The new Turkish Commercial Code1 (the "TCC") has introduced the "group of companies" concept into Turkish corporate law. Under the TCC, a "group of companies" is formed by (i) a controlling commercial company (i.e. the parent company) and (ii) at least two commercial companies, directly or indirectly, controlled by the parent company. The TCC determines the instruments granting control to the parent company, and sets forth certain obligations for the members of the group of companies.

To this end, the TCC sets forth a registration obligation for share transfers in the members of the group of companies. The details of this process are elaborated in the Trade Registry Regulation (the "TRR").2 Although share transfers in joint stock corporations are normally not required to be registered, the TRR provides that share transfers in companies involved in the group of companies must be registered with the relevant trade registry and announced in the Turkish Trade Registry Gazette.

According to Article 198 of the TCC, if a company (the "Notifying Company"), directly or indirectly:

  1. acquires shares representing 5%, 10%, 20%, 25%, 33%, 50%, 67% or 100% of the share capital of another company (the "Target Company") or
  2. the Notifying Company's shareholding ratio in the Target Company falls below the above-mentioned thresholds,

the Notifying Company must inform the Target Company of such transaction, in writing, within ten days following completion of the share transfer.

Once the Target Company receives this notification, it must submit an application to the relevant trade registry, within ten days following its receipt of the notification, for registration of the share transfer and its announcement in the Turkish Trade Registry Gazette. These share transfers must also be explained in detail in the Target Company's annual activity report and the audit report. If the share transfer falling within the scope of Article 198 is not registered with the relevant trade registry within the ten-day period, the rights vested in the transferred shares, including voting rights, will be suspended until registration.

Although Article 198 provides a simple notification process in relation to share transfers, failure to make such notification prevents the transferee from benefiting its shareholding rights in the Target Company. Accordingly, in M&A transactions, the parties must assess whether or not any of the transaction parties is a member of a group of companies and, if so, the registration obligation under Article 198 should be included as a closing action in the transaction documents.

1 Law No. 6102 published in the Official Gazette dated 14 February 2011 and numbered 27846.

2 Published in the Official Gazette dated 27 January 2013 and numbered 28541.

© Kolcuoğlu Demirkan Koçaklı Attorneys at Law 2015

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