NEWSLETTER-2017

27 COMMERCIAL LAW (i) In the event of existence on the balance sheet of funds that are allowed by legislation to be added to the capital, capital cannot be increased through capital commitment without first converting such funds into capital. On the other hand, it is possible to convert such funds into capital and increase the capital through capital commitment, both at the same time and in the same proportion. The rationale behind this regulation is that in practice, some companies prefer capital increases through capital commit- ment, although there are funds that could be added to the capital on the balance sheet, and most of the time in a consi- derable amount and, therefore, take advantage of this through practically preventing some shareholders to participate in the capital increase and increasing the share capital of the share- holders who are able to participate in such capital increase 9 . Through this method, since the share capital of such certain shareholders increases, the number of gratis shares that they acquire also increases. The provision aims to protect the shareholders through precluding such kinds of practices; the legal consequence of non-compliance with such mandatory rule that has no exceptions, and which cannot be eliminated for any reasons, being nullity 10 . However, one should not overlook the fact that the letter of the law allocates such prohibition only to the funds that are allowed by legislation to be added to the capital, and does not explicitly propose a restriction for the reserve funds that are allocated by the articles of association or a general as- sembly resolution, not allotted for a specific purpose, and the statutory reserves. Due to this special regulation, there are views arguing that there is no obstacle to capital increases through capital commitment in the event of a lack of funds that are allowed by legislation to be added to the capital, but the existence of reserve funds and freely-usable parts of the 9 Preamble of Article 462 of the TCC. 10 Preamble of Article 462 of the TCC.