I. Introduction
Article 198 of the Turkish Commercial Code (“TCC”) imposes on an undertaking, where its shareholding ratio in a capital company directly or indirectly exceeds or falls below certain ratios (5%, 10%, 20%, 25%, 33%, 50%, 67%, 100%), the obligation to notify the company of this situation, and on the company, the obligation to have this situation registered. The scope and procedure of this obligation are explained in detail in Article 107 of the Trade Registry Regulation (“Regulation”). Nevertheless, there are certain uncertainties both in the TCC and in the Regulation concerning the scope of the persons who may be responsible for the notification obligation and how the method and content of the notification should be.
This article will attempt to answer certain questions which are not clear under the said laws and regulations, by examining the purpose of the statutory provisions and sources of case law and scholarly work. In particular, this article will examine (i) whether the undertaking subject to the notification obligation may be a natural person; (ii) whether it is sufficient to state in the content of the notification that the threshold has been exceeded or fallen below; (iii) whether the notification obligation will also arise where an undertaking becomes an indirect shareholder upon its non-controlled affiliate acquiring shares; and (iv) whether Article 198 of the TCC will apply where a right other than a property right over a share, such as a usufruct right, has been acquired.
II. Can the Undertaking Subject to the Notification Obligation Be a Natural Person?
TCC and Regulation do not expressly regulate whether natural persons are responsible for the obligation to notify their changing shareholding ratio.
According to Article 198 of the TCC, the shareholder upon whom the notification obligation is imposed must be an “undertaking”. From the replacement of the words “capital company” included in the draft bill of the Turkish Commercial Code with the word “undertaking” in the final text enacted as law, it may be concluded that the legislator aimed to broaden the scope of the persons subject to the notification obligation.[1]
It is stated in case law and doctrine that the expression of undertaking has a broad scope and also covers natural persons, legal persons, and associations of persons without legal personality.[2]
In addition, Article 107/2 of the Regulation provides that the undertaking must “be included in a group of companies”. According to Article 105 of the Regulation, for a group of companies to exist, there must be at least three commercial companies within the group. On the basis of these provisions, it has been argued by scholars that not every natural person, but only natural persons who have under their control a group of companies consisting of at least three commercial companies, may be subject to the notification obligation.[3]
In contrast, in a decision in 2023, the 11th Civil Chamber of the Court of Cassation, upheld the decision of a lower court which held that Article 198 of the TCC could not be applied on the ground that the company shares was not acquired by an undertaking in a share transfer that appears to have taken place between natural persons.[4]
In addition to the above explanations, pursuant to the express provision of Article 198/1 of the TCC, if a natural person is a member of the board of directors or a manager in the undertaking that is the shareholder or in the capital company whose shareholding ratio has changed, he/she must make a notification concerning the shares of that capital company held by himself/herself, his/her spouse or children, and commercial companies in which they hold at least twenty per cent.
III. Should the Final Shareholding Ratio Be Indicated in the Content of the Notification?
Article 198/1 of the TCC and Article 107/1 of the Regulation provide that, where an undertaking’s direct or indirect shareholding ratio in a capital company exceeds certain percentages or falls below them, the undertaking must notify the “situation”. It is not expressly specified whether the situation that must be notified is the final shareholding ratio or merely the fact that the ratio specified in the law has been exceeded or fallen below.
In scholarly works, it has been submitted that, since the situation triggering the notification obligation under the provision of law is the fact of reaching certain thresholds or falling below them, it is sufficient to state that the relevant threshold has been exceeded or fallen below without specifying the shareholding ratio.[5] Accordingly, for example, if an undertaking’s shareholding ratio in a capital company has increased from 53% to 80%, it should be sufficient for the content of the notification to be made by the undertaking to contain only the information that its shareholding ratio has increased to a ratio above 67%.
Nevertheless, Tekinalp interprets the provision as “not only the shares in the amount exceeded, but the percentage reached will be notified”.[6] In addition, the sample board of directors’ resolution and registration application petition texts published by the Istanbul Trade Registry Directorate indicate that the percentage equivalent of the capital share before and after the share transfer must be specified.[7]
IV. Is an Indirect Shareholder Subject to the Notification Obligation Even If It Is Not the Controlling Entity of the Direct Shareholder Company?
According to the wording of the relevant statutory provision, the notification obligation also arises where the shares indirectly owned by an undertaking in the capital of a capital company pass such thresholds. It may be questioned whether this obligation arises in every type of indirect shareholding situation or only for an indirect shareholder that exercises control over the direct shareholder.
Indeed, an undertaking may not be aware of changes in the shareholding of a third company that is partly owned by a company in which the undertaking holds a minority interest. For example, if Company A holds a 40% shareholding in Company B and Company B’s shareholding in Company C increases from 70% to 90%, Company A’s indirect shareholding ratio in Company C will increase from 28% (40% x 70%) to 36% (40% x 90%), and will therefore have exceeded the 33% threshold set out in Article 198 of the TCC. However, Company A may not be aware of this share transfer if it is not represented in the management of Company B. According to this example, since Company B’s shareholding ratio in Company C has increased from 70% to 90% and there is no question that notification obligation has not been triggered for Company B as the thresholds under Article 198 of the TCC have not been exceeded, it will also not be possible for Company A to learn of this situation through the registration and announcement of Company B’s notification. If a situation in which Company B was subject to the notification obligation had existed, Company A would not have been required to make a separate notification upon Company B’s notification.[8]
Based on an interpretation that considers the purpose of the law, if an indirect shareholder cannot reasonably be aware of the relevant share transfer, the indirect shareholder should not be held responsible for the notification obligation under Article 198 of the TCC. As also stated in the explanatory memorandum to the legislative bill, this notification obligation aims to inform the public, ensure transparency in the capital markets, and apply the provisions on liability by compelling the disclosure of participation relationships. It may be considered that, where an indirect shareholding relationship is established through non-controlled affiliates, there would be no public interest in terms of ensuring transparency. Moreover, pursuant to Article 198/2 of the TCC, until the obligations of notification and registration and announcement is fulfilled, the other rights, including voting rights, attached to the relevant shares are frozen. In a scenario where the direct shareholder is not obliged to notify a share transfer to the authorities, the freezing of the direct shareholder’s rights only because the indirect shareholder did not notify a situation of which it was unaware, would be a consequence contrary to the purpose of the law.
V. Does the Notification Obligation Arise in the Acquisition of Rights Other Than Ownership Rights Over a Share?
Article 198/1 of the TCC describes the subject of the notification as “owning” shares representing certain thresholds or the existing shares falling below these thresholds. Article 107/2 of the Regulation also states that the undertaking that “acquires or disposes of shares” is subject to the notification obligation. It may be concluded from these regulations that the notification obligation may arise in every type of shareholding situation, including not only in share transfers but also in acquisitions by operation of law. However, acquisition of a right over a share other than an ownership right would not fall within the scope of the obligation. In this vein, in a decision rendered in 2025, the 43rd Civil Chamber of the Istanbul Regional Court of Appeal reversed the lower court’s decision ordering the registration of a usufruct right on the ground that the holder of the usufruct right over the share had voting rights and that third parties had an interest in the registration and announcement of this right. The higher court concluded that Article 198 of the TCC only concerns ownership rights, not usufruct rights.[9]
In this assessment, the provision of Article 196/3 of the TCC may be important. This article applies in the calculation of the percentages of shares pursuant to an express reference in Article 198/1 of the TCC. Article 196/3 of the TCC provides that “when calculating the shares owned by an undertaking in a capital company, the shares owned by its affiliated companies or acquired on its account and held by third parties shall also be taken into account”.[10] Taking into consideration the shares owned by affiliated companies is a natural extension of Article 198/1 of the TCC imposing a notification obligation also for shares “indirectly” owned. However, shares which are in the ownership of a third person but “acquired on the account” of the undertaking are also taken into consideration in the calculation of the percentages. This indicates that, for the purposes of Article 198 of the TCC, the expression “indirectly” applies not only to shares in the ownership of the undertaking’s affiliates, but also to shares held by a fiduciary owner.[11]
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[1] Turkish Court of Cassation, General Assembly of Civil Chambers., E. 2024/568, K. 2025/526, decision dated 17.9.2025, para. 13: “In the draft bill of the Turkish Commercial Code […] the concepts of capital companies and undertaking were initially taken as a basis, and although the reason for preferring the concept of undertaking was stated to be that its scope was broad and that it encompassed the undertaking and similar concepts, the Justice Commission made an amendment with the aim of broadening the scope of application of the institution, on the ground that the system introduced by the draft was narrow in scope and could give rise to disadvantages. Indeed, in the Commission’s Rationale for Amendment, as the reason for the use of the concept of undertaking in both Article 195/5 and Article 198 and other articles of the TCC No. 6102, it was stated that the concept of undertaking was broader than a commercial enterprise, and the draft was enacted in this form.”
[2] Id., para. 15: “as also referred to in the doctrine […] the concept of undertaking used in group of companies law has a very broad meaning encompassing, in particular, all natural persons, all public and private legal persons capable of participating in a company, artisan enterprises, commercial enterprises and inheritance partnerships (Reha Poroy, Ünal Tekinalp, Ersin Çamoğlu, Partnership Law I, Istanbul 2019, p. 716)”; Özlem Karaman Coşgun, “Obligation to Notify, Register and Announce Changes in Shareholding Ratios in Capital Companies within the Framework of the Turkish Commercial Code / Türk Ticaret Kanunu Çerçevesinde Sermaye Şirketlerinde Pay Oranlarındaki Değişikliklerin Bildirilmesi, Tescili ve İlanı Yükümlülüğü”, Marmara University Faculty of Law Journal of Legal Research, 2025 (“Karaman Coşgun”), p. 302.
[3] Dr. Kadir Baş, “Notification Obligation of Shareholders in Joint Stock Companies Pursuant to Article 198 of the Turkish Commercial Code and the Consequences of Breach of This Obligation / Anonim Şirketlerde Pay Sahiplerinin Türk Ticaret Kanunu m. 198 Uyarınca Bildirim Yükümlülüğü ve Bu Yükümlülüğe Aykırılığın Sonuçları”, Journal of Banking and Commercial Law, 2020 (“Baş”), pp. 66-67.
[4] Turkish Court of Cassation 11th Civil Chamber, E. 2021/3098, K. 2023/755, decision dated 9.2.2023. The personal data of the parties to the proceedings were redacted in the text of the decision, but it is inferred that the transferor was a natural person from the allegation that the transferor was “made to sign”.
[5] Karaman Coşgun, p. 305; Baş, pp. 81-82.
[6] Reha Poroy, Ünal Tekinalp and Ersin Çamoğlu, Partnership Law II / Ortaklıklar Hukuku II, 15th Edition, 2023 (“Tekinalp”), para. 2103.
[7] Istanbul Chamber of Commerce, “Trade Registry Procedures, Joint Stock Companies, Notification Procedure Pursuant to Article 198 of the TCC for Joint Stock Companies”, ito.org.tr/documents/Ticaret-Sicil/dilekceler-belgeler/198_bildirim_dilekcesi.doc, ito.org.tr/documents/Ticaret-Sicil/dilekceler-belgeler/198_yk_karari.doc, accessed 3 September 2026. In a similar direction: Ankara Chamber of Commerce, “Trade Registry Procedures, Trade Registry Company Procedures, Documents Required for Notification under Article 198 of the TCC for Joint Stock Companies, Board of Directors’ Resolution (Notarised)”, atonet.org.tr/Uploads/Birimler/Internet/Ticaret%20Sicil%20Müdürlüğü/Şirket%20Evrakları/ttk_198_bildirimi.docx, accessed 3 September 2026.
[8] Trade Registry Regulation (“TRR”), published in the Official Gazette No. 28541 dated 27 January 2013, Article 107/3: “Where notification of indirect participations is in question, notification for all undertakings or commercial companies that indirectly exceed the thresholds or fall below the thresholds may be made by any one of them on behalf of all.”; Tekinalp, para. 2104.
[9] Istanbul Regional Court of Appeals 43rd Civil Chamber, E. 2022/594, K. 2025/1676, decision dated 17.11.2025.
[10] See also TRR Article 107/9.
[11] Tekinalp, para. 2021. The author specifies, as other examples of shares acquired on the account of the undertaking and owned by a third person, shares held by a securities broker or an intermediary institution.
