The New Turkish Commercial Code ("New Code”) has been prepared after a five-year long painstaking study and finally passed by the Parliament in January 2011. The New Code aims to regulate commercial relations in line with the recent changes in the local and global business environment as well as technological and legal developments including the EU legislation. The New Code has been effective as of 1 July 2012.

The New Code consists of six main chapters: Enterprise Law, Company Law, Securities Law, Transportation Law, Maritime Commercial Law and Insurance Law. Particularly the Company Law section of the New Code includes maybe the most radical changes which will have a significant impact on the Turkish commercial life.

The main changes under the Company Law can be summarized as follows:

• Corporate governance is the prevalent concept in the New Code. The corporate governance approach is based on four pillars: (1) Full transparency (2) Impartiality (3) Accountability (4) Responsibility.
  
  
• The New Code introduces a simple, plain, practical and unique system for public incorporation.
  
  
• The New Code enables the incorporation of a joint-stock company ("AS”) and a limited liability company ("LS”) with a single shareholder and a single partner, respectively. This change will abolish the requirement of incorporation by minimum five shareholders for AS and minimum two shareholders for LS under the existing code. In parallel with this amendment, under the New Code, a board of directors may consist of one person and the necessity that the board members have to be shareholders has been removed which paves the way for independent board members in the BoDs. In addition, legal person entities are allowed to become board members.
  
  
• The New Code, for the first time in Turkish law, regulates group companies, i.e. the relations between the parent company and its subsidiaries which are subject to the same principles and policies and which are gathered under the same group management.
  
  
• The New Code ensures transparency by means of the company's internet site. Accordingly, capital companyies subject to independent audit has to have an internet site and reserve a certain part of the website specifically for stakeholder information.
  
  
• Financial statements have to be prepared in conformity with the Turkish Accounting Standards to be published by the Public Oversight, Accounting and Auditing Standards Board and which are in compliance with the International Financial Reporting Standards.
  
  
• The New Code states an entirely new system for the audit of companies. Accordingly, the audit performed by an auditor who does not have to be specialized regarding the subject matter and which is actually considered as one of the company's obligatory organs, has been replaced by an independent audit to be exercised through an independent audit firm or sworn financial advisers (YMM) and independent accounting financial advisers (SMMM) by the new regulation. The Public Oversight, Accounting and Auditing Standards Board will issue Turkish Auditing Standars. Turkish Auditing Standards will be in full conformity with International Standards on Auditing.
  
  
• The general assembly cannot adopt any resolution based on the financial statements over which an adverse or disclaimer of opinion has been issued.
  
  
• The board of directors shall prepare and submit to the general assembly the annual report together with the financial statements and its annexes. The annual report of the board of directors has to reflect the company's flow of activities as well as its financial status in every aspect in a correct, complete, true and honest manner.
  
  
• Professionalism and specialization in bodies have been emphasized which require establishing a mechanism with respect to:
• Internal controls
• Internal audit
• Risk identification and assessment
• Financial planning
  
  
•  The minority rights list has been enriched.
  
  
• The New Code has arranged the structural changes regarding companies, namely spin-off, merger and conversion, in 60 articles. Most of these provisions relate to securing the benefits of the partners, the partnership creditors, protecting the workers and protecting their rights and receivables.