The primary piece of legislation governing mergers in Turkey is the Turkish Commercial Code (the "TCC"). Under the TCC, mergers of companies may be carried out in two ways: (i) acquisition of a company by another company (merger by acquisition) or (ii) consolidation of two companies under a new company (merger by formation of a new company).
In the insurance sector, mergers are generally done by way of merger by acquisition. In a merger by acquisition, at the end of the merger, the transferor company merges into the transferee. It consequently ceases to exist and is deregistered from the respective trade registry.
Under the Insurance Law, insurance companies' merger and acquisition transactions are subject to the Undersecretariat of Treasury's (the "Treasury") approval. Furthermore, in principle, since insurance companies can only operate within the insurance field for which they are licensed (i.e. a life insurance company cannot hold a non-life license and vice versa), mergers between life insurance companies and non-life insurance companies are not possible.
1. Merger Agreement
The merging companies must execute a merger agreement to implement the merger transaction. Before executing the merger agreement, both companies' boards of directors must adopt a board resolution regarding the preparation of the merger agreement and the application to the Treasury for its approval.
2. Merger Report
In addition to the merger agreement, the boards of directors of both merging companies must individually or jointly prepare a merger report. The merger report must address the legal and economic grounds as well as the purpose and projected results of the merger, elements of the valuation used in determining the exchange ratio as well as the liabilities, if any, imposed on the shareholders due to the new structure.
3. Treasury & Ministry Approval
In practice, the Treasury's approval takes approximately two months. After the Treasury's approval, the transferee company must apply to the Ministry of Customs and Trade (the "Ministry") to obtain the Ministry's approval for amendment of its articles of association.
4. Shareholders' Inspection
According to the TCC, the merging companies must prepare and make available the merger documents (i.e. merger report, balance sheets of the last three fiscal years, activity reports of the last three fiscal years, interim balance sheet and merger agreement) for the inspection of shareholders for a 30 day period before the general assembly meeting.
5. General Assembly Meetings for Approval of the Merger
Following the expiration of the inspection period, the boards of the merging companies must call the companies' general assemblies, for approving the merger agreement. Under the TCC, the merger agreement's approval is subject to a qualified quorum. Accordingly, the affirmative vote of at least 75% of the votes represented at the general assembly meeting is required for this approval.
6. Application to the Trade Registry
Upon the merger's approval by the general assembly of each merging company, each merging company must apply to the respective trade registry together with required documentation, to have the merger transaction registered and announced in the Turkish Trade Registry Gazette. The merger takes effect upon registration of the merger transaction with the respective trade registry.
7. Notification of the Merger to Creditors
On the registration date of the merger, each merging company must notify its creditors through an announcement in the Turkish Trade Registry Gazette. This announcement will be made three times with seven day intervals. The creditors of the merging companies participating in the merger are entitled to assert a claim against the transferee company to secure their receivables from the merging companies. Such claim must be filed within three months following the registration date of the merger.
8. Announcement of the Merger in accordance with the Insurance Law
Under the Insurance Law, the merger must be announced through the Press Announcement Authority in two of the top ten rated national newspapers. The policy holders of the transferor company may terminate their policies within three months as of the date on which they become aware of the merger.
© Kolcuoğlu Demirkan Koçaklı Attorneys at Law 2015
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
