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If the claims of the creditors are not paid or secured, the creditors
can claim the cancellation of the general assembly resolution for the
capital reduction within two years following the publication of the res-
olution.
Capital Reduction to Recover a Company’s Loss
Capital reduction may be exercised to remedy losses or the balance
sheet. In order to reduce the capital for such purposes, the following
conditions shall be fulfilled: the loss of the company must be an actu-
al loss and the company must have lost 2/3 of its capital, in other terms,
the company should be insolvent. The company should be able to cover
its debts with its assets after the reduction and this shall be determined
by a board of directors’ resolution. The capital should be reduced equal
to the amount of the adverse balance or the loss; said amount should
not be exceeded.
Pursuant to Article 474/2 TCC, in the case of a capital reduction to
recover the company’s losses, the board of directors can renounce to
notify the creditors, to secure or to pay their claims. Therefore, the
invitation procedure is not applicable herein. The general procedure
explained above is also applicable to this type of reduction.
Quorums under TCC for Capital Reduction
Pursuant to Article 421/3 TCC, the resolution for capital reduction
shall be adopted by the affirmative votes of shareholders, or their rep-
resentatives, holding at least seventy five percent of the share capital.
In the event that the quorums regulated under Article 421/3 cannot be
reached in the first meeting, the same quorums shall apply to the fol-
lowing meetings.
Conclusion
The TCC regulates capital reduction, in cases where the company
aims to return the reduced capital to its shareholders and to recover the
company’s loss. A joint stock company can also reduce its capital con-
currently with the capital increase. In both types of capital reduction,
the board of directors prepares a report stating the aim, purpose and the
procedure for the reduction and submits it to the general assembly. It’s
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NEWSLETTER 2014