Author: Helin Akbulut
Introduction
Arguably, one of the most important principles of joint stock companies is the principle of capital maintenance. This principle is one of the founding principles of Turkish Commercial Code No. 6102 (“TCC”), as well as being one of the principles adopted in the Civil law countries along with the legal capital system.[1] The two main pillars of this principle are that company obtains the capital fully and the paid-in capital is not unlawfully returned to the shareholders.[2]
In this context, the TCC contains comprehensive provisions both at the incorporation of a joint stock company and at the capital increase stages during which subscribed capital is fully brought to the company, which is the first pillar of the principle of capital protection. Article 342 and the following provisions of the TCC regarding joint stock companies contain provisions regarding the types of capital contribution, capital in kind, the process of valuation of capital in kind, and capital contribution in cash. The scope of this article is the receivables within the scope of capital contribution in joint stock companies and the discussions on the performance of the shareholder’s capital contribution through the set-off mechanism.
Regulation on Contribution as Capital in Kind
Article 342 of the TCC (Assets that may be capitalized in kind) lists the assets that can be considered as capital in kind for joint stock companies. As per the article, in order for an asset to be brought as capital in kind, (i) there should be no limited right in rem, or attachment or interim measure on the asset, (ii) it should be possible to estimate the monetary value of the asset and the asset should be transferable, and (iii) the asset should not be in the nature of service, personal labor, commercial reputation, or undue receivable. The second paragraph of the article states that Article 128 of the TCC, which comes under the general provisions regarding commercial companies, is reserved.[3] This reserved provision mainly governs rules on the de jure transfer of an asset, which is contributed as capital, to the company.
Unlike a cash contribution, a valuation phase is required for capital contributions in kind. Referring back to the capital maintenance principle, this valuation procedure aims to prevent the company from incurring losses if the actual value of the same negatively differs from the amount of the capital commitment. As a valuation procedure, if capital in kind is brought to the joint stock company, the TCC requires a valuation report to be prepared by an expert, who is to be appointed by the commercial court where the company’s headquarters is located.
Assignment of Receivables to the Company
The shareholder may assign a receivable from a third person to the company within the scope of a capital commitment. As a matter of fact, the wording in the last sentence of Article 342 of the TCC, which reads “undue receivables shall not be brought as capital in kind,” confirms through argumentum e contrario, that due receivables may be put into the company as capital. In this context, even if the subject of the receivable is a cash payment, the right of receivable assigned to the company within the scope of capital contribution would bear the nature of a capital in kind.[4]
On the other hand, it is one of the points criticized by scholars, to prohibit capital contribution through undue receivables to the company as per Article 342 of the TCC, a prohibition which was not expressly stated in the repealed Commercial Code (“rCC”). When the rCC was in force, a number of scholars argued that an undue receivable could not be brought as capital to the company, even if it was not explicitly stated under the rCC. One of these scholars, Ünal Tekinalp, stated that assigning undue receivables to company is contrary to the “maturity at the registration principle,” and argued that what is in line with this principle is to assign the due receivables as capital in kind to the company.[5]
On the other hand, the scholars of the opposite view underlined the absence of any provision in the rCC that prohibits the assignment of undue receivable as capital to the company and argued that such assignment would not conflict with the principles in the rCC. Referring to Article 142 of the rCC which states “If the receivable is undue, it must be collected by the company within one month from the due date (…), unless otherwise agreed,” Fatih Arıcı argued that undue receivables may actually be brought to a company as capital in kind. Further he argued that (i) the right of receivable is transferred to the company upon registration, in other words, there should be no concern on its transferability; (ii) in any case, the assigned right of receivable will be subject to a valuation procedure as a capital in kind, and therefore will not constitute a violation of the equal treatment principle, and (iii) the undue nature would only bear the consequence of not claiming the amount until its due.[6]
With the clear wording of TCC, it is no more controversial whether it is allowed to assign undue receivables to the company as capital contribution; however, this clear choice of the lawmaker became subject criticism de lege feranda. Abuzer Kendigelen argued that the concerns leading to this prohibition on undue receivables could well be eliminated with a duly prepared valuation report, and criticized the prohibition for lacking a justification.[7] In addition, Arıcı criticized the prohibition on assigning undue receivables as capital to the company, which was explicitly adopted with Article 342 of the TCC, because (i) such a regulation was not encountered in the model laws, (ii) the uncertainty, which is argued to arise from the risk of non-collection of the timed receivables when due, can be eliminated with a valuation report, (iii) the risk of non-collection is also born by the three quarters of cash capital with a maturity of twenty-four months, and (iv) in case the real value of the undue receivable is determined with the valuation report, there will be no reservations in terms of the equal treatment principle.[8]
Performance of Capital Contribution by Set-Off
The discussion on performing the capital contribution through assignment of a receivable from a third party to the company, as a capital in kind, are explained above. However, the nature of capital contribution (whether cash capital or capital in kind) is also controversial among both scholars and practitioners when the shareholder sets off her receivable from company with her capital debt to the company...
[1] Toraman Çolgar, Emek. Şirkete Borçlanma Yasağı. On İki Levha Yayıncılık, 2019, p. 10.
[2] Toraman Çolgar, pp. 10-11.
[3] The fact that Article 128 of the TCC is explicitly reserved by Article 342(2) of the TCC, is also criticized by the scholars for not bearing any legal meaning. For these criticisms, see. Kendigelen, Abuzer. Yeni Türk Ticaret Kanunu: Değişiklikler, Yenilikler ve İlk Tespitler. On İki Levha Yayıncılık, 2011, p. 197.
[4] Arıcı, Mehmet Fatih. “Sermaye Şirketleri Hukukunda Vadeli Alacağın Sermaye Olarak Konulması Yasağı” İÜHFD (2015) Volume: 73, Issue: 1, p. 319. (Vadeli Alacağın Sermaye Olarak Konulması Yasağı)
[5] Tekinalp (Poroy/Çamoğlu). Ortaklıklar, 2005, N. 1031.
[6] Arıcı, Mehmet Fatih. Alacak Hakkının Anonim Ortaklığa Sermaye Olarak Konulması, Beta, 2003, pp. 58-60.
[7] Kendigelen, p. 197.
[8] Arıcı, Vadeli Alacağın Sermaye Olarak Konulması Yasağı pp. 328 ff.
