Receivable Rights in the Context of Capital Contribution

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Arguably, one of the most important principles of joint stock companies is the principle of capital maintenance. This principle is one of the founding principles of Turkish Commercial Code No. 6102 (“TCC”), as well as being one of the principles adopted in the Civil law countries along with the legal capital system.[1] The two main pillars of this principle are that company obtains the capital fully and the paid-in capital is not unlawfully returned to the shareholders.[2]

In this context, the TCC contains comprehensive provisions both at the incorporation of a joint stock company and at the capital increase stages during which subscribed capital is fully brought to the company, which is the first pillar of the principle of capital protection. Article 342 and the following provisions of the TCC regarding joint stock companies contain provisions regarding the types of capital contribution, capital in kind, the process of valuation of capital in kind, and capital contribution in cash. The scope of this article is the receivables within the scope of capital contribution in joint stock companies and the discussions on the performance of the shareholder’s capital contribution through the set-off mechanism.

Regulation on Contribution as Capital in Kind

Article 342 of the TCC (Assets that may be capitalized in kind) lists the assets that can be considered as capital in kind for joint stock companies. As per the article, in order for an asset to be brought as capital in kind, (i) there should be no limited right in rem, or attachment or interim measure on the asset, (ii) it should be possible to estimate the monetary value of the asset and the asset should be transferable, and (iii) the asset should not be in the nature of service, personal labor, commercial reputation, or undue receivable. The second paragraph of the article states that Article 128 of the TCC, which comes under the general provisions regarding commercial companies, is reserved.[3] This reserved provision mainly governs rules on the de jure transfer of an asset, which is contributed as capital, to the company.

Unlike a cash contribution, a valuation phase is required for capital contributions in kind. Referring back to the capital maintenance principle, this valuation procedure aims to prevent the company from incurring losses if the actual value of the same negatively differs from the amount of the capital commitment. As a valuation procedure, if capital in kind is brought to the joint stock company, the TCC requires a valuation report to be prepared by an expert, who is to be appointed by the commercial court where the company’s headquarters is located.

Assignment of Receivables to the Company

The shareholder may assign a receivable from a third person to the company within the scope of a capital commitment. As a matter of fact, the wording in the last sentence of Article 342 of the TCC, which reads “undue receivables shall not be brought as capital in kind,” confirms through argumentum e contrario, that due receivables may be put into the company as capital. In this context, even if the subject of the receivable is a cash payment, the right of receivable assigned to the company within the scope of capital contribution would bear the nature of a capital in kind.[4]

On the other hand, it is one of the points criticized by scholars, to prohibit capital contribution through undue receivables to the company as per Article 342 of the TCC, a prohibition which was not expressly stated in the repealed Commercial Code (“rCC”). When the rCC was in force, a number of scholars argued that an undue receivable could not be brought as capital to the company, even if it was not explicitly stated under the rCC. One of these scholars, Ünal Tekinalp, stated that assigning undue receivables to company is contrary to the “maturity at the registration principle,” and argued that what is in line with this principle is to assign the due receivables as capital in kind to the company.[5]

On the other hand, the scholars of the opposite view underlined the absence of any provision in the rCC that prohibits the assignment of undue receivable as capital to the company and argued that such assignment would not conflict with the principles in the rCC. Referring to Article 142 of the rCC which states “If the receivable is undue, it must be collected by the company within one month from the due date (…), unless otherwise agreed,” Fatih Arıcı argued that undue receivables may actually be brought to a company as capital in kind. Further he argued that (i) the right of receivable is transferred to the company upon registration, in other words, there should be no concern on its transferability; (ii) in any case, the assigned right of receivable will be subject to a valuation procedure as a capital in kind, and therefore will not constitute a violation of the equal treatment principle, and (iii) the undue nature would only bear the consequence of not claiming the amount until its due.[6]

With the clear wording of TCC, it is no more controversial whether it is allowed to assign undue receivables to the company as capital contribution; however, this clear choice of the lawmaker became subject criticism de lege feranda. Abuzer Kendigelen argued that the concerns leading to this prohibition on undue receivables could well be eliminated with a duly prepared valuation report, and criticized the prohibition for lacking a justification.[7] In addition, Arıcı criticized the prohibition on assigning undue receivables as capital to the company, which was explicitly adopted with Article 342 of the TCC, because (i) such a regulation was not encountered in the model laws, (ii) the uncertainty, which is argued to arise from the risk of non-collection of the timed receivables when due, can be eliminated with a valuation report, (iii) the risk of non-collection is also born by the three quarters of cash capital with a maturity of twenty-four months, and (iv) in case the real value of the undue receivable is determined with the valuation report, there will be no reservations in terms of the equal treatment principle.[8]

Performance of Capital Contribution by Set-Off

The discussion on performing the capital contribution through assignment of a receivable from a third party to the company, as a capital in kind, are explained above. However, the nature of capital contribution (whether cash capital or capital in kind) is also controversial among both scholars and practitioners when the shareholder sets off her receivable from company with her capital debt to the company.

Before turning to a discussion of the nature of the capital commitment, it should be noted that the fact that the shareholder is allowed to set off her due cash receivable from the company against her capital debt to the company could be derived from the opposite meaning of Article 200(2) of Execution and Bankruptcy Law no. 2004. The relevant paragraph states that in case of bankruptcy of the shareholders of the joint stock company, the unpaid capital commitments cannot be set off against the debts of the company. Therefore, it is understood that in cases where the shareholder is not bankrupted, the shareholder can set off her cash receivable from the company against the remaining capital debt to the company.[9]

The Circular of the Ministry of Customs and Trade, dated 27.09.2013 and numbered 50035491.449-7326 regarding “Contributing Receivables to the Company as Capital in Kind” in joint stock companies (“Circular”), considers it as a capital contribution in kind, when the shareholder brings her receivable from the company as capital to the company. In the Circular, it is stated that if the shareholder “brings” her receivable from the company for the purpose of capital contribution in the capital increase of the company, the actual value thereof may be determined by a valuation report from a certified public accountant or an independent financial advisor, apart from the valuation report of the expert to be appointed in accordance with Article 343 of the TCC.

The Circular has been criticized thoroughly by many authors, and the dominant is that the capital contribution is cash capital when the shareholder performs her debt to the company through a set-off against her cash receivable.[10] The main argument for the dominant view focuses on the fact that set-off is a concept related to the performance or payment method, not the nature of capital or commitment. Tolga Ayoğlu explains the economic function of set-off as preventing unnecessary transactions, and emphasizes this function through the following scenario: it is possible for the shareholder to pay the same amount to the company in cash in exchange for capital debt, immediately after collecting the due cash receivable from the company.[11]

Arıcı also criticizes the Circular and states that the legal difference between the set-off notice addressed to the company and the assignment of a receivable to the company was not envisioned in the Circular and that the conclusion in the Circular was inconsistent with its justification.[12] Another writer, Tekinalp, agrees to the capital in kind characterization of the Circular. However, he considers the performance of the capital contribution through set-off to be a cash capital contribution and, criticized the Circular for allowing reports by certified public accountants or independent accountants contrary to the clear wording of Article 343 of the TCC. He opines that due to the explicit provision of the TCC, valuation reports on capital contribution by a financial advisor or public accountants may give rise to invalidity claims against the capital increase of a company.[13] Ayoğlu has also criticized the Circular. According to Ayoğlu, a hybrid system was created due to the departure from the TCC’s valuation procedure for capital in kind. In addition, he disagrees with the Circular’s characterization of capital in kind per se.[14]


The first pillar of capital maintenance principle is that company obtains the committed capital in full, and the TCC envisages different procedures for bringing cash capital and capital in kind to a company. In this context, the assignment of receivable right by the shareholders as a capital contribution to the company is of a capital in kind nature, and that receivable should be evaluated by an expert to be appointed in accordance with the TCC provisions. However, in accordance with Article 342 of the TCC, only due receivables may be assigned to the company as capital in kind. This preference of the legislature, which excludes undue receivables, has been criticized by several authors.

The performance of the shareholder’s capital contribution debt through set-off of a cash receivable from the company is characterized as an example of the performing cash capital contribution by the dominant view of scholars. However, the Circular dated 27.09.2013 characterizes the capital commitment as capital in kind when the shareholder “brings” her receivables from the company to the same company, without making an assessment that there may not be an assignment but rather a set-off claim. The Circular has been extensively criticized, not only for its assessment on the nature of the capital contribution, but also for its deviation from the Article 343 of the TCC, which requires the valuation report by an expert appointed by the court for valuation of capital in kind.

(Authored by Helin Akbulut and first published by Erdem & Erdem on November 2021)

[1] Toraman Çolgar, Emek. Şirkete Borçlanma Yasağı. On İki Levha Yayıncılık, 2019, p. 10.

[2] Toraman Çolgar, pp. 10-11.

[3] The fact that Article 128 of the TCC is explicitly reserved by Article 342(2) of the TCC, is also criticized by the scholars for not bearing any legal meaning. For these criticisms, see. Kendigelen, Abuzer. Yeni Türk Ticaret Kanunu: Değişiklikler, Yenilikler ve İlk Tespitler. On İki Levha Yayıncılık, 2011, p. 197.

[4] Arıcı, Mehmet Fatih. “Sermaye Şirketleri Hukukunda Vadeli Alacağın Sermaye Olarak Konulması Yasağı” İÜHFD (2015) Volume: 73, Issue: 1, p. 319. (Vadeli Alacağın Sermaye Olarak Konulması Yasağı)

[5] Tekinalp (Poroy/Çamoğlu). Ortaklıklar, 2005, N. 1031.

[6] Arıcı, Mehmet Fatih. Alacak Hakkının Anonim Ortaklığa Sermaye Olarak Konulması, Beta, 2003, pp. 58-60.

[7] Kendigelen, p. 197.

[8] Arıcı, Vadeli Alacağın Sermaye Olarak Konulması Yasağı pp. 328 ff.

[9] Tekinalp (Poroy/Çamoğlu). Ortaklıklar, 2005, N. 1046.

[10] Manavgat (Kırca/Şehirali Çelik). Anonim Şirketler Hukuku, Volume 1, Banka ve Ticaret Hukuku Araştırma Enstitüsü, 2013, p. 345; Arıcı, Vadeli Alacağın Sermaye Olarak Konulması Yasağı, pp. 327-328; Ayoğlu, Tolga. “Sermaye Avansı Kavramı Üzerine Düşünceler” Prof. Dr. Hamdi Yasaman’a Armağan. On İki Levha Yayıncılık, 2017, p. 45.

[11] Ayoğlu, p. 46.

[12] Arıcı, Vadeli Alacağın Sermaye Olarak Konulması Yasağı, fn. 44.

[13] Tekinalp (Poroy/Çamoğlu). Ortaklıklar I, 2014, N. 487a.

[14] Ayoğlu, p. 51.

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