Miran Legal

Attorney

27.03.2023

Sports Joint Stock Companies

Law No. 7405 on Sports Clubs and Sports Federations was published in the Official Gazette dated 26/4/2022 and entered into force. With this Law No. 7405, "sports joint stock companies" are regulated in detail in Turkish law.

The purpose of Law No. 7405 is to regulate the procedures and principles regarding the establishment of sports clubs, sports joint stock companies and sports federations, their organs, formation of supreme organizations, income and expenses, budget and expenditure principles, duties, powers and responsibilities, audits, the forms and conditions of all kinds of aid to be provided to them and other issues related to them.

All public sports joint stock companies, including sports joint stock companies whose shares are traded on the stock exchange, are subject to capital markets legislation. The provisions of this Law for sports joint stock companies shall be applied unless they differ from the provisions of the capital markets legislation for publicly traded companies. In case there are different provisions on the same subject, the provisions of the capital markets legislation shall apply to public sports joint stock companies. In this article, excluding the scope of the provisions of the capital markets legislation, Sports Joint Stock Companies will be explained within the scope of the Law No. 7405 on Sports Clubs and Sports Federations with its general characteristics.

1. Establishment and Structure

The concept of sports club refers to private law legal entities that are registered with the Ministry in order to participate in the activities of the Ministry and sports federations, while the concept of sports joint stock company refers to a joint stock company established as a subsidiary or affiliate of a sports club or independently of the sports club in accordance with the Turkish Commercial Code No. 6102 and registered with the Ministry of Youth and Sports in order to engage in sports activities.

The ability of sports clubs to participate in a sport depends on their registration by the sports federation to which that sport is affiliated. In order to take part in certain leagues, sports federations may impose an obligation to have the status of a sports joint stock company and a minimum capital requirement of not less than one million Turkish Liras for these companies. Therefore, in this case, the obligation to establish a sports joint stock company will arise.

 

Pursuant to Law No. 6102, joint stock companies that are established and become legal entities acquire the status of sports joint stock companies upon their registration by the Ministry. The registration application of the companies shall be decided by the Ministry within thirty days.

The Ministry has the right to cancel the registration of the following sports joint stock companies with the Ministry.

a) Loses the conditions for registration, 

b) Forms its organs in violation of this Law and fails to rectify these violations within three months from the date of warning despite a written warning by the Ministry, 

c) Has not participated in any of the committed sports activities for three consecutive years without permission or excuse

In addition, sports joint stock companies must also register the sports branch in which they will operate with the relevant sports federation. The registration of sports joint stock companies that do not participate in the activities of the sports branch they have committed to for three consecutive years without permission or excuse may be canceled by the relevant sports federation.

The board of directors of sports joint stock companies consists of one or more persons appointed by the articles of association or elected by the general assembly. Those who take part in the management of a sports club and a sports joint stock company cannot simultaneously take part in the management of another sports club or sports joint stock company operating in the same sports branch and in the same league.

2. Financial Considerations

Sports clubs may put or transfer their active and passive assets related to a particular sport as a whole to a sports joint stock company as capital. The shares of sports joint stock companies affiliated with a sports club must be registered shares.

Sports clubs and sports joint stock companies must..;

a) Strive to increase their transparency and credibility by improving their economic and financial capabilities, 

b) Exercise due diligence to fulfill its financial obligations in due time, 

c) Establish a balanced budget, create an administrative and financial structure that will realize its expenses in proportion to its revenues and in this context, comply with the budget and expenditure principles determined by the relevant sports federation with instructions, 

ç) Carry out activities to ensure and protect the sustainability of sports and encourage long-term sports investments in this context,

Sports clubs and sports joint stock companies benefit from sources of income such as membership fees, sponsorship revenues, advertising revenues, rental revenues, revenues from companies and enterprises owned or partnered by them, fees from athlete transfers in order to realize their purposes specified in their statutes or articles of association and their duties under this Law.

The budget and expenditure principles of sports clubs and sports joint stock companies are regulated in Article 20 of Law No. 7405. According to the text of the article, "Sports clubs and sports joint stock companies may borrow up to a maximum of ten percent of their previous year's gross revenues in a budget year. Borrowings above this rate may be made with the affirmative vote of the shareholders or their representatives constituting the majority of the capital for publicly traded sports joint stock companies, with the affirmative vote of the shareholders or their representatives constituting at least two-thirds of the capital for other sports joint stock companies, and with an additional budget to be adopted with the affirmative vote of at least two-thirds of the total number of members of the general assembly for sports clubs."

In addition, in parallel with the legislation of the Turkish legal system, another practice in the international arena emerged with the Financial Fair Play (FFP) concept initiated by UEFA in 2011 to regulate the financial structures of clubs. Thanks to this practice, many financial items of the clubs that are entitled to participate in UEFA organizations, especially their debts to footballers, tax authorities and other clubs, have come under scrutiny. With this practice, UEFA imposes a transfer budget limit and salary limitations on clubs equal to the revenue generated from the sale of players. Clubs that do not fulfill the conditions are subject to sanctions after being identified by the Financial Control Board established by UEFA. The sanctions and disciplinary penalties imposed on clubs that do not comply with FFP can be as follows: warnings, reprimands, fines, point deductions, confiscation of UEFA revenues, squad restrictions in UEFA organizations and bans from European cups. Through this practice, UEFA requires clubs not to exceed a certain level of loss each year within the framework of the income-expenditure balance.

CONCLUSION

A comprehensive regulation has been made on Sports Joint Stock Companies under Turkish Law within the scope of the Law on Sports Clubs and Sports Federations, which was adopted on 22/4/2022 and published in the Official Gazette dated 26/4/2022. Unlike the Joint Stock Companies under Turkish Commercial Law, Sports Joint Stock Companies are obliged to apply and register with the Ministry of Youth and Sports and to register with the federation in which the company will operate. In the event that the relevant Sports Joint Stock Company is publicly traded, the Capital Markets legislation will be applicable. The general characteristics of Sports Joint Stock Companies, which include very special regulations in this respect, are explained in this article. The regulation and encouragement of incorporation within the scope of the Sports legislation and the Commercial Code, instead of being structured as an association in the old system, is a more regular and systematic approach for sports clubs.