26 May 2020
Client Alert | Turkey | M&A / Corporate
Effective from 16 April 2020, a provisional article was added to the Turkish Commercial Code No. 6102 (the "Law") with the Omnibus Bill No. 7244, which provides that until 30 September 2020, a maximum of 25% of the net profit of capital companies for the year 2019 can be distributed, that profits of previous years and free reserve funds of such companies could not be subject to any distribution, and that their general assemblies would not be authorised to empower the managing body of the company for distribution of advance dividends .
In this respect, a Communiqué on the Procedures and Principles Regarding the Implementation of the Provisional Article 13 of the Law (the "Communiqué") was published in the Official Gazette No. 31130 dated 17 May 2020, effective on the same date, aiming at determining procedures, principles and exceptions regarding the implementation of the abovementioned new rules under the Turkish Commercial Code.
In accordance with principles introduced in the Communiqué, the distribution restrictions defined in Provisional Article 13 of the Law shall not apply to share capital increases made from internal resources in accordance with Article 462 of the Law.
Furthermore, the following companies shall also be exempted from restrictions on distribution of dividends and advance dividends:
For companies that fall within the scope of the abovementioned exceptions to be allowed to discuss dividend distributions at General Assembly meetings, the prior assent of the Ministry of Commerce must be obtained, through submission of the following documents to the Ministry of Commerce General Directorate of Domestic Trade:
The basis for calculation of the dividends must be the financial statements to be prepared (i) in accordance with Article 88 of the Law for those companies that must prepare their financial statements in accordance with the standards determined by the Public Oversight, Accounting and Auditing Standards Authority or (ii) in accordance with the Tax Procedure Law No. 213 for other companies.
Dividend amounts looking to be distributed cannot exceed the total amount of resources subject to dividend distribution in the records kept in accordance with the Tax Procedure Law.
In addition to the circumstances stated in the Communiqué and the Provisional Article 13, the Communiqué further stipulates that in cases where a dividend distribution is made from free reserve funds despite the occurrence of a loss during the relevant accounting period, all payments concerning the unpaid portion of such dividends shall be postponed until 30 September 2020 and that no interest rate shall be accrued for such postponed payments.
Furthermore, it has been decided that advance payments shall be postponed until 30 September 2020 in cases where authority to distribute advance dividends has been granted to the managing body by the general assembly prior to 16 April 2020.
>> Click on the PDF below to read the Turkish version
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In compliance with Turkish bar regulations, opinions relating to Turkish law matters that are included in this client alert have been issued by Özdirekcan Dündar Şenocak Avukatlık Ortaklığı, a Turkish law firm acting as correspondent firm of Gide Loyrette Nouel in Turkey.
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