ERDEM-NEWSLETTER-2018-metin

24 NEWSLETTER 2018 Whilst Article 388/1 of the TCC states, as a general principle, that a company cannot subscribe for its own shares, the second paragraph of theArticle extends the scope of prohibition by regulating that a third party or a subsidiary subscribing for the shares in its own name, but on the company’s account, would also be considered as subscription for its own shares. Although one can think that at the incorporation stage, a joint stock company cannot subscribe for its own shares as it does not yet exist, in fact, a subsidiary subscribing for the company’s shares in its name, but on the company’s account, means that the company subscribes for its own shares even at the incorporation stage. Pursuant to the last paragraph of the Article, the first paragraph shall apply by way of analogy to the subsidiary company, which subscribes for the parent company’s shares. The reason for explicitly regulating that a third party or a subsid- iary subscribing for the shares in its own name, but on the company’s account, is included within the scope of the prohibition, is explained in the preamble of the Article, as follows: “ The purpose of the provision is to prevent the prohibition under the first paragraph from being disabled by collusive transactions. If this provision had not been regulated under the draft, maybe the same result could have been reached based on the provisions relating to evasion of law, and (partially) based on the third paragraph. However, any hesitations that might appear in one’s mind, different approaches and interpretations might have eliminated the benefit anticipated from the prohibition regulated under the first paragraph. The reason for explicitly stating “subsidiary company ” is the concern that it might not be considered as a third party through certain assumptions. In incorporation and capital increases , in the event that a third party or a subsidiary subscribes for the shares of a joint stock company in its own name, but on the joint stock company’s account, which exists or is be - ing established, the aforesaid shares would be considered subscribed for on account of the above-mentioned joint stock company, and such situation would be included within the scope of the prohibition regu - lated under the first paragraph. The third party may be a real person, a legal entity, or a single proprietorship. The subsidiary company is defined pursuant to Article 195. The provision also applies where the subsidiary company is a single proprietorship. Subscription on ac-