What happens if company shares are transferred but not registered in the Commercial Registry?

In limited liability companies, the transfer of shares is a significant transaction that changes the ownership structure. A partner may wish to leave the company and transfer their shares to another partner or a third party. The parties can sign a limited liability company share transfer agreement in the presence of a notary, the transfer price can be paid, and the new partner can effectively participate in the company's operations.

However, a significant problem is frequently encountered in practice: even though a share transfer has taken place, this transfer is not registered with the commercial registry, recorded in the company's share register, or a resolution is not passed by the shareholders' meeting. In this case, serious disputes may arise between the parties regarding questions such as "Was the share transfer completed?", "Is the former shareholder still liable?", and "Can the new shareholder exercise their rights?".

In limited liability company share transfers, simply preparing a notarized agreement is often insufficient to complete the process. For the share transfer to have a sound legal effect on the company and third parties, meticulous registration with the trade registry, share register, shareholders' meeting approval, and directorate records must be completed.

How to Transfer Shares in a Limited Liability Company?

The transfer of shares in limited companies is subject to specific formal requirements under the Turkish Commercial Code. The share transfer agreement must be in writing, and the signatures of the parties must be notarized. However, in most cases, a notarized agreement alone is not sufficient for the validity of a share transfer in limited companies.

Unless otherwise stipulated in the company's articles of association, the transfer of shares in a limited liability company requires the approval of the general assembly. Once the general assembly approves the transfer, it becomes valid for the company. Subsequently, the transfer must be recorded in the company's share register and the trade registry records must be updated.

If any of these steps are omitted, the transfer process could lead to serious disputes later on.

A notarized transfer agreement was prepared but not registered in the registry: What will be the problem?

The parties may have entered into a share transfer agreement before a notary public. The transferee may have paid the transfer price. However, if the share transfer has not been registered in the commercial registry and the company records have not been updated, legal uncertainty arises.

In this situation, the former partner may still appear as a partner in the commercial registry. However, the new partner may not be officially registered as a partner even though they have actually paid money into the company.

This uncertainty;

Exercise of partnership rights

dividend claim

right to information,

liability for company debts

director's authority,

tax and social security processes,

banking transactions

company's relationships with third parties

This can lead to serious problems.

What happens if the former partner continues to appear in the Commercial Register?

If a share transfer has taken place but has not been registered in the commercial registry, the former partner may continue to appear as a partner in official records. This situation is particularly risky for the former partner.

The former partner might think, "I've transferred my share, I'm no longer involved with the company." However, if they still appear as a partner or manager in the commercial registry records, they may appear to have an ongoing connection with the company to third parties and public institutions.

The risk is even greater, especially if the former partner is also the company director. If the directorship has not been terminated despite the transfer of shares, the former partner may continue to be considered an authorized representative of the company. This can have serious consequences in terms of taxes, social security contributions, banking, and commercial responsibilities.

What happens if the new partner doesn't appear in the official records?

The person who acquires the share may have difficulty exercising their partnership rights unless it is registered in the commercial registry. For example, a person who does not appear as a partner in the company records;

They may not be invited to the board of partners meetings

may not be able to exercise their right to vote,

You may have trouble claiming dividends

They may not be able to examine the company books

You may not be able to get information from the company manager

It may be difficult to prove one's rights to company shares to third parties.

Therefore, the transferee must ensure that the commercial registry and internal company records are completed after the notarized agreement is made. Otherwise, despite making the payment, they may not be able to actually benefit from the partnership rights.

What happens if General Assembly approval is not obtained?

In limited liability companies, one of the most important steps in the transfer of shares is the approval of the general assembly. Unless otherwise stipulated in the company's articles of association, the approval of the general assembly is required for the share transfer to be valid for the company.

A transfer made without the approval of the general assembly may result in a debt-creating transaction between the transferor and the transferee; however, it may create problems in terms of acquiring the status of a shareholder in the company.

For example, the transferee may have already paid the share price. However, if the company's general assembly does not approve the transfer, the transferee's acceptance as a partner becomes disputed. In this case, claims for a refund, termination of the contract, compensation, or completion of the transfer process may arise between the transferor and the transferee.

Is registration in the Commercial Registry a founding act?

One of the legal debates regarding the transfer of shares in a limited liability company is the nature of registration in the commercial registry. In practice, the most important factor is that the share transfer transaction is carried out in accordance with the company's articles of association and the conditions stipulated in the Turkish Commercial Code. Notarized agreements and general assembly approvals are particularly crucial.

However, registration and publication in the commercial registry are of great importance for ensuring that the partnership structure appears accurate to third parties and official institutions. Therefore, the approach of "the transfer has already been made, there is no need to register it" is incorrect.

Failure to register the company may result in the current ownership structure not appearing in official records, leading to numerous legal problems in practice.

What happens if the share is not recorded in the share register?

In limited companies, the share register is an important company ledger used to track shareholders and share transactions. When shares are transferred, this transfer must be recorded in the company's share register.

Failure to register shares in the share register can lead to uncertainty regarding the internal ownership structure of a company. Share register entries serve as important evidence, especially in cases of disputes between existing and new shareholders.

If the previous partner still appears in the share register, the new partner may have difficulty exercising their partnership rights. Therefore, the share register must be updated after the notarized transfer agreement and the general assembly resolution.

If the share transfer is not registered, will the former partner's liability for public debts continue?

This matter should be evaluated according to the specifics of the case. In limited companies, the liability of partners and directors for tax and social security debts is subject to separate rules. Even if shares have been transferred, past public debts, the period of partnership, share percentage, and directorial status are important factors.

If a person has transferred their share but continues to appear as a partner or manager in the registry records, they may encounter problems with public institutions. The risk regarding tax and social security debts increases, especially if the managerial registration continues.

Therefore, the person transferring the shares should not only rely on the notarized agreement but also verify that the trade registry records are updated, that the director's title has ended, and that the records with public institutions have been corrected.

The title of Director should also be terminated

A partner who transfers their shares may also be the company director. In this case, simply transferring shares does not always terminate the directorship. A separate decision, registration in the commercial registry, and publication may be required to terminate the directorship.

This is one of the biggest mistakes in practice. A person thinks they have transferred their shares; however, they still appear as the company director in the commercial registry. In this case, disputes regarding signing authority on behalf of the company, public debts, and liability to third parties may continue.

Therefore, during the share transfer process, the question of "will the transferring partner's directorship end or continue?" must be clearly regulated.

How does the transferee protect their partnership rights?

The transferee should not remain passive after signing the notarized agreement. If the transfer price has been paid and the transfer process is to be completed, the company's general assembly approval, share register registration, and trade registry procedures must be followed.

The person taking over can take the following steps:

To request general assembly approval from the company,

To request that the share transfer be recorded in the share register

To request the submission of a trade registry application

To submit a written application to the company director

Sending a notarized warning letter if necessary

If the transfer process is not completed, legal action may be taken.

The notarized agreement, payment receipt, correspondence, and company decisions must be kept so that the transferee can prove the price paid and their intention to transfer the ownership.

How can a transferring partner protect themselves?

The partner transferring their share must also follow the process. Because if the transfer is not registered and the company records are not updated, the former partner may continue to appear in official records.

The transferring partner should perform the following checks:

Is the share transfer agreement notarized?

Has the general assembly's approval been obtained?

Has the transfer been recorded in the share register?

Has the commercial registry application been submitted?

Has the trade registry announcement been published?

Has his/her term as director ended?

Have your authorization statuses been updated in tax and social security records?

Have the bank's signing authorities been revoked?

Saying "I no longer have a relationship with the company" before these processes are completed can be risky.

What happens if the company manager doesn't complete the registration process?

Sometimes, even though a share transfer has taken place, the company director or current partners may deliberately fail to complete the necessary registration with the commercial registry. This can put either the transferor or the transferee in a difficult position.

In this case, a written application should first be submitted to the company and the director, followed by a notarized notice. The notice should request that the share transfer be registered and announced, recorded in the share register, and that the necessary decisions be made.

If no resolution is reached, legal action can be taken. Depending on the specifics of the case, claims may include compulsory registration, exercise of contractual rights, compensation, reimbursement of payment, or determination of partnership status.

Can compensation be claimed due to a share transfer?

Even if a share transfer has taken place, failure to complete the transaction may result in losses for one of the parties. For example, the transferee may have paid the price but not been able to exercise their partnership rights. The transferor, despite transferring their shares, may still be listed in the registry and therefore face public debt or commercial risks.

In this situation, a claim for compensation may arise against the negligent party. For a compensation claim to be valid, the damage, fault, and causal link must be demonstrated with concrete evidence.

Who is invited to the Shareholders' Board Meetings after a share transfer has taken place?

If company records are not updated, the call for voting may be made to the old partner. The new partner, not being called upon, may not be able to exercise their voting rights. This situation could create controversy regarding the validity of the decisions made.

If the share transfer has become effective within the company but the records have not been updated, disputes may arise regarding call and voting rights. Therefore, the ownership structure must be consistent with the trade registry, share register, and internal company records.

To whom is the dividend paid after the share transfer?

Determining who will receive the dividends after the share transfer is also an important issue. The transfer date, the general assembly approval, the date of the dividend distribution decision, and company records should all be considered together.

If the transfer has not been recorded in the registry or share register, the company may choose to pay the dividend to the former partner or may refuse to pay. The new partner, having acquired the shares, may claim that they are entitled to the dividend.

To prevent such disputes, the share transfer agreement should clearly specify "who will receive the dividends before and after the transfer date.".

If shares are transferred, who becomes responsible for the company's debts?

The share transfer agreement should clearly regulate the impact of company debts on the parties. The company's debts prior to the share transfer, including tax and social security debts, bank loans, enforcement proceedings, lawsuits, and obligations to third parties, are important for the transferee.

If the transferee takes over shares without knowing the company's existing debts, they may face serious problems in the future. The transferor, on the other hand, may face liability for debts incurred during their own tenure after the transfer.

Therefore, a legal and financial review should be conducted before the transfer of shares; past debts, public debts, hidden debts, and liability for damages should be clearly regulated in the contract.

Bank and Signature Authorizations Must Be Updated After the Share Transfer

After the share transfer is completed, the company's bank signature authorizations, e-signatures, financial seals, accounting records, MERSİS authorizations, and SGK and tax office records should also be checked. In particular, if the transferring partner is a company director or authorized signatory, these authorizations should be revoked.

Otherwise, the former partner may continue to appear involved in company transactions against their will. This could lead to both legal and practical problems in the future.

What evidence is important in share transfer disputes?

In disputes arising from the fact that the share transfer has not been registered in the registry, the following evidence is important:

Notarized share transfer agreement,

Transfer fee payment receipts,

General assembly resolutions,

Company agreement,

Commercial registry records,

Share register records,

MERSİS applications,

Correspondence between partners,

Notary notices,

Bank records,

Tax and social security records,

Company management decisions,

Trade registry gazette records.

These documents are important because they show at what stage the transfer process is currently, and who has failed to fulfill which obligation.

What is the role of a lawyer in this process?

Failure to register the transfer of shares in a limited company in the commercial registry is not merely a technical deficiency. This situation can have serious consequences in terms of shareholder rights, liability for public debts, dividends, directorial authority, compensation, and company management.

The lawyer during this process;

The notary examines the share transfer agreement

It assesses whether general assembly approval is required

checks the transfer restrictions in the company's articles of association

It ensures the completion of share register and trade registry transactions

It checks whether the director's authority has been terminated

It defines the responsibilities of the transferor and the transferee

If necessary, a notary public will prepare the notice

If the registration process is not completed, it determines the legal course of action

It evaluates claims for compensation or refunds.

Therefore, it is important to seek legal assistance to ensure that all transactions are completed and that registry records are updated after the share transfer.

Conclusion

Failure to register a company share transfer in the commercial registry can lead to serious legal problems in limited liability companies. The former partner may still appear as a partner or manager in official records, while the new partner may have difficulty exercising their partnership rights.

The transfer of shares must be handled together with the notarized agreement, general assembly approval, share register registration, trade registry registration, regulation of the director's title, and updating of records with public institutions.

If a share transfer has been made but not registered in the registry, the parties should immediately check the company records, send a notarized notice, and, if necessary, pursue legal action. Incomplete registration procedures may lead to future disputes regarding public debt, dividends, partnership rights, and compensation.

Therefore, share transfers in limited companies must be carried out after completing all necessary legal and commercial registry processes.