The Legal Nature of Representations and Warranties in Share Purchase Agreements* Tuna Çolgar Introduction In a share purchase transaction of stock corporations, the assets, management or actives and passives of the company are not directly transferred, instead, the partnership rights over the company is transferred. The legal nature of the share purchase transaction is not transfer of an asset, it is a transfer of a right. The determination of the necessary legal transactions for share purchase depends on ascertaining the nature of the partnership, the type of shares, and whether share transfer is restricted or not. For instance, if a private company has bearer shares, Article 489 of the Turkish Commercial Code (“TCC”) states that “Transfer of bearer share certificates inure to company and third parties only with the notification to be made to the Central Securities Depository by the transferee via the devolution of possession.” Likewise, if a private company has registered shares, pursuant to Article 490 of the TCC, the transfer shall be completed with the endorsement of the share certificates and the devolution of possession to the transferee. Thence, the share purchase is completed by full endorsement of the share certificate and devolution of possession from the rightful transferor to the transferee with the purpose to transfer ownership. As endorsement is an independent declaration of will, transfer of registered shares does not require a valid promissory transaction.1 The act of disposal, which consists of endorsement and transfer of possession, * Article of October, 2021 1 Poroy, Reha/Tekinalp, Ünal/Çamoğlu, Ersin: Ortaklıklar Hukuku, Vol. II, Vedat Kitapçılık 2014, p. 126.
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