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22 February 2021
The Turkish Grand National Assembly has promulgated the Act on the Prevention of the Financing of Propagation of Weapons of Mass Destruction (7262), published in the Official Gazette (31351) on 31 December 2020, which foresees material amendments to the Commercial Code's provisions regarding bearer share certificates. Although these amendments may seem misplaced, they are the result of long deliberation and deep international cooperation. The act aims to implement the United Nations Security Council's measures on this matter.
The amendments include the following.
The Ministry of Trade may oblige that the share ledger, the board of directors' resolution book and the book of the general assembly meeting and discussion be kept electronically – without prejudice to the Capital Markets Law (6362).
As of 1 April 2021, owners of bearer share certificates can no longer attend general assembly meetings by:
In accordance with the amendment, the board of directors of private joint stock companies will issue a list of bearer share certificate owners which can attend the general assembly pursuant to the shareholders' chart provided by the Central Registry Agency, which was previously issued only for the owners of dematerialised shares in accordance with the Capital Markets Law. Owners of bearer share certificates may attend the general assembly meeting only if their name is recognised by the shareholders' chart provided by the Central Registry Agency.
The Ministry of Trade is authorised to prohibit, if deemed necessary, the transfer of bearer share certificates limited to the day of the general assembly meeting.
Only owners which prove that they possess the bearer share certificates and that this possession has been notified to the Central Registry Agency may exercise their shareholder rights against a company.
As of 1 April 2021, the board of directors must notify the Central Registry Agency about the identities of bearer share certificate owners and their respective shares before the share certificates may be distributed.
The share transfer is effective against a company and third parties only if the Central Registry Agency is notified of such transfer. The date of notification, rather than the date of transfer, is considered when exercising shareholder rights against a company and third parties.
Members of a board of directors who fail to notify the Central Registry Agency about the issuance of bearer share certificates, identities and respective shares of the owners of the newly issued bearer share certificates will be penalised with an administrative fine of TL20,000. Those who fail to notify the Central Registry Agency of their acquisition of bearer share certificates will be penalised with an administrative fine of TL5,000.
These amendments are largely aligned with Article 24 of the Revised Financial Action Task Force (FATF) Recommendation (2012), which states that:
[i]n particular, countries that have legal persons that are able to issue bearer shares or bearer share warrants, or which allow nominee shareholders or nominee directors, should take effective measures to ensure that they are not misused for money laundering or terrorist financing.
After the September 11 attacks, the FATF's mandate was expanded to include countering the financing of terrorism in addition to countering money laundering as the international community was quick to realise the dangers of a vehicle (ie, the bearer share certificate) which confers control over a company and its capital while permitting absolute anonymity.
However, these amendments are not completely aligned with Article 24 as they set no concrete measures to prevent by-passing the identification obligations by appointing nominee shareholders and by using shareholding entrustment agreements. This partial fulfilment of the article's directive is unsurprising as, although the FATF's mandate was expanded in 2001, most countries made significant amendments only in the past decade regarding concrete measures for the tracking of actual beneficial owners. These amendments largely come in the form of either:
These measures seek to balance the concerns in a free market economy with concerns over abuse of anonymity.
Although these amendments cause transactional friction and restrict shareowners from engaging in unannounced share transfers, money laundering and the financing of terrorism pose a greater threat than these inconveniences. Also, it must be noted that while countries susceptible to terrorist incursions must practise higher vigilance, the same vigilance is essential for relatively safe countries to effectively combat terrorism to remain safe. The FATF's COVID-19 report(1) shows that companies in EU member states were used extensively to launder considerable amounts of money through COVID-19 aids and medical purchases. After these amendments establish more transparency and accountability regarding bearer share certificates, which were instruments of the anonymisation of ownership on the means of production during the 19th century, it is only expectable that wider reforms and efforts to deepen international cooperation in the face of revolutionising the anonymisation of money during the 21st century are crucial, if not vital.
For further information on this topic please contact Kaan Demir at Kayum & Demir by telephone (+90 212 291 1002 ) or email (email@example.com). The Kayum & Demir website can be accessed at www.kayumdemir.av.tr.
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