The CMB, in response to the global economic turmoil and recent
fluctuations observed in the ISE, has revised the principles
applicable for share buy-backs and paved way for all ISE Listed
Companies to conduct share buy-back programs. The Resolution brings
the currently applicable legal framework in line with the share
buy-back rules of the New Turkish Commercial Code (the "New
TCC") which will be in force as from 01.07.2012 and, rather
surprisingly, broadens the type of companies which may utilize the
so-called share price supporting process.
Under the new framework, it is possible for all type of ISE
Listed Companies to purchase their shares up to %10 of their paid
up/issued share capital provided that they are authorized through
their general assemblies. However, board of directors (the
"BoD") of those companies may conduct share buy-backs
without a general assembly authorization in case there is a
reasonable cause to do that. The Resolution governs share buy-back
processes and consequences arising therefrom in detail.
Swift Market Response
As a prompt reaction to the Resolution, three ISE Listed
Company, namely Ersu Meyve ve Gıda Sanayi A.Ş.,
Martı Otel İşletmeleri A.Ş. and
Karkim Sondaj Akışkanları Enerji
Mühendislik Hizmetleri Sanayi ve Ticaret A.Ş. have,
without obtaining general assembly decisions and by solely
depending on the intention of their BoDs, decided to initiate share
repurchases due to market's undervaluation of their shares.
Legal Risk Analysis Required
The recent practical initiative taken by the CMB has raised
concerns in the market regarding the legal basis of the Resolution.
Under the currently applicable Turkish Commercial Code (the
"Currently Applicable TCC"), apart from certain
exemptions, it is not possible for ISE Listed Companies, excluding
listed brokerage firms and investment companies, to buy-back their
shares. The Currently Applicable TCC, excluding certain exemptions,
clearly declares share buy-back arrangements to be null and void.
The New TCC, unlike the Currently Applicable TCC, authorizes all
type of ISE Listed Companies irrespective of their type and status,
and considers those arrangements valid provided that certain
conditions are met. However, such authorization and consideration
will be in force as from 01.07.2012 and, accordingly, the New TCC
cannot be deemed as a legal backdrop for the Resolution until
By taking into account the above described landscape, we advice
ISE Listed Companies, excluding listed brokerage firms and
investment companies, and their BoDs to consider the legal risks in
detail before initiating any share repurchase programs.
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.
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