TURKISH LAW BULLETIN
February, 2014
Overview of Share Buybacks under Turkish Law
Over the last couple of weeks, the Turkish Capital Markets
Board (the “CMB”) has issued new communiqués to regulate
the system of the Turkish Capital Markets Law in detail.
Among the communiqués recently issued by the CMB, the
Communiqué on Share Buy Backs (the “Communiqué”)1 has
the crucial importance to listed companies as it regulates the
process and principles to buy back their own shares by taking
into account of the provisions and limitations set out in the Turkish Commercial Code2 and
the Turkish Capital Markets Law (“CML”)3. This article briefly summarizes the process of
share buy backs introduced by the Communiqué.
I.
Procedure
In order to proceed with the share buyback, the general assembly of shareholders (the
“GAS”) of publicly held companies must approve the share buyback program4 (the
“Program”) prepared by the board of directors (the “Board”) and authorize the Board to
carry out the share buyback transaction in accordance with the Program. The period of the
Program is utmost three years for the publicly held companies whose shares are traded in
the stock exchange (“Traded Companies”)5 and maximum of one year for the publicly held
companies whose shares are not traded in the stock exchange (“Non-Traded
Companies”). Unless a higher quorum is required by the articles of association, the meeting
quorum for such GAS meeting is the presence of the shareholders holding at least one fourth
of the share capital and the decision quorum is the majority of the votes present at such GAS
meeting. Even though a GAS resolution authorizing the Board for the buyback of shares is
required, there is an exception set forth for Traded Companies in the Communiqué. Traded
Companies may buy back their shares through only a Board resolution in order to avoid an
immediate and material loss as long as they comply with the disclosure rules. This exception
is not applicable to Non-Traded Companies and the affiliates6 of listed companies.
1
Published in the Official Gazette on 3 January 2014.
Law No. 6102, published in the Official Gazette on 14 February 2011.
3
Law No. 6362, published in the Official Gazette on 6 December 2012.
4
The Program must contain/ address the following: (i) the purpose of the share buyback, (ii) the period of the
Program, if any, (iii) the maximum number of the shares to be purchased, (iv) the minimum and maximum
purchase prices, (v) the purchase principles of buy back shares, if specified, (vi) the resource and the total
amount of the fund for such purchase, (vii) the number of the purchased shares in accordance with the previous
share buyback programs and the number of the shares which are yet to disposed of and the results of the
previous share buyback program, (viii) information regarding the proposed effects of program on the financial
status and the activity results of the company, (ix)information regarding the affiliates which may buy back shares
in accordance with the program, if any, (x) the maximum, minimum and weighty average price of the shares in
the last year and the last three months and (xi) the benefit to the related parties from such transaction, if any.
5
Under the CML, joint stock corporations having more than 500 shareholders are also deemed publicly held and
are subject to the CML. The CML requires such companies to apply for stock exchange listing within two years
starting from date on which the company reaches 500 shareholders.
6
The provisions of the Communique are also applicable to the affiliates of a company which purchase the
company’s shares. The affiliate’s Board must adopt a resolution regarding the proposed purchase of the
company’s shares by the affiliate.
2
II.
Limitations
The nominal value of the buyback shares cannot exceed 10% of the issued or paid-up share
capital of the company. The shares of Traded Companies must be traded shares in the stock
exchange and must be bought back in the stock exchange in which they are traded. The
total purchase price of the buyback shares cannot exceed the total amount of the funds
which can be subject of distributable profit. The purchase or sale of shares is not permitted if
there is any undisclosed insider information. Furthermore, such sale or purchase of shares
cannot be carried out from the date of GAS/Board7 resolution with respect to capital increase
until the completion of the capital increase in the company.
III.
Public Disclosure
The Program must be disclosed to public and published in the web site of the company at
least three weeks prior to the GAS meeting date. The companies must comply with the
CMB’s disclosure rules.
IV.
Rights Attached to Buyback Shares
Once the company completes a buyback of its shares, these shares are not taken into
account at the calculation of the GAS for a meeting quorum. The company will not be
entitled to exercise any of the rights attached to these shares save for the dividend and
preemptive rights.
Kemal Aksel ([email protected]) & Zeynep Buharalı ([email protected])
© Kolcuoğlu Demirkan Attorneys at Law, 2014
7
For the companies which adopted registered share capital system.
2