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Loss of Capital in Joint Stock Companies
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Att. Tuna Colgar
Introduction
Situation of the capital, namely, the effect of losses on a compa-
ny’s equity, carries vital importance in the deterioration of a joint stock
company’s financial structure. Worsening of the financial structure,
losses due to incompetency, in other words, loss of equity, or superior-
ity in the ratio of assets versus debts, may lead to over-indebtedness.
The essential objective underlying the provisions of Turkish
Commercial Code numbered 6102 (“TCC” or “Law”), governing the
precautions to be taken upon the loss of capital and over-indebtedness
of joint stock companies, is to maintain the organization and protection
of the company capital that constitutes the main assurance for creditors
of joint stock companies.
TCCArt. 376/1 and TCCArt. 376/2 are two of the primarily debat-
ed, and most significant, provisions of the TCC, aiming to maintain
protection of the capital until termination of the company. TCC Art.
376 regulates the precautions that are to be taken in the event of dete-
rioration of the company’s financial structure. Due to the fact that the
first two paragraphs of such provision govern the duties of the board of
directors in the event of capital loss, those two paragraphs pertain sole-
ly to the protection of the equity. The third paragraph, on the other
hand, designates over-indebtedness of the company, namely, if a com-
pany’s debts exceed its assets.
The actions to be performed in both the events of loss of capital
and over-indebtedness have been designated as obligations of the
board of directors. Moreover, the duty to notify the competent court in
the event of over-indebtedness has been stipulated under the TCC as
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NEWSLETTER 2015
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Article of September 2015