ERDEM-NEWSLETTER-2018-metin

22 NEWSLETTER 2018 Prohibition of Joint Stock Companies’ Subscription for their own Shares * Att. Ecem Cetinyilmaz Introduction Pursuant to Article 388 of Turkish Commercial Code No. 6102 1 (“TCC”), amongst the provisions governing joint stock companies, a company cannot subscribe for its own shares. Subscription for the company’s shares by a third party, or a subsidiary in its own name, but on the company’s account, is also considered as subscription by the company for its own shares. Although not explicitly regulated, this rule was also adopted as a principle under the abrogated Turkish Commercial Code No. 6762 (“Previous TCC”). Through the TCC, the rule and the scope were both clarified, and the sanctions applicable to violation thereof were regulated, as well. This Newsletter examines the legal grounds, scope of application, and consequences concerning the prohibition of subscription by a company for its own shares. Legal Grounds of the Prohibition and the Reference Legislation Article 388 of the TCC is mainly based on Second Council Di- rective 77/91/EEC dated 13 December 1976 of the European Union, and Article 56 of the German Stock Corporation Act. Even though the expression of “prohibition of subscription for its own shares” was first used in the TCC, the preamble of Article 388 of the TCC states that the term “free from any collusion” under Article 285/1 of the Previ- ous TCC also included this rule 2 . Therefore, although Article 388 of * Article of December 2018 1 TCC , (OG, 14.02.2011, No. 27846) entered into force on 01.07.2012. 2 Preamble of Article 388 of the TCC.