Limited Company Share Transfers: Why Notarisation Is Not Enough

The transfer of a share in a Turkish limited company is one of the most frequently left-unfinished transactions in practice. The parties attend a notary, sign, pay, and assume the matter is closed. In fact the transfer does not yet take effect against the company.

Four steps

Completing a limited company share transfer requires four steps, in order.

1. Written agreement, notarised signatures. The transfer agreement must be in writing and the signatures notarised. This is a condition of validity, but not sufficient on its own.
2. General assembly approval. Unless the articles provide otherwise, the transfer takes effect against the company only with the approval of the general assembly.
3. Entry in the share ledger. After approval, the transfer is recorded in the company's share ledger.
4. Registration and announcement. The transfer is registered with the trade registry and announced.

Where the first step is completed and the others skipped, what remains is an arrangement that creates obligations between the parties without conferring shareholder status on the transferee.

When the gap surfaces

Rarely at the time — usually years later:

• On a dividend distribution. Someone absent from the share ledger cannot establish the status their claim depends on.
• On a vote at a general assembly. Resolutions passed with the participation of someone whose status is disputed may be challenged.
• On a sale of the company. Due diligence surfaces the mismatch between the share ledger and the registry, and the deal stalls.
• On a death. Shares whose transfer was never completed raise a question about whose estate they belong to.

The role of the articles

The law permits the general assembly approval requirement to be removed by the articles. If shares are meant to be freely transferable, that must be stated expressly.

The reverse is equally possible: the articles can subject transfers to stricter conditions. Where a family business wants to keep shares from passing to outsiders, this is the right place to say so.

Either way, what governs is what the articles say. That is the first document to read before starting a transfer.

Pre-transfer checklist

• Do the articles contain a specific provision on share transfers?
• Has the share ledger been kept properly, and does it match the registry?
• Is the share subject to a pledge, attachment or usufruct?
• Does the transferor still owe unpaid capital to the company?
• Can the general assembly be convened properly?

The last point matters most. Where the shareholders are in dispute, the inability to convene a general assembly can lock the transfer entirely. That possibility belongs in the assessment before the agreement is signed.

The tax dimension

Because limited company shares cannot be embodied in negotiable instruments, the two-year income tax exemption available in joint stock companies does not apply. The gain on transfer is treated as a capital gain irrespective of the holding period.

Where a sale is expected in the longer term, choosing a joint stock company at the outset, or converting well in advance of any sale, removes a difference that cannot be closed later.

Conclusion

A limited company share transfer is completed by a chain of steps, not a single signature. When a link is missing, the result is usually more complicated than if the transfer had never been attempted.