The Turkish Commercial Code ("TCC" or "Law") has enabled companies to apply different structural models and to implement new legal formations by including spin-off provisions to its Article 159 et seq. In accordance with the provisions of the law, companies may transfer a certain element, or elements, of their assets to a single company or multiple companies that are already incorporated, or to a newly incorporated company via spin-off method. By this means, companies may exclude the unwanted elements of their assets in a manageable manner.

TCC Art. 159/I categorizes spin-off operations into two types that are full or partial spin-offs. In a full spin-off, all assets are transferred to the current or potential company or companies, by being separated. The separated company dissolves, and the shareholders of such company become the shareholders of the acquiring company.

On the other hand, in a partial spin-off, a single or multiple parts of the company transfers its assets to another current or potential company. The shareholders of the company that is the subject of the spin-off becomes the shareholders of the acquiring company. The company that is partially spun off does not dissolve, but continues its existence with its remaining assets.

TCC Art. 160 regulates how spin-offs are to be conducted. According to this Article, equity companies and cooperatives may be spun off to equity companies and cooperatives. Invalid spin-offs are avoided by means of conversion.

With respect to company shares and the preservation of rights in spin-offs, the TCC refers to Article 140 that pertains to mergers. As per such Article, the principle of the continuation of company shares is dealt with. The current shareholding rights of the spun-off company shall also be met in the company structure that emerges following the spin-off operation. Within this context, the asset values of the spun-off companies, and the distribution of their voting rights shall be dealt with.

Capital decrease during the spin-off operations is regulated under Art. 162 of the TCC. Since a certain amount of company assets are being separated from the body of the spun-off company, a decrease in the capital of such company may actualize. Capital decrease may be required in order to prevent the capital loss of the transferor company in the partial spin-off operation, and to adjust the capital to the new company structure. There are no explicit provisions in the law governing the conditions of the capital decrease and the ratios thereof. The decision as to whether a capital decrease is necessary shall be determined by the managerial body. The paragraph in Art. 162 of the TCC expressing that "Art. 473 and 474 of the law shall not be applied," regarding the capital decrease, rendered spin-off operations more feasible by allowing capital increase operations to be conducted without a board of directors' report and convocation of the creditors.

Due to the fact that the elements of the company assets of the spun-off company that are being separated from the body of such company and are being transferred to the acquiring company, the assets of the acquiring company shall be increased. The capital increase to be conducted as such is governed by Art. 163 of the TCC. Pursuant to such Article, the acquiring company shall increase its capital by preserving the rights of the shareholders of the spun-off company. The decision regarding the capital increase shall be taken in accordance with the procedure on the amendments to the articles of association. The important thing to consider in this step is the term, "The provisions regarding the capital in kind shall not be applied in the spin-offs," which is stipulated under Art. 162/3 of the TCC. Thus, another convenience is envisaged for companies that aim to conduct restructuring via a spin-off.

As mentioned above, a spin-off operation is followed by a merger operation, in which a portion of the assets of the spun-off company are merged by a current or newly established company1. The magnitude and value of each element of the company to be separated from the company via spin-off shall be evaluated in terms of Turkish Liras, and the assets to be transferred to the acquired company shall be explicitly determined and listed. This operation shall be conducted by the parties to the spin-off agreement, or by the party preparing the spin-off plan2.

Since the assets of the spun-off company are distributed into both full and partial spin-off operations, the assets of the transferred company shall not be entirely devolved to the acquiring company or to the newly incorporated company, yet such assets shall be devolved to such companies, partially. Therefore, the principle of "partial complete succession" comes into question in spin-offs. Partial complete successions are subject to the principles of complete successions. The mere difference is the fact that partial complete successions are a form of complete successions that are allocated to portions of assets3. Additionally, it is also stated in the preamble of Art. 159 of the TCC that the assets being acquired are transferred to the acquiring company as a result of partial complete successions.

One of the most significant issues with regard to the applicability of the spin-off is that together with the finalization of a valid spin-off, the legal transfer thereof actually finalizes via a single operation ("uno actu" and "ipso iure") as per the law. Consequently, as per the prevailing view of the doctrine, all agreements of the spun-off company that takes part in the spin-off operation, shall ex officio be transferred to the acquiring company or companies, via a single operation, as per the law.

As far as the sequence of actions is concerned, initially, the managerial body should request the registration of the resolution regarding the spin-off. Again, in a partial spin-off, if the capital of the company must be decreased, the amendment to the articles of association pursuant to the capital decrease must also be registered. There are numerous outcomes of the registration of the resolution regarding spin-off. Firstly, spin-offs become valid as of the registration. Moreover, complete successions actualize, and the assets and liabilities are recorded with the inventory transfers to the acquiring company at the moment of the registration. Lastly, in full spin-offs, the transferred company dissolves via registration.

In addition, the issue as to whether personal agreements that are securely attached to persons or agreements, which are non-transferrable due to their natures or agreements and that are subject to non-assignment, is also contradictory among the academics4.

In addition, unless otherwise implied, we are of the opinion that due to the substantial principal of spin-offs that render all of the company assets ex officio transferred to the acquiring company via a single operation as per the law, the agreements shall also be transferred to the company to be incorporated owing to the spin-off.

The balance of liabilities and assets must also be considered during spin-off operations. The liabilities and assets that are subject to spin-off operations should be determined in a balanced manner. Both the assets and liabilities must be included with the assets that are subject to the spin-off operation. The sole transfer of liabilities is impossible. Otherwise, the shareholders of the spun-off company shall not be able to acquire equivalent shares in the acquiring company. However, it is not mandatory for the assets and liabilities to be counterbalanced5.

The assets that are not subject to the spin-off operation, and which are excluded from such operation, are especially significant in terms of full spin-off. The Spin-Off Agreement or spin-off plan may be comprised of regulations regarding the assets to be excluded from the spin-off operation. If there are no such regulations, the provisions under Art. 168 of the TCC shall be applied. The first paragraph of such Article regulates the rules to be applied in cases of full and partial spin-offs. Pursuant thereto, it is envisaged that with regard to the assets that remain unallocated as per the spin-off agreement, or plan a) in full spin-offs, all acquiring companies shall be entitled to joint ownership in accordance with their net asset ratio transferred to them as per the spin-off agreement, or plan b) in partial spin-offs, all assets in question shall remain with the transferor company.

It is stated in the second paragraph of the Article that the first paragraph shall also be applied by analogy to the receivables and intangible asset rights. In accordance with the third paragraph of the same Article, the companies joining the spin-off operation shall be jointly liable for the debts that are not exclusively allocated to a single company, as per the spin-off agreement or plan.

Consequently, spin-off operations that enable commercial companies to restructure themselves or even to fix their financial situations, are currently the most commonly practiced operations within commercial life. The transfer of assets, which is the main element of spin-off operations and its consequences are highly debated issues. However, benefiting from the spin-off operation in the most effective manner shall give rise to quite practical solutions for companies aiming to be restructured.


1 Tekinalp Ünal, Sermaye Ortaklıklarının Yeni Hukuku, 4th Edition Istanbul 2015, p. 731.

2 Tekinalp Ünal, Sermaye Ortaklıklarının Yeni Hukuku, 4th Edition, Istanbul 2015, p. 731.

3 Tekinalp Ünal, Sermaye Ortaklıklarının Yeni Hukuku, İstanbul 2013, s. 666.

4 Pulaşlı Hasan, 6102 Sayılı Türk Ticaret Kanununa Göre Şirketler Hukuku Şerhi, Ankara 2011, p. 203

5 Tekinalp Ünal, Sermaye Ortaklıklarının Yeni Hukuku, 4th Edition, Istanbul 2015, p. 727.

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