Annulment of Administrative Fines Regarding Bearer Share Certificates: Review of the Constitutional Court Decision

Regulations Regarding Bearer Shares

As per Art. 489 of the TCC as amended by Law No. 7262, the enforcement of the rights arising from the shareholding of the holders of bearer share certificates against the company and third parties is conditioned upon the notification of such shareholding to the CRA. The condition of being the holder of a bearer share certificate, which was the rule for bearer share certificates before the amendment, is no longer sufficient by itself, and the holder of a bearer share certificate cannot exercise his/her rights unless the CRA is notified. In addition, the date of notification to the CRA is taken as a basis for asserting the rights attached to the bearer share certificate against the company and third parties.^[2] 

Under the new regulation, the transfer of bearer share certificates of joint stock companies is also subject to the notification requirement to the CRA. While before the amendment, only the transfer of possession was sufficient for the transfer of bearer share certificates, under Art. 489 of the TCC, the transferee may not exercise its rights attached to the shares unless the transfer is notified to the CRA. The date of notification to the CRA shall be taken as the basis for the exercise of the rights attached to the shares.^[3] 

Under the amendment to Art. 486 of the TCC, companies issuing new bearer share certificates must notify the CRA of these newly issued certificates. Accordingly, companies may only distribute the relevant share certificates to shareholders following the notification to the CRA. Failure to make such notification would result in an administrative fine of TRY 5,000 under Art. 562/13 of the TCC, which is annulled by the Constitutional Court. 

As per the amendment made to Art. 426/2 of the TCC, the person who proves that he/she is has a bearer share certificate and who is notified to the CRA is authorized to exercise the rights arising from share ownership against the company. Therefore, the holder of a bearer share certificate who can participate and vote in the general assembly of the company will also be the person who is registered in the CRA records. In parallel, under Art. 417 of the TCC and Art. 6 of the Communiqué on Notification and Registration of Bearer Share Certificates to the Central Registry Agency (“Communiqué”)^[4] , the schedule of shareholders provided by the CRA shall be taken into consideration in the preparation of the list of attendees for the recorded bearer share certificates.

As per Art. 11 of the Communiqué, records regarding bearer shareholders and the shares they hold will be kept in the electronic environment created by CRA. The records and notifications can be made electronically by accessing the CRA system via e-Government Gateway (E-Devlet Kapısı) with an electronic signature, e-government password or the Turkish Republic Identity Card number or by logging in directly from CRA’s application called “e-Investor: Investor Information Center” (e-Yatırımcı Bilgi Merkezi). 

As per Art. 12 of the Communiqué, companies, and shareholders of bearer shares are obliged to notify the CRA of any changes in the contact information they previously provided. The relevant company or shareholder is responsible for keeping the contact information up-to-date.

The Communiqué also includes regulations on the realization of measures and lien to be applied to bearer shares and regulations on the notification of minors, incapacitated persons, and heirs to CRA.

Constitutional Court’s Annulment Decision

The lawsuit filed before the Constitutional Court requested the annulment of the administrative fine to be imposed in case of violation of the notification obligation introduced by subparagraph (b) of paragraph (13) added to Art. 562 of the TCC by Art. 33 of the Law on the Prevention of Financing the Proliferation of Weapons of Mass Destruction dated 7.12.2020 and numbered 7262, because the rule is contrary to Art. 38 of the Constitution, since the act subject to administrative fine is not regulated in a precise and foreseeable manner in the law and leaving this issue to the regulation would not be compatible with the principle of legality in crime. 

The legal assessment of the unconstitutionality made by the Constitutional Court can be summarized as follows;

• The first paragraph of Art. 38 of the Constitution states that “No one shall be punished for an act which the law in force at the time it was committed does not criminalize; no one shall be punished with a heavier penalty than the penalty prescribed for that offense in the law at the time he committed the offense”, thus guaranteeing the legality of the crime; In the third paragraph, it is stated that the principle of legality of punishment is guaranteed by stating that “Punishment and security measures substituting for punishment can only be imposed by law” and it is emphasized that following the principle of legality in crime and punishment, prohibited acts and the punishments to be imposed for these prohibited acts must be clearly, comprehensibly and discretely in the law, leaving no room for any doubt. 
• The Constitutional Court assessed that the principle of legality in crime and punishment can be considered a special regulation of the rule that fundamental rights and freedoms expressed in Article 13 of the Constitution can only be restricted by law. It emphasized that it is not sufficient for regulations regarding crime and punishment to be enacted formally in the form of law. Instead, the act subject to criminal sanction must be criminalized by law, and legal rules must be precise, accessible, and foreseeable in a way that does not allow for arbitrariness. In this respect, it is declared that the texts of the laws should be written in such a way that individuals can foresee with a certain clarity and certainty which legal sanction or consequence is attached to which concrete act and fact, and that individuals should know with a certainty that which legal sanction is attached to which act in the law and that the consequences of the actions should be foreseeable. 

Again in the Decision it is concluded that; 

• Since Art. 38 of the Constitution does not distinguish between administrative offenses and penalties and judicial offenses and penalties, both are subject to the same principles; in judicial and administrative offenses, there is a violation of a legal value protected by the legislator with an act that violates the norms of behavior and constitutes an injustice, and both judicial and administrative penalties involve coercion (CC, E.2015/85, K.2016/3, 13/1/2016, §13);
• The main difference between administrative offenses and penalties and judicial offenses and penalties is that the legal value protected and the legal consequences caused by the violation are not the same; although there are also regulations that allow administrative fines to be imposed in amounts higher than judicial fines, since the penalties foreseen for judicial offenses are generally more severe than the penalties for administrative offenses, since the penalties that bind freedom are generally valid for judicial offenses, since administrative offenses involve the violation of a legal value to which the legislator attributes less importance, and since the sanction prescribed is generally imposed by an administrative authority following administrative procedures, Art. 38 of the Constitution does not to administrative offenses and penalties. The principle of legality in crime and punishment should be applied more flexibly in terms of administrative offenses, taking into account the slow functioning of the legislative body and the rapidly changing and developing conditions of economic and technical life (CC, E.2015/85, K.2016/3, 13/1/2016, § 14; E.2019/110, K.2021/85, 11/11/2021, § 19);
• In this context, as stated in the preamble of Art. 38 of the Constitution, although the principle of legality in crime and punishment does not prevent the legislator from establishing explicit criminal provisions, for an administrative offense and punishment to be considered by Art. 38 of the Constitution, the subject matter of the offense and its sanction must be clearly stated in the law in a way that leaves no room for doubt;
• It is clear that the rule stipulating the imposition of administrative fines for misdemeanors is a provision of law in formal terms and is accessible. However, it was concluded that while the specified rule considers the act of failing to notify under Article 489 (1) of the TCC as a crime and prescribes the imposition of an administrative fine for this act, neither the rule nor the referenced article includes a provision regarding the time frame within which the notification must be made. Therefore, it is unclear within what time frame the failure to notify the transfer of bearer share certificates to the CRA would constitute the commission of the misdemeanor.

It was concluded that the elements of the crime prescribed in the rule are not regulated by law and that the rule does not meet the legality requirement, and therefore it was decided that it should be annulled.

Conclusion

As a result of the annulment decision of the Constitutional Court, the regulations regarding the obligation of joint stock companies issuing new bearer share certificates to notify the CRA of the newly issued certificates and the distribution of the relevant share certificates to the shareholders only after such notification remain valid, but the administrative fine to be imposed in case of failure to make such notification has been annulled. It would be appropriate for the legislator to introduce a new regulation regarding the time period within which the notification to the CRA must be made to impose an administrative fine.