JOINT STOCK COMPANY (JSC) IN A NUTSHELL

UNDER POLISH AND TURKISH COMMERCIAL CODE

 

 

Muhammed KARAKOÇ[*]

 

ABSTRACT

 The joint stock company is engaged in areas such as banking, insurance, capital market and economic activities of the state, therefore it is economically important. Since it is a preferred type in the laws of both countries, the subject has been tried to be explained in terms of the Turkish Commercial Code No. 6102 (TCC) and the Act of 15 September 2000 Polish Code of Commercial Companies (CCC).

 Due to the structure of joint stock companies suitable for being multi-share, capital and the extent of their activities, conflicts of interest and other disputes are less common in joint stock companies than in other partnerships, therefore it is also very important from a legal point of view. In this regard, first of all, definitions were made and the similarity and difference between the CCC and the TCC were tried to be put forward in general terms. In the conclusion a number of legal ideas were tried to be obtained.

Keywords: Joint Stock Company, Turkish Commercial Law, Polish Code of Commercial Companies

 

 

 

 

 

 

 

  A joint stock company can be defined as a partnership whose capital is certain and divided into shares, whose liability for debts is limited to the amount of capital they have committed and whose liability is limited to the amount of capital they have committed and which is only against the company. The capital to be brought to the joint stock company must be expressed in cash, fully committed, predetermined and fixed, and divided into shares.[1] (Art. 329 of TCC, Art. 301 of CCC)

  SA (Spółka Akcyjna) and A.Ş. (Anonim Şirket), which is a popular form of large-scale enterprises or investments, can be formed by one or more persons for any legitimate purpose, unless otherwise stipulated by law. Every joint stock company in Poland is obliged to give the company name (i.e. its own name) in a legal form, adding a company name and an abbreviation, i.e. SA. In Turkiye, A.Ş. is added to the end of the title.[2]

 The articles of association are the constitution of the partnership. In Art. 339 of and 304 of CCC, what the articles of association should include, mandatory and optional elements are specified in detail. Real person and/or legal entity who sign the Articles of Association and undertake to put up capital shall acquire the title of founder. (Art. 337/1 of TCC, 301/2 of CCC) After the conclusion of these articles of association, the company is established by notarizing the signatures of the founders in the articles of association issued in accordance with the law, in which they unconditionally undertake to pay the full share capital and declare their will to establish a company.[3] (Art. 335 of the TCC, Art. 12 and 301 of the CCC)

 Capital is divided into shares of equal par value. The minimum capital is 100,000 PLN for Polish companies and the minimum nominal value of shares is 1 Grosch. (Art. 308 of the CCC) For Turkish Joint Stock Companies, it is 50.000 Turkish Lira and the minimum nominal value of the shares is 1 Kuruş.[4] (Art. 476 of the TCC)

  Deficiencies and inconsistencies in the establishment procedures shall be subject to a certain sanction. Violation of the provisions of the law during the establishment may lead to the dissolution of the partnership.[5] The relevant issues are regulated in articles 531 of the TCC, articles 326 of the CCC and their sequels.

 In joint stock companies, a legal relationship arises between the shareholder and the joint stock company. As a result of this relationship and having shares, the shareholder has a number of rights and incurs a number of debts and responsibilities towards the JSCs in which he is a partner.[6]

 The more shares a shareholder has in the shares that make up the nominal capital of the company, the more he has the right to the partnership position. In addition to the rights that the shareholder has, it is also natural that he is incurred debts and responsibilities at the same rate. The shareholder benefits from the minority rights if he has at least 10% of the nominal capital of the company.[7]

To summarize, each shareholder has the right to receive dividends individually, the right of priority (priority), the right to participate in the general meeting, the right to receive information about the company and the right to examine it, and the right to file a lawsuit for compensation of damages.[8]

3.      BOARDS OF THE JOINT STOCK COMPANY

In joint stock companies, since the number of partners is high, the relationship between them is non-existent or limited and their responsibilities are limited; they are organized and divided into labor.[9] Under this heading, the board of directors, the audit in the joint stock company and the general assembly will be examined in general.

3.1.  Board of Management

Management board is authorized to take decisions on all kinds of transactions and works necessary for the realization of the company’s business subject, except those left to the authority of the general assembly in accordance with the law and the articles of association. The most important task and authority of the board of management is to manage and represent the partnership.[10] While the issue is regulated between Articles 359 and 396 in the Turkish Commercial Code, it is regulated between Articles 368 and 380 in the Polish Code Of Commercial Companies.

In addition to the conduct of partnership business and relations such as carrying out daily affairs, appointment of officers and contractors, et seq., management also covers the duties and powers stipulated by the laws and articles of association regulating the relations between the partnership and the partners, such as inviting the general assembly, exercising priority rights, informing the partners, etc. In other words, the management of company affairs means making decisions about both strategic issues (e.g., acquisition of another company, establishment of a subsidiary abroad) and day-to-day management.[11]

The board of directors convenes with the majority of the total number of members. It takes decisions by absolute majority of those present at the meeting. (Art. 371/2 of the CCC) The quorum for the decision is the majority of the existing one. Board decisions can be ignored, considered superstitious or cancelled.[12] These arrangements are more or less the same in both legal systems.[13]

The duty and authority to represent the partnership against third parties and partners, as a rule, lies with the board of management. Representation is the right and debt holder of the partnership through the transactions carried out on its behalf. The board of management is the legal representative of the company and exercises the power of representation by signing on behalf of the partnership and under its title.[14] (Article 371 of the TCC) The issue is similarly regulated in Article 372 of the CCC. In order to be effective in dealing with third parties, the manner of representation of the company must be disclosed in the register (KRS or TTSG).[15]

If we refer to the membership of the board of directors and the legal status of the members; the board of directors may consist of a single person, this member may be a legal entity or a real person. In addition, the member of the board of directors may not be a shareholder. However, the member of the board of management and the real person to be registered on behalf of the legal entity must be fully qualified and there must be no obstacle to election. Again, the articles of association may stipulate that the member of the board of directors has certain qualifications. [16]

Membership of the board of management is earned by methods such as appointment by articles of association, election by the general assembly, provisional election by the board of directors. Members may be dismissed by the General Assembly and may resign. Members of the board of directors have financial and personal rights. The right to peace, wages, profit share, bonuses and premiums are some of the personal rights of the members. In addition, the members of the board of directors have duties and obligations such as the obligation to participate in the management, to obtain information and to examine, not to transact with the partnership and not to compete.[17]

3.2.  Audit in Joint Stock Company

Audit can be defined as the evaluation of whether certain activities and transactions are carried out in accordance with the rules. The Supervisory Board has not been deemed to be a mandatory board in the Turkish Commercial Code.[18] When we look at the regulations in Articles 397 and 406 of the TCC; it will be seen that there is a distinction in the form of internal and external audit. However, in Articles 381 and 392 of the CCC, the audit mechanism is regulated in detail as a board of the company.

The supervisory board will conduct continuous supervision over the activities of the company. The supervisory board may examine all documents of the company in order to fulfill its duties, review the employees and the assets and liabilities of the company, and request reports and explanations from the board of directors.[19] (Art. 382 of the CCC)

According to the TCC, internal audit is the audit conducted on behalf of the company regarding the operation of the company and the result is presented to the shareholders. External audit can be defined as the audit of the partnership by some external and authorized persons or institutions. It is divided into two as audits carried out by public legal entities on behalf of the state and audits carried out by independent auditors. The auditor may be a capital company consisting of persons authorized by the Public Oversight, Accounting and Auditing Standards Authority and/or their partners who have the title of certified public accountant or certified public accountant to conduct independent audits.[20] (Art. 400 of the TCC)

The TCC also stipulates that the company must request a special audit in certain cases of need. Special auditing is carried out to shed light on certain events. The duty of the special auditor is to conduct audits and examinations on the relevant subject and to explain the result with a report. The special auditor must have expertise in the subject to be audited, according to article 441/1 and 441/3 of the TCC.[21]

3.3.  General Assembly

One of the boards required by law in joint stock companies is the general assembly. The lack of this board, which must necessarily be within the company, may lead to the dissolution of the company. General assembly takes decisions on the issues that form the basis of the company, such as the selection of other boards that make up the joint stock company structure, the distribution of the company’s earnings, the verification of the company’s accounts.[22]

The general assembly convenes at least once a year and when necessary, with the participation of shareholders or their representatives. Decisions are taken on many issues related to the partnership. The decisions taken at the meeting include and affect all partners, bodies and partnerships, whether they attend the meeting or not. Shareholders can exercise their rights regarding the affairs of the company at the general meeting. The duties of the general assembly include the examination and approval of the company’s annual reports, decisions on the distribution of profits or compensation of losses, various procedures such as election of the board of management, dismissal.[23] (Art. 408 et seq. of the TCC, Art. 393 et seq of the CCC)

Apart from some unchangeable duties and powers of the general assembly specified in the law, the material and board election duties concerning the partnership are among the inalienable duties. In single-shareholder partnerships, the shareholder has all the powers of the general meeting, but these decisions must be in writing. In some articles of the law, the duties of the general assembly are also included separately. There are privileged shares represented at the general meeting, as well as minority rights and individual rights of shareholders. This issue is explained in detail in both the TCC and the CCC. Although it is the decision-maker on many important issues and the decision-making board of the partnership, the general assembly also has limits of authority.[24]

General assembly meetings are held as ordinary meetings and extraordinary meetings. Regular meetings; according to the TCC, each activity is carried out within three months from the end of the period. In CCC, it is foreseen that it will be made within 6 months. (Art. 395/1 of CCC) Failure to do so leads to responsibilities, as a result of not being held because of a minority or insufficient number of meetings and the meetings to be held afterwards are considered as ordinary meeting. Extraordinary meetings, if needed, it may be done several times a year or not at all. Apart from that; it is divided into meetings with and without calls or physically and electronically. The agenda is determined by the meeting caller. In ordinary meetings; issues concerning the partnership are discussed and decisions are taken. The subjects of extraordinary meetings are not specified in the law. Among those authorized to call the meeting; apart from the partnership bodies and shareholders, there are also trustees and insolvency administration.[25]

Those who will attend the meeting are the shareholders. It is stated in the law that each shareholder has at least one voting right and no share can be created without votes in the TCC system. Shareholders can attend the meetings themselves or one of their representatives can participate.[26]

There are also quorums for meetings and decisions foreseen for the General Assembly to convene and take decisions. These vary according to the agenda topic, not the type of meeting. An absolute majority of the votes at the meeting is sufficient to take decisions at the meeting. But many decisions may also require a qualified majority. These qualified majority meetings and quorums for decisions are regulated in Art. 421 et seq. of the TCC and Art. 430 et seq. in the CCC. [27]

The conditions required for the existence and validity of the general assembly decisions are also specified in the relevant laws. A decision must comply with legal provisions, otherwise legal disability will occur. Legal disability is divided into four according to the TCC system. These are non-existence, nullity, suspension nullity and revocability.[28]

4.      TERMINATION OF JOINT STOCK COMPANY

The termination of the joint stock company means the termination of the partnership without the need to take a separate decision with the realization of a situation in the law or the articles of association.[29]

As reasons for termination; the expiration of the stipulated period, the acquisition or impossibility of the subject of the enterprise, the failure to take the necessary measures despite the loss of 2/3 of the capital, the bankruptcy of the partnership, the realization of a reason for insolvency stipulated in the articles of association.[30] This issue is similarly regulated in Art. 529 et seq. of the TCC and Art. 459 et seq. of the CCC.

The dissolution is carried out through winding-up proceedings. The liquidators are the last members of the board. Liquidators can be set by a court. In the event of bankruptcy, insolvency proceedings are under way and only after the termination of the bankruptcy proceedings the company estate is distributed.[31]

4.1.  Consequences of Termination and Liquidation

In joint stock companies, liquidation is the final stage in terms of the termination of companies. The liquidation phase consists of many technical procedures. With the completion of the liquidation phase, the company loses its legal entity. In the event of termination, except in the cases leading to non-liquidation of the company’s assets, the assets of the company must be liquidated.[32]

There are some principles that dominate liquidation. These are;

      The legal entity continues during liquidation.

      The purpose of partnership automatically turns into the purpose of liquidation. As a rule, the Partnership cannot engage in new transactions and activities for this purpose. The phrase “In Liquidation” is added to the company name.

      The duties and powers of the company boards become limited to the transactions that cannot be carried out by the liquidators, although they are mandatory for the liquidation to be carried out.

      Liquidation with one of the reasons for termination other than bankruptcy is carried out by liquidators. In bankruptcy, liquidation is made by the bankruptcy administration.[33]

5.      LEGAL LIABILITY

Shareholders, as a rule, are not responsible for the obligations of the joint stock company. They carry risk up to value of contribution they make.[34]

Unlike the LLC, as arranged in parallel in terms of both legal systems, in JSC the board members are not responsible for the company’s debts if they do not file for bankruptcy in a timely manner. These regulations are included in Article 549 et seq. of the TCC and Article 479 et seq. of the CCC.

6.      CONCLUSION

It is mentioned above that the joint stock company is engaged in areas such as banking, insurance, capital markets and economic activities of the state, so it is economically important, so the importance of the issue in terms of the law of both countries.

According to the laws of both countries, if we need to draw a brief conclusion; joint stock companies that can be established for all kinds of economic purposes and subjects that are not prohibited by law can be single-shareholding or these partnerships can be established with more than one person. According to both laws, a minimum capital amount is determined as a capital amount. Provisions such as the establishment of a joint stock company, the duties and rights of shareholders, the boards of the joint stock company, and amendments to the articles of association, capital increase and decrease are in parallel with both the TCC and the CCC.

Similarities and differences can be clearly seen in the table below.

	According to TCC	According to PCCC
Founders	Minimum 1 stockholders	Minimum 1 stockholders
Method of Incorporation	Signing Statue at the Notary or Online via designated portal (MERSIS)	Signing Statue at the Notary or Online via designated portal
Minimum Stock Capital	50.000 Turkish Lira payable in cash or kind contribution	100.000 Złoty payable in cash or kind contribution
Minimum Stock Value	0.01 ₺	0.01 zł
Who can be a Stockholder?	No restrictions. Foreigners may be stockholders.	No restrictions. Foreigners may be stockholders.
Who can be a Member of Management Board?	No restrictions. Foreigners act as Directors. Directors must have clear criminal record with regards to corporate and business crimes.	No restrictions. Foreigners act as Directors. Directors must have clear criminal record with regards to corporate and business crimes.
Supervisory Board	No obligatory as a board but supervision is mandatory. Audited by independent institutions and organizations.	Always Obligatory
Auditing Requirement	Always Obligatory	Always Obligatory
Reporting Requirement	Obligatory – Once in a year to MCT (Ministry of Custom and Trade)	Obligatory – Once in a year to KRS (National Court Register)
Liability of Stockholders	Stockholders hold no liability for JSC company debts.	Stockholders hold no liability for JSC company debts.
Liability of Directors	Directors hold no liability for JSC company debts.	Directors hold no liability for JSC company debts.

However, while the supervisory board is foreseen as a mandatory board in the CCC, independent audit is essential according to the TCC system. . Art. 397 of the TCC adopts an independent audit system for JSCs. All types of JSC’s are in principal subject to audit. However, independent audit requirement is introduced exclusively for those companies which meet the criterion specified in the TCC.

Current technological developments are tried to be included in the laws of both countries. Examples of these are the obligation to establish a website, the holding of general meetings electronically, and the signing of documents electronically. Again, the provisions of the dissolution of the company and liquidation are similarly included.

Although the language, culture, geopolitical importance and needs of commercial life of both countries are different, the fact that there are so many similar regulations can be explained as follows. The fact that Turkey was the scene of a legal revolution at the beginning of the 20th century, the adoption of the Roman Law system instead of the ecclesiastical and customary law of the Ottoman Empire and the acquisition of legal acquisitions from the states of Continental Europe such as Switzerland, Germany, France; led to the emergence of similar systems and regulations.

 

 

 

 

 

 

 

 

 

 

 

REFERENCES

Bartosz Kucharski, Polish Commercial Law in a Nutshell (1st edn University of Łódź Press, 2015)

Hüseyin Bilgin, Polonya Yargı Sistemi Üzerine İzlenimler, (2013) Türkiye Barolar Birliği Dergisi, p. 389-430.

Joanna Kruczalak-Jankowska, an Outline of Polish Commercial Law – Law: The Basic Concepts (1st edn. University of Gdansk Press, 2019)

Krzysztof Oplustil and Arkadiusz Radwan, “Company Law in Poland: Between Autonomous Development and Legal Transplants” (2010) Private Law in Eastern Europe, Tubingen, p. 445-494  < https://ssrn.com/abstract=3079494 > Date of access 27 May 2022.

Marta Janina Skrodzka, European Company and a Polish Joint-Stock Company from a Comparative Perspective (Temida 2 University of Białystok, 2008)

Mehmet Bahtiyar, Makaleler III, (1. Baskı, Beta Yayınları, Istanbul, 2014)

Oruç Hami Şener, Teorik ve Uygulamalı Ortaklıklar Hukuku, (2. Baskı, Seçkin Yayınları, 2015)

Oruç Hami Şener, Anonim Ortaklıkta Ek Tasfiye (İhya), (1. Baskı, Adalet Yayınları, Ankara, 2015)

Oğuz Yolal, The Minority Shareholder Rights In The Joint Stock Companies According To Turkish Commercial Code, (2016, Conference: 23rd International Academic Conference, Venice < https://www.researchgate.net/publication/313841371>  Date of access 29 May 2022.

Robert Lewandowski, Polish Commercial Law: an Introduction, (C.H. Beck Press, 2007)

 

 

 

[*] Attorney at Law & LL.M.

[1] Oruç Hami Şener, Teorik ve Uygulamalı Ortaklıklar Hukuku, (2. Baskı, Seçkin Yayınları, 2015) p. 293; Bartosz Kucharski, Polish Commercial Law in a Nutshell (1st edn. University of Łódź Press, 2015) p.49 ff. ; Mehmet Bahtiyar, Makaleler III, (1. Baskı, Beta Yayınları, Istanbul, 2014) 

 

[2]Oruç Hami Şener, (op. cit.), p. 296; Marta Janina Skrodzka, European Company and a Polish Joint-Stock Company from a Comparative Perspective (Temida 2 University of Białystok, 2008) p. 15 ff. 

[3] Oruç Hami Şener, (op. cit.), p. 323 ff.; Bartosz Kucharski (op. cit.) p.81 ff.

[4] Marta Janina Skrodzka, (op. cit.) p. 26 ff. ;

[5] Oruç Hami Şener, (op. cit.), p. 328 ff.

[6] Oruç Hami Şener, (op. cit.), p. 492 ff.; Bartosz Kucharski (op. cit.) p.81 ff. ; Oğuz Yolal, The Minority Shareholder Rights In The Joint Stock Companies According To Turkish Commercial Code, (2016, Conference: 23rd International Academic Conference, Venice p. 526 ff.< https://www.researchgate.net/publication/313841371>  Date of access 29 May 2022.

[7] Oruç Hami Şener, (op. cit.), p. 311 ff. ; Robert Lewandowski, Polish Commercial Law: an Introduction, (C.H. Beck Press, 2007) p. 48;

[8] Oğuz Yolal, (supra note 6), p. 526 ff. ;

[9] Bartosz Kucharski (op. cit.) p.91 ff.

[10] Marta Janina Skrodzka, (op. cit.) p. 24, Oruç Hami Şener, (op. cit.), p. 347

[11] Krzysztof Oplustil and Arkadiusz Radwan, “Company Law in Poland: Between Autonomous Development and Legal Transplants” (2010) Private Law in Eastern Europe, Tubingen, p. 445-494  < https://ssrn.com/abstract=3079494 > Date of access 27 May 2022, p. 470 ff;  Robert Lewandowski, (op. cit.) p. 53; Oruç Hami Şener, (op. cit.), p. 347 ff.

[12] Joanna Kruczalak-Jankowska, an Outline of Polish Commercial Law – Law: The Basic Concepts (1st edn. University of Gdansk Press, 2019), p. 29 ff. ;

[13] Hüseyin Bilgin, Polonya Yargı Sistemi Üzerine İzlenimler, (2013) Türkiye Barolar Birliği Dergisi, p. 425.

[14] Joanna Kruczalak-Jankowska, (op. cit.2) p. 29 ff. Oruç Hami Şener, (op. cit.), p. 347-348.

[15] Robert Lewandowski, (op. cit.) p. 53 ff. Oruç Hami Şener, (op. cit.), p. 348-349.

[16] Krzysztof Oplustil and Arkadiusz Radwan, (op. cit.1) p. 484;

[17] Oruç Hami Şener, (op. cit.), p. 430; Bartosz Kucharski (op. cit.) p. 91;

[18] Oruç Hami Şener, (op. cit.), p. 430 ff. ;

[19] Marta Janina Skrodzka, (op. cit.) p. 24; Robert Lewandowski, (op. cit.) p. 53

[20] Oruç Hami Şener, (op. cit.), p. 430-441;

[21] Oruç Hami Şener, (op. cit.), p. 430-441;

[22] Bartosz Kucharski (op. cit.) p. 96; Joanna Kruczalak-Jankowska, (op. cit.) p. 51 ff. ; Oruç Hami Şener, (op. cit.), p. 454 ff. ; Mehmet Bahtiyar, (op. cit.), p. 135.

[23] Marta Janina Skrodzka, (op. cit.) p. 25; Oruç Hami Şener, (op. cit.), p. 479 ff. ; Mehmet Bahtiyar, (op. cit.), p. 152.

[24] Robert Lewandowski, (op. cit.) p. 54; Oruç Hami Şener, (op. cit.), p. 479-492. ; Mehmet Bahtiyar, (op. cit.), p. 177

[25] Mehmet Bahtiyar, (op. cit.), p. 177 ff. ; Oruç Hami Şener, (op. cit.), p. 508 ff. ; Krzysztof Oplustil and Arkadiusz Radwan, (op. cit.1) p. 470 ff.; Marta Janina Skrodzka, (op. cit.) p. 25. ;

[26] Joanna Kruczalak-Jankowska, (op. cit.) p. 51; Oruç Hami Şener, (op. cit.), p. 492 ff.;

[27] Robert Lewandowski, (op. cit.) p. 54. ; Oruç Hami Şener, (op. cit.), p. 525;

[28] Krzysztof Oplustil and Arkadiusz Radwan, (op. cit.1) p. 470 ff.

[29] Oruç Hami Şener, (op. cit.), p. 622 ; Robert Lewandowski, (op. cit.) p. 55. ;

[30] Oruç Hami Şener, (op. cit.), p. 624-625.; Joanna Kruczalak-Jankowska, (op. cit.) p. 61;

[31] Oruç Hami Şener, (op. cit.), p. 630 ff.; Oruç Hami Şener, Teorik ve Uygulamalı Ortaklıklar Hukuku, (2. Baskı, Seçkin Yayınları, 2015) p. 29 ff.

[32] Oruç Hami Şener, (op. cit.), p. 637 ff.; Bartosz Kucharski (op. cit.) p. 104 ff. ;

[33] Article 459-478 of the CCC, Article 529-548 of the TCC. Oruç Hami Şener, (op. cit.), p. 640 ff.;  Robert Lewandowski, (op. cit.) p. 55 ff.

[34] Oruç Hami Şener, (op. cit.), p. 328 ff.; Joanna Kruczalak-Jankowska, (op. cit.) p. 59-60; Bartosz Kucharski (op. cit.) p. 102 ff. ;