Transfer Of Shares Upon Inheritance And Acquisition Of Shareholder Status In Capital Companies

I. Introduction

Under Turkish law, the types of commercial companies are regulated by the Turkish Commercial Code numbered 6102 (published in the Official Gazette dated February 14, 2011 and numbered 27846 ("TCC") and are primarily divided into two categories: sole proprietorship (şahıs şirketleri) and corporations (sermaye şirketleri). The principal distinction between these two categories lies in the fact that, whereas partners in sole proprietorships are personally liable with their entire assets, shareholders in corporations are liable only to the amount of capital they have undertaken.

Pursuant to the TCC, corporations consist of joint-stock companies ("JSCs") limited liability companies ("LLCs"), and limited partnerships divided into shares. In this article, the rules governing the transfer of shares upon the death of a shareholder and the acquisition of shareholder status by heirs will be examined in relation to privately held joint-stock companies and limited liability companies which are more commonly encountered in practice compared to limited partnerships divided into shares.

II. Transmission of the Inheritance

Upon the death of an individual, his/her estate passes to the heirs by virtue of universal succession pursuant to Article 599 of the Turkish Civil Code. Universal succession refers to the automatic transfer of the entire estate to all heirs at the moment of death. If multiple heirs exist, the estate becomes subject to co-heirship under joint ownership until partition, and legal dispositions over the estate require joint action of all heirs. In this context, as a general rule, company shares form part of the estate and fall into the joint ownership of the heirs.

Universal succession applies to all assets of the deceased, including company shares. However, until the partition of the estate is completed, heirs may exercise rights pertaining to such shares only jointly. Since the community of heirs does not possess legal personality, it cannot acquire shareholder status per se; therefore, representation of the shares before the company is only possible through the appointment of a common representative or through joint action by all heirs.

The deceased may also dispose of certain specific assets through testamentary disposition. In the case of a specific bequest ("singular succession"), the beneficiary does not acquire ownership of the asset automatically upon death. Instead, an obligatory right arises in favour of the beneficiary, who must assert his/her right against the obligors of the estate and complete the statutory acquisition requirements to obtain ownership. Therefore, universal succession remains the principal mechanism governing the transfer of company shares to heirs.

III. Transfer of Shares in Joint-Stock Companies upon Succession

In joint stock companies, the share capital is divided into shares, each representing a fraction of the share capital (TCC Art. 329). Shareholding may be acquired originally or derivatively. Acquisition by succession constitutes derivative acquisition by operation of law. Unless and until partition occurs, joint ownership persists and heirs act as a single shareholder before the company.

Under Turkish law, heirs acquire shareholder status, including property rights and financial entitlements (such as dividend and pre-emption rights), by operation of law upon the opening of the succession. However, the exercise of membership rights — in particular the right to attend general meetings and to vote — is contingent upon registration in the share ledger and, in the case of non-listed registered shares, upon the company's approval.

It should be noted that the principle of universal succession does not prevent the company from limiting the participation of heirs in the shareholder structure. Under Article 493/4 of TCC, where shares are acquired by reason of inheritance, division of estate, matrimonial property regime, or enforcement proceedings, the company may refuse to approve the transferee's entry into the company. Nevertheless, refusal is permissible only if the company simultaneously offers to purchase the shares at their "real value" . In other words, the company cannot block succession-based acquisition without making a purchase offer; nor may it impose additional conditions. If the company does not exercise this statutory option, the heir is entitled to be registered as a shareholder.

Therefore, while the succession-based acquisition itself occurs automatically, the admission of heirs into the shareholder structure is not absolute. Article 493/4 of TCC grants JSCs a statutory mechanism to avoid involuntary shareholder changes by obliging them to purchase the relevant shares at their real value. This mechanism differs from the regime applicable to voluntary transfers, as the company's discretion here is limited to either accepting the heir or purchasing the shares.

The transferee may request the determination of the real value of the shares from the commercial court of first instance located at the company's registered office; in such case, the court shall take as a basis the value of the company as of the date closest to the date of the relevant decision. The valuation costs shall be borne by the company. If the transferee does not reject this price within one month from the date on which it learns of the real value, it shall be deemed to have accepted the company's acquisition offer.

During the period prior to registration or where there are multiple heirs, the inherited shares form part of the estate held under joint ownership (elbirliği mülkiyeti) until partition. Accordingly, shareholder rights, such as voting, must be exercised jointly or through an appointed representative (Article 640/3 of the Turkish Civil Code). The company is entitled to request evidence of such representation prior to recognizing the exercise of shareholder rights.

IV. Transfer of Shares in Limited Liability Companies upon Succession

In limited liability companies, acquisition of shares by inheritance constitutes a "statutory transfer" under Article 596 of the TCC. Therefore, heirs are not required to obtain general assembly approval to become shareholders; unlike voluntary transfers, statutory transfers are not subject to the company's consent.

However, pursuant to Article 596/2 of the TCC, the limited liability company may refuse to admit the heirs as shareholders within three months from the date it becomes aware of the acquisition. If the company exercises this right properly, the heirs may be prevented from obtaining shareholder status; however, in such case, the company must pay the real value of the shares to the heirs or ensure their transfer to a third party. Thus, while the heirs' economic rights are protected, the company's ability to preserve its shareholder structure is also safeguarded.

The refusal decision shall have retroactive effect as of the date of the transfer. Such refusal shall not affect the validity of general assembly resolutions adopted during the period until the decision on the refusal is rendered.

V. Conclusion

In corporations, shares pass to heirs automatically upon the shareholder's death by virtue of universal succession.

In JSCs, heirs acquire shareholder status without requiring company approval; however, registration in the share ledger is necessary to exercise shareholder rights. If multiple heirs exist, the shares pass to them under joint ownership, and shareholder rights must be exercised jointly or through a designated representative. For the shares to be transferred to heirs separately, an inheritance partition agreement must be executed.

In LLCs, shares likewise transfer to the heirs by operation of law; however, pursuant to Article 596/2 of the TCC, the company may refuse to admit the heirs. In the case of multiple heirs, the shares are divided among them in proportion to their respective inheritance shares, enabling each heir to individually exercise shareholder rights to the extent of his or her shareholding.