, LLCs are subject to the regime for the shareholders.regulations prescribed for joint stock corporationsin respect with the statement of accounts and the Dissolution Preserving the current legislation inreserves ( Art. 514-527 TCC). Consequently, the some aspects, TCC introduces certain new rulesstatement of accounts of a LLC shall be arranged regarding the dissolution of LLCs. For instance, thein conformity with Turkish Accounting Standards absence of a corporate organ for a long period,and further with International Financial Accounting has been handled with detailed rules (Art. 636/2Standards. Moreover, this conformity shall be TCC), whereas the principles of “proportionality”examined by an independent auditor (Art. 635 and “subsidiarity” have been underlined for theTCC). This regulation has innovative effects on dissolution on adequate grounds (Art. 636/3 TCC).LLCs and even on the auditing activity in Turkey. Apart from the dissolution on adequate grounds and in the event that a shareholder intends to leave the company through an action before the court, other shareholders may equivalently declare to leave the company (Art. 642 TCC). In such a case, TCC regulates the conditions of the payment of the share price to the shareholders. 17
  22. 22. Securities lawTCC preserves the legal regime of TCC in respectwith the securities to a large extent and does notenact an extensive reform in this area. TCC solelyreform several articles which contain translationfailures. Evidently, Company Law reform andthe expected Stock Exchange Law reform willindirectly influence this legal discipline.18
  23. 23. Transportation law Regulating Transportation Law as an independent The definition of the carrier reflects a wide chapter is one of the fundamental reforms perspective and includes any persons carrying implemented by TCC. Originating from the former goods, passengers, relocation goods and any TCC, the rules of TCC regarding this discipline persons involving a part of multimodal carriage. were not in line with modern transportation rules This definition is similarly applicable to carriages and did not meet the needs of the practice. TCC by railway. On the other hand, this definition is orientated to enact a modern transportation underlines that the carriage shall be conducted law regime based on general principles of according to a carriage contract. Actually, this international transportation law. First subchapter rule is a clarification for the carriages performed includes general principles, whereas the second on the grounds of personal relationships in state subchapter is assigned to the transportation of a professional agreement. Evidently, a carrier, of goods. Consequently, the third subchapter who carries goods or persons on the ground of encompasses the legal regime formed for a non- professional relationship, is not a carrier relocation goods. Whereas the fourth subchapter with respect to TCC. As a consequence of this, concerns with multimodal transportation, the fifth general principles related to transportation are not subchapter includes detailed rules for passenger applicable to such transportations. transportation. Finally, freight forwarding is regulated in the last subchapter. Another reform to be mentioned in this context is that the railway transportations are subject to the General principles rules of the first and second chapters of this book. On the contrary, maritime and air transportations General principles reflect the main characteristics which are handled by separate regulations, are not of a code or of a chapter. General characteristics subject to these rules. Transportations on inland of Transportation Law, as accepted in TCC, waters are equally subject to the rules of maritime have been formulated by CMR and by German transportation. Transportation Law Reform. All claims arising from transportation transactions In this framework, CMR has a very eminent are subject to a prescription period of one year. influence on the new rules regarding transportation. Although CMR is mainly an international convention subject to regulate cross border transportations, this legal source has been adopted even for internal transportations, since this Convention equivalently includes several rules for internal transportation. Such rules refer to material rules as well as rules referring to conflict of laws. This approach of TCC reflects the tendency to harmonize the Turkish law system with international transportation law. The chapter dedicated to general provisions includes common rules applicable to carriages of goods by road or railway, which fall outside the scope of international conventions, further to transportations of passengers, carriage of relocation goods, to multimodal carriages and freight forwarding. 19
  24. 24. Transportation of goods TCC equivalently regulates the legal situations of “contractual carrier” and “de facto carrier” inIn TCC, the rules regarding the transportation of the event that the carriage is conducted partly orgoods are enacted in consideration of CMR and wholly by a third party in spite of the existence ofthe new German Commercial Code. According to a contractual carrier. On the other hand, the rightTCC, the arrangement of a bill of loading is not of retention has been apprised in conformity withnecessary for the validity of the transportation the general rules in Turkish Code of Obligationscontract. The bill of loading shall be arranged and with the general theory in respect with theupon the request of a party. Usually, the bill of property rights on ships.loading shall be arranged by the sender upon therequest of the carrier, whereas the sender may Transportation of relocation goodsarrange the bill of loading without such a request.On the other hand, the delivery of the goods to TCC assigns a separate chapter for thethe carrier shall be evaluated as a presumption for transportation of relocation goods. For a properthe existence of a transport contract. Respectively, application of these rules, TCC defines thein the event that the parties have not undersigned relocation goods as “any goods to be transportedany written agreement, the delivery of the goods from a house, an office or production unit tomay serve as evidence. another, provided that these goods are utilized in a lodgment or for business related purposes”.In this framework, bill of loading is not classifiedas a security, but it serves as an instrument of These rules originate from German Commercialthe transportation contract. The burden of proof, Code. The reason to enact special rules forachieved by the bill of loading is effectuated by relocation goods depends on the specific naturethe delivery of the goods and functions on behalf of these goods. Actually, packaging, unpacking,of the carrier. The bill of loading may be classified mounting and dismantling of these goodsas a delivery receipt provided that the carrier has necessitate specialization.undersigned this document. In the event that the sender is a consumer, TCCTCC restricts the liability of the carrier. Gross enforces a different system for the transportationweight of the shipment shall be taken into account of relocation goods. In such a case, the obligationsas of the calculation of the limits, whereas the of the sender are moderated, while the obligationsfreight fee shall be considered in case of delay. In of the carrier are expanded. Under thesethe event of demolition or damage, the carrier of circumstances, TCC intends that the carrier maythe liability is limited to 8.33 calculation unit per not to easily achieve the liability exclusion. Carrierseach kilogram. On the other part, the liability is and his assistants, who do not fulfill certainlimited to three times of the freight fee, in case of conditions, may not benefit from liability exclusion.delay. Damages arising from other reasons shall belimited to three times of the compensation, whichshall be paid in the event of whole damage.Due to the restriction of the liability, the conceptof fault is defined and approved in line withinternational conventions. This concept shall bedefined as acting incautiously and acting in aconscious manner of the fact that the damagemay probably arise”. This concept of fault shall bedeemed equal to the concept of animus.20
  25. 25. Multimodal transportation Transportation of passengersThe articles of this chapter originate from The rules regarding the transportation ofthe German Law of Transportation Reform. passengers have been delivered from TCC toMultimodal transportation means that the TCC to a large extent. In addition to that, TCCtransportation shall be conducted on a basis of prescribes that complementary regulations shall bea transportation contract and at least by two enforced in order to safeguard passenger’s rights.different vehicles. To resolve legal problemsarising from multimodal transportations, relevant Freight forwardingnorms shall be applied in this order : Specificnorms of this chapter, relevant international For the rules regarding freight forwarding,conventions, general principles specified in the first German Commercial Code has been consideredtwo chapters of this book. This order is similarly as the model act. Firstly, TCC perceives a newapplicable for maritime transportations. With terminology. TCC mentions “freight forwarder” inrespect to this fact, for multimodal transportations state of “commissioner”. Through this terminology,encompassing equivalently maritime transportation TCC aims to underline that the forwarderas a part, the rules in the first two chapters of the organizes the transport. Evidently, the forwarder isFourth Book of TCC are applicable in state of the the exact subject, who shall determine the scoperules imposed for maritime transportation in TCC. and the manner of transportation and exactly the conductor of the carriage. In this framework, theThis general principle has an exception: This freight forwarder shall conclude any agreementsexception is solely applicable in the event that with the carriers on behalf of himself or on behalfthe place of damage is already known. For of the sender. Further, the freight forwarder maydetermining the place of damage, TCC enforces have to conclude other agreements referringa presumption, whereby the specific law is storage, loading and discharge.applicable, which is the certain law applicableto the liability of the transporter, which would According to TCC, the freight forwarder maybe applicable as if the parties would intend to conduct the carriage solely in the event that theundersign a sole agreement for the certain part parties have concluded this right in the agreement.of the transportation, at which part the loss has Contrarily, TCC does not necessitate such anarisen. agreement between the parties, so the freight forwarder may equivalently act as carrier. In suchAs a consequence of this, in the event that it is cases, the contracts referring freight forwardingdeterminable, whether the loss has come true at or carriage will exist together and the freighta certain part of the transportation, the specific forwarder may claim for freight forwarding andlegal regime which is normally applicable to this freight fees.certain part shall be applied as of the liability ofthe transporter.Finally, in case that the multimodal transportationconcerns with the transportation of relocationgoods, specific rules for the relocation goodsin the third chapter shall be applicable. Inthis context, even if the place of damage isdeterminable, mentioned rules in the third chaptershall govern the legal conflict. Contrarily, in theevent of an international contract, the exceptionspecified above shall take place. 21
  26. 26. Maritime commercial law Throughout TCC, Turkish maritime law faces The ship a challenging reform. On one part, existing institutions have been revised, whereas modern General principles In TCC, many institutions institutions have been integrated to TCC. TCC and relevant definitions have been amended in advances to remove inadequate rules and to consideration of the opinions demonstrated in the replace these rules with new norms in the light of doctrine. As the legal nature of the ships is one modern maritime law. of the most problematic concerns of Maritime Law, TCC emphasizes that the ship is a movable. One of the most important aims of TCC is The exceptions of this rule have equivalently been to reform Turkish maritime law in line with demonstrated in the TCC. international agreements. For this reason, Visby London Rules of 1968-1979, London Convention Identity of the ship The rules related to hoisting of 1976 on Limited Liability of the Carrier, London Turkish flag have been preserved in TCC to a large Convention of 1989 on Maritime Assistance, extent. However, the rules referring to acquire Geneva Convention of 1993 on Liens, London Turkish identity have been treated more flexibly. Convention of 1992 on Oil Pollution, Geneva In respect with ships subject to joint property, Convention of 1992 on the Arrest of the Ships TCC prescribes that for acquiring Turkish identity, and finally Athens Convention of 2002 on the shares relating to a ship shall be owned 100 the Transportation of Passengers have been % by Turkish personalities. TCC treats this rule implemented in TCC. more flexible in a manner that for acquiring Turkish identity, it is sufficient that more than Many institutions which have fulfilled their half of the shares belong to Turkish personalities function, such as disciplinary powers of the whereas most of the controlling shareholders captain, seamen’s obligation to comply with shall be of Turkish identity. For the ships owed by orders, crimes conducted abroad, maritime loans corporations, it is required that more than 50 % of are not regulated in TCC. the shares belong to Turkish personalities. Maritime registry TCC intends to establish a more transparent and systematic registry system. This system is completed by the legal regime enacted by a specific code (Code Number: 4490) in respect with international maritime registry.22
  27. 27. Property rights The rules regarding the Art. 948 of the former TCC, regulating theproperty rights on ships have been retreated and restriction of the ship owner’s liability is tacitlysystematized in TCC. Acquiring and losing the abrogated by the “International Convention onproperty of the vessels, which is not thoroughly the Restriction of Liability versus Maritime Loans”treated in the former TCC, have been appraised of 1976. For this reason, TCC records a referencewith detailed rules. In state of the TCC’s system, to international conventions, whereas it enforcesthe new TCC requires a transfer agreement and a detailed regime in conformity with internationalthe transition of the ship’s possession for the conventions on the restriction of liability (Art.alienation of the ship. For other rules related with 1328-1349).These rules originate from the formerthe sales agreement, general rules in respect with TCC to a large extent.sales contract in Turkish Code of Obligations shallapply. CaptainTCC enacts a new regulation for the demolition This chapter has been renewed in respect with itsof the property on the ship. In principle, the wording. Since maritime loan is no more treateddemolition of the ship gives rise to the demolition in TCC and since maritime loan is appraised withof the property. Contrarily, there may exist a a new system, certain rules in respect with theproperty right on the ship despite the demolition. captain do not appear in TCC.Evidently, in the event that wreckage is remained,it is possible to conclude the existence of On the other hand, the “International Conventionproperty rights. Moreover, TCC underlines that of Liability Restrictions Versus Maritime Claims” ofthe existence of wreckage shall be evaluated in 1976 have been reserved in TCC with a reference.respect with the rules referring to the removal of As a consequence of this, the captain’s liabilitythe wreckage and environmental pollution. may be restricted in conformity with this Convention.Finally, regulations referring maritime lien (pledge)and construction lien have been treated in the TCC contains several regulations related with theframework of a new systematic whereas the maritime labor law. Since Turkey has undersignedwordings of several rules originating from German several international conventions in the area ofLaw in this chapter have been corrected carefully. Labor Law, labor relations, such as the relation between the captain and the employees are notShip-owner and affreightment consortium treated in TCC.In this chapter, the legal status of the ship ownerand of the affreightment consortium havebeen appraised with an innovative approach.Particularly, the definition of “ship-owner” hasbeen amended in a manner that the element of“conducting the ship in maritime commerce” bythe element of “conducting the ship on waters foracquiring benefits”. 23
  28. 28. Maritime commercial agreements Certain reforms may be enumerated as follows: (1) The arrangement of the bill of lading onTCC inaugurates a new legal regime for maritime mechanical and electronic instruments has beencommercial agreements. First, maritime loan enacted. (2) The validity of the incorporationagreements do not appear in TCC contrarily to clause has been safeguarded (3) In the event thatthe former TCC. However, two new contract the carrier is not identifiable through the bill ofmodels, namely, time charter and bare boat lading the ship owner shall be deemed as thecharter contracts have been incorporated to carrier, whereas a new rule has been enforcedTCC. On the other hand, the rules regarding the enabling the claim for the compensation arisingfreight contracts originate from the former TCC. from the delay of the announcement of theCompared to Art. 1020-1060 TCC, TCC enacts carrier’s identity. (4) Letter of guarantee on cleara distinct and advanced legal regime for these bill of lading has been imposed regarding theagreements, particularly with respect to new rules model of Hamburg Rules. (5) Another articlerelated to lading, discharging and dead freight. has been incorporated to TCC which enacts the arrangement of other valuable papers apart fromIn addition, many rules in respect with the the bill of lading.liability of the carrier are manifested in TCC.These new rules originate from Visby Rules of In state of enforcing general rules for prescription,1968 revising Bruxelles Convention of 1924 and the lawmaker prefers to determine eachLondon Convention of 1978. On the other hand, prescription date specifically in the certain articlethe rules in TCC are completed with Hamburg dedicated to the related institution. Apart fromRules of 1978. In this framework, non-liability this, all the prescription periods due to maritimegrounds arising from technical failure and fire commercial agreements last one year. Consideringhave been preserved, whereas the following that maritime transportation is rapidly growinginstitutions have been reformed in line with in Turkey, TCC is predicated on the “Internationalinternational conventions: Liability arising from Athens Convention on the Maritime Transportationdelay, liability of the de facto carrier, the extension of Passengers and Baggages” of 2002.of the prescription periods by contract, liabilityper package or unit restricted with the right of Sea accidentstowage, application of liability limits on torts. This chapter consists of three subchapters, namelyRegarding the rights of the carrier, TCC specifies general average, stacking and maritime assistance.the freight debtor and the due date of the freight. Each subchapter comprehends extensive reforms.On the other hand, TCC leaves the system ofabstention from delivery or right to mortgage but General Average Despite the lack of anbases its new system on the right of detention in international convention on general average,the event of the default of the debtor. In addition, York Antwerp rules have become the relevantthe liabilities of the freight forwarder and of the legal source applicable on general average cases.loader have been enforced in TCC for the first time In order to keep the legal regime update, TCCin Turkish Law refrains from incorporating these rules but prefers to regulate general average by complementingRegulations Referring Bill of Ladings Regarding regulations to be issued by a higher council ofthese regulations, Bruxelles Convention of 1924, experts to be constituted by Secretary of MaritimeVisby Rules of 1968, London Convention of 1979 Affairs, International Law Association and Generaland as a complementary source Hamburg Rules of Office of Insurance in Turkey. Thanks to this1972 demonstrate the main rules. approach, any amendments in the mentioned rules may be easily reflected to Turkish law. The above mentioned institutions shall implement these amendments ex officio or upon a request of any persons.24
  29. 29. On the other hand, certain issues which are not Accordingly, the rules of TCC, restricting thetreated in York Antwerp Rules, have been enacted liability of the ship-owner solely with the vesselin TCC. and the freight have lapsed wholly. In addition to that, Turkey has equivalently undersignedStacking Turkey is a party to the “International the “International Convention on the LiabilityConvention on the Harmonization of Certain Rules Arising from Oil Pollution” and the “Internationalon Stacking on the Sea” of 1910. TCC has revised Convention on the Compensation of the Damagescertain rules adopted from this Convention and Arising from Oil Pollution “enforced in London inenforced an article regarding the relation between 1992.the rules on stackings with the rule regarding thenonliability of the carrier in the event of technical These conventions encompass certain norms,failure. In this context, the carrier may use the which are directly applicable. For this reason, thesetechnical failure exception, equivalently in case of rules have not been incorporated to TCC, whereasstacking. Moreover, the legal status of the guide solely complementing rules have been enforced inhas been treated with more evident rules and this draft.the collection of evidence in case of stacking andthe arrangement of the relevant report has been Moreover, two other international conventionsenacted with distinct rules. on liability have been incorporated in TCC: First of these conventions is the “International ConventionMaritime Assistance TCC includes certain rules on Liability and Compensation for Damage inreferring maritime assistance originating from an Connection with the Carriage of Hazardous andinternational convention of 1910. However, these noxious Substances by Sea” of 1996. The secondrules do not cover current needs of the practice. convention is the “International Convention onTaking into account this legal fact, TCC enacts Civil Liability for Bunker Oil Pollution Damage”. Incertain rules on maritime assistance originating the event that these conventions shall be valid andfrom the “International Convention on Maritime binding for Turkey, new regulations referring theseAssistance” of 1989. conventions will be incorporated to TCC.Vessel liens Legal executionsResembling TCC, TCC equivalently encompasses One of the most troubling matters in maritime lawcertain rules on vessel liens. In this regulation is the legal execution on vessels. Whereas materialTCC considers the “International Convention maritime rules originate from German Law, Turkishon Preferences and Mortgages on Vessels” of Procedural Law and TurkishExecution Law base on1993. Since this convention is in line with the Swiss law. This differentiation as of the source of“International Convention on the Sequestration two legal regimes has caused many problems inof Vessels”, both conventions complement each practice. As a consequence of this, a new chapterother. In this framework, short prescription periods referring legal executions has been incorporatedhave been prescribed for vessel mortgages. On to TCC. This chapter consists of four subchapters:the other hand, TCC does not include any rules Applicable law, complementary rules, specialregarding the right owed by the creditor of freight. rules for the execution on vessels and special rules for the execution on the freight. In state ofLimitation of the liability and compensation enacting an independent regulation for maritimeof losses arising from oil pollution executions, TCC solely enforces necessary specific rules, which shall equivalently complete by generalAs already mentioned above, Turkey has rules of Turkish Code of Execution and Bankruptcy.undersigned the “International Convention onthe Limitation of the Liability versus MaritimeCreditors” of 1976. 25

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