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Conditional Capital Increase

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Att. Tuna Colgar

Introduction

The notion regarding the quick and easy fulfillment of the need for

capital, which was adopted by the Turkish Commercial Code No. 6102

(“TCC” or “Law”), resulted in the formation of new capital types and

the regulation of provisions on various capital increase procedures.

Two types of capital systems existed in the former code that has been

abrogated with the entry into force of the new Law. These were the

principal capital system adopted in the former TCC and the registered

capital system adopted in the Capital Markets Law. However, the new

TCC, in preserving the principal capital system, made the registered

capital system a system not only beneficial to public companies but

also to other companies and diversified the instruments that may be

used in the capital increase concluded from the domestic funds of the

companies.

The conditional capital increase, which is the subject of this arti-

cle, is a new capital increase system under Turkish law and finds its

roots in the Swiss Code of Obligations. The conditional capital

increase is a capital increase system that may be concluded depending

upon the creditor’s exercise of its conversion and purchase rights in the

issuance of bonds replaceable with share certificates, and in capital

increases directed at employees. This system will provide convenience

in that it allows for the usage of capital in a more flexible and effective

manner.

The Principles of Conditional Capital Increase

The basis of this capital increase system, foreseen as a funding

instrument, is formed with the purpose of procuring the participation

COMMERCIAL LAW

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Article of March 2014