Beneficiary Certificates of LLC

beneficiary certificates of LLC

Issuance of Beneficiary Share Certificates For Limited Liability Company

We briefly explain the beneficiary certificates of LLC, according to Turkish Corporate Law principles. 

A limited company has the authority to issue beneficiary shares. These shares do not represent any basic capital shares in the company and do not provide the holder with partnership status. However, they do confer certain property rights to the holder. The concept of beneficiary shares is a new opportunity provided to limited companies by the Turkish Commercial Code numbered 6102. However, this opportunity is not widely known in practice.

Eligibility for Issuance

Beneficiary shares can be issued for the benefit of the founders of the limited company, the owners of shares that have been lawfully eliminated in terms of value, creditors, or other individuals who have a similar association with the company. These shares can be established through the company’s articles of association or can be created later through an amendment to the agreement. In order to include a provision for beneficiary shares in the company’s articles of association, the vote of shareholders representing two-thirds of the company’s basic capital is required. Beneficiary shares do not grant the holder partnership status or voting rights at the general assembly.

Types of Certificates

In a limited company, beneficiary shares can be issued in two forms: founding beneficiary shares and ordinary beneficiary shares. The holders of beneficiary shares are entitled only to benefits such as participating in the net profit, the remaining amount after liquidation, or the right to acquire newly issued shares. The amount payable to the holders from the net profit cannot exceed one-tenth of the amount after allocating five percent profit share for the partners from the distributable company profit. Even if the general assembly decides not to distribute the profit, if it is available, the holders of beneficiary shares receive the profit shares envisaged in the company’s articles of association.

Company’s Articles of Association

To avoid future issues and to facilitate resolution in case of any problems, it is beneficial for both the founders and the company shareholders to include a detailed provision in the company’s articles of association regarding the type of beneficiary shares, the benefits provided to the holder, the duration if specified, and the transfer conditions, considering the property rights it confers.

By ensuring that the company’s articles of association cover these details, it serves the interests of both the founders and the company shareholders.

For your questions and requests about the beneficiary certificates of LLC, you can contact us. 

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