Legal Requirements For Capital Contribution In Kind in relation with Intellectual Property Rights In Joint Stock Companies And Limited Liability Companies

24.06.2013

 

Commercial Companies which assets may be deemed as legal capital are regulated generally under the article 127 of the New Turkish Commercial Code numbered 6102 (Herein referred to as "NTCC").Beside, as per the same article  states specifically that the Intellectual Property Rights are considered  as a capital. In accordance with the preference of the law maker, part of this article has to be interpreted broadly.

 The term of "intellectual property" is to be construed in a broad sense to include, among others, literary and artistic works, trade names, designs, patents and geographical signs. (According to the preamble of the NTCC)

I.)                 Basic Legal Requirements for capital contribution in kind in relation with Intellectual property rights in  Joint Stock Companies and Limited Liability Companies

Intellectual Property Rights; in order to be considered as real capital for companies, the following conditions which specified herein below must be satisfied.

1-)       Negative Condition: Assets without such restriction as measure, pledge and encumbrances on them, which can be convertible to cash and which are transferable , including Intellectual Property Rights and virtual environments, can be contributed as capital in kind. (NTCC 342/1)

2-)       Positive Condition Intellectual property rights are considered as real capital with the values assessed by court expert as stated in articles of incorporation or prime contract provided that intellectual property rights shall be registered in their special registries.

II.)               Phases of Capital Contribution in Kind for Intellectual Property Rights

According to the general conditions mentioned above, in order to perform the capital contribution in kind for related rights, the following steps must be satisfied.

1-      Assessment by the court expert for intellectual property rights is required.

2-      After the completion of assessment, the intellectual property right should be registered in their special registry with their value and if there is a special registry and it is regulated specifically.

3-      Resolution of the shareholders" assembly must be prepared and articles of incorporation must be altered to perform a capital contribution in kind for the related right regarding export report's valuation

4-      Finally, registration process must be performed before the Trade Registry along with other required documents which the registry requested from the company.

A.     Expert Report and Valuation Phase

Exclusivity is determined by law:

1-      The Commercial Court of First Instance (Asliye Ticaret Mahkemesi in Turkish) at the location of the company's headquarters is exclusively competent for the decision of the valuation regarding rights.

2-      The valid valuation report shall be prepared by court experts only and exclusively and it shall be definite upon the confirmation by the judge.

a.      Importance of an Expert Report on Valuation of Rights

Intellectual property rights as capital in kind shall be evaluated by court experts only which is assigned by the Commercial Court of First Instance at the location of the company's headquarters Afterwards the valuation report shall be approved by a judge and it shall become definite. In other words, there is no other person or institution that may evaluate the amount of the related rights. Due to the exclusivity which is implemented by legislative power, contributing to such rights in capital has become relatively hard.

 

In consideration of the delicacy in the matter trademark evaluation methods and quality assessments may be differentiated and so the risk of undervaluation for intellectual rights is very likely. Therefore, the courts experts have to duly perform their duty in detail. Otherwise possible unwanted outcomes may emerge. As it is highly recommended also and very common in practice that members of the Turkish Patent Institute and academic members from universities are chosen as court experts for the preparation of the valuation report.

 

In case the applicant has a sufficient amount to cover the expenses of additional reports, then in accordance with article of 293 of the Turkish Code of Civil Procedure "Expert Opinion" may be submitted as an additional report as a discretionary proof and it shall serve the purpose of the applicant when the severity of the situation is taken into consideration.

 

Even if this kind of private expert report is not binding for the judge, it may be very informative  and influence the course of the trial.

 

a.1 Requisite elements of the Expert Report

 

As per the Article 343 of NTCC

-The valuation report must explain in detail that the selected evaluation method has to be just and appropriate.

- Shares amount and Turkish lira equivalence related to each asset contributed as capital in kind shall be explained satisfactorily and in accordance with the accountability principles

a.2 Right of objection against the Expert Report

 

The people who have right of objection against the expert report are:

--Incorporators

--Transaction Auditors

--Stakeholders

 

a.3 Doctrinal criticism on the subject

Criticism on the subject mainly focuses on the articles regulation. Indeed, even if the article states otherwise, requesting opinion from court experts regarding collectability are erroneous. Also, approval of the judge is not regulated by the rules of Civil Procedure, thus there exist some ambiguity on the meaning and certainty of the approval.[1]

a.4 Relevant Articles :  NTCC  127, 128, 131, 342, 343, 578

 

 Trainee Lawyer Ömer DALKIRAN

 


[1]  P.197, Kendigelen Türk Ticaret Kanunu, Değişiklikler, Yenilikler ve İlk Tesptiler