GENERAL PRINCIPLES OF COMPANY LAW

1. GENERAL PRINCIPLES OF COMPANY LAW Prof.Dr.Huriye Kubilay Law 519 BusinessLaw 15.10.2012

2. CorporateGovernance Corporate governance is the dominant concept in the New Turkish Commercial Code (“New Law”). No longer does corporate governance mean a system of rules applicable onlyto publicly traded companies; it is a principle that should be applied to all enterprises. Itaims to inspire investor confidence and ensure sustainable development. The New Lawintroduces material provisions regarding good management and internal and independentaudit that are to be applied to all capital stock companies.

3. Thus the New Law will embedin Turkish law, simply and understandably, the concept of corporate governance – which has become common in recent years around the world and has grown in complexity,reflecting differences in the economic, financial, political and cultural structures of thecountriesapplying it.

4. The regulation of corporate governance under the New Law can besummarised as follows: 1. The corporate governance approach of the New Law is based on four pillars that have universal characteristics within the context of corporate governance. (1) full transparency, (2) fairness, (3) accountability, (4) responsibility.

5. Full transparency 2. Full transparency has been sought in; (1) financial statements, (2) boards of directors’(BoD) annual reports, (3) independent audits, (4) transactional auditors, (5) all auditreports of individual companies and group of companies.

6. Fairness 3. Fairness has been ensured by establishing a balance of interests and by objectivejustice.

7. Accountability 4. Accountability has been embodied in the BoD reports, flow of information, right toinformationandoversight.

8. Responsibility 5. Responsibility has been regulated in parallel with accountability. 6. The rights of shareholders to sue, obtain information and perform oversight havebeen created along with smooth-running legal mechanisms.

9. 7. The minority rights list has been expanded. 8. Privileged shares have been restricted. 9. Representation opportunities for group of shareholders and the minority in the BoD,havebeenincreased.

10. 10. The Capital Markets Board (CMB) has been provided with exclusive authority toregulate corporate governance. This authorisation will ensure it remains dynamic andup-to-date. 11. The BoDs of publicly held companies are now obliged to publish corporategovernancereports. 12. Professionalism and specialisation in bodies has been emphasised.

11. Web Site, Information Society Services and Access Rights ofCapitalStockCompanies Under the New Law, all capital stock companies are obliged to create a Web site; if thecompany already has a Web site, it must allocate part for “information society” services. The New Law defines “information society” as a society with access to information.

12. Single-Shareholder Joint Stock Company (A.Ş.) andSingle-Member Limited Liability Company (L.Ş.) The New Law introduces one other significant innovation that satisfies a major need: Single-shareholder A.Ş. and single-member L.Ş. This “one-man company” has beenregulated by means of adapting the Twelfth Council Company Law Directive (89/667/ EEC) from EU law to Turkish law.

13. A one-man company does not contradict the concept of “company”. A company is notnecessarily a union of people with more than one partner, but an operational organisationthat manufactures and supplies goods and services. A company is the name given to anenterprise that functions for the purpose of realisation of its scope of activity. Accordingly,the company can consist of a single shareholder or a single partner; however, it canalso have a BoD consisting of 10 to 15 members, various audit committees and severalcommissions, in line with the principles of corporate governance. The important thing isthe appropriateness of the structure for the scope of the activity; best management andauditpracticesareessential.

14. A single-shareholder or partner company responds to the followingneeds: 1. It provides the opportunity for the owner of an enterprise who wishes to convertits single proprietorship to a new legal type of limited liability company, i.e., for anA.Ş. or a L.Ş. to incorporate a one-man company. Thus, the owner will no longer beforced to add token individuals into the company for its incorporation.

15. 2. When a foundation, association or university wants to incorporate a company, itmight naturally be the single partner or shareholder of such a company. Taking ontoken shareholders or partners into the company along with the actual partner israrely well-suited to these organisations’ purposes.

16. 3. If an A.Ş. or a L.Ş. wants to establish a vendor related to its own scope of operation,it can establish such vendor on its own through a new company. For example, if a company that manufactures refrigerators wants to incorporate a company that produces plastic refrigerator shelves, it would no longer have to take on a partner unnecessarily.

17. 4. As single-shareholder or partner companies are very common in European countries, companies that want to invest in Turkey can make their investments directly as a single shareholder or partner by themselves.

18. Group of Companies A group of companies (“Group”) which is created for the specific purpose of managingmore than one capital stock company, according to predetermined and concrete policieswithin the context of controlling relationships, has been regulated for the first time inTurkish law by the New Law. A group of companies is known as a “corporate group” inAnglo-American communities and in German law as a “Konzern”. A significant loophole in the law has been closed and a significant need has been satisfiedthroughthisnewregulation.

19. StructuralChanges in Companies Nationality: In the New Law, structural changes are carried through in connection with the principle of nationality. Cross-border mergers and divisions are not covered by the New Law.

20. Corporate Mobility: The New Law allows corporate headquarters to be relocated abroad under certain conditions, just as the previous Code did. However, relocation abroad has been regulated in detail for the first time in Turkish law through the New Law and the law dealing with its application and execution. Relocation of an enterprise’s headquarters to Turkey is regulated under the Trade Registry Statute.

21. Protection: In every merger, division (spin-off/split-up) and conversion, theprotection and continuity of partnership shares and rights, rights arisen fromredeemed shares, usufruct (the legal right to use and derive profit or benefit from property that belongs to another), rights in debenture and similar bonds relatedto the transferred, divided or converted company is a core principle in the newcompany. In this scope the protection of all rights aside from those arising from thepartnershipsharesarenew.

22. Audit in Equity Capital Companies The New Law introduces a fundamental system change with a reformist understandingand a contemporary evolution in the auditing of equity capital companies, namely jointstock companies, companies with limited liability and companies limited by sharesand group of companies. This change makes a substantial contribution to establishingtrust in national and international markets and creating a new perspective for Turkey. The provisions with an advanced understanding of audit will change the structure andorganisational chart of joint stock companies and limited liability companies

23. The new audit will be conducted as follows: 1. by an auditor who is expert, professionally competent, technically equipped, attentivein a legal sense and aware of its responsibility, 2. by an independent auditor in compliance with International Auditing Standards, 3. in accordance with professional ethics, 4. with all due professional scepticism, 5. transparently.