Turkey: Advance Dividend

Last Updated: 26 February 2013
Article by Nilay Celebi

Advance dividend is regulated under Turkish Commercial Code numbered 6102 ("TCC numbered 6102") and under the Communiqué concerning Advance Dividend Distribution ("Communiqué published in the Official Gazette on August 9, 2012. The Communiqué comprises companies which are not subject to Capital Markets Law, limited liability companies and limited partnerships divided into shares.

Pursuant to Article 5 of the Communique, for the distribution of advance dividend by the companies, it is required that:

a) A resolution must be taken by the general assembly of the company on advance dividend distribution, and

b) Profit must be made according to the interim financial statements of 3, 6 or 9 months prepared in the accounting period in which advance dividend will be distributed.

Article 6/1 of the Communiqué regulates the content of the resolution taken by the general assembly of the company. Pursuant to this article, in case general assembly of the company resolves to distribute advance dividend, the following must be stated in this resolution as well;

a) In the end of the related accounting period, if net profit which shall cover the advance dividend distributed within the year does not occur, advance dividend exceeding the net profit shall be deducted from the free reserve funds stated in the previous year's balance sheet

b) In cases where the amount of free reserve funds does not cover the advance dividend, the overpaid advance dividend shall be returned to the company by the shareholders upon notice of the Board of Directors

c) If loss occurs at the end of the related accounting period;

1) General legal reserve funds and free reserve funds, if any, included in the previous years' balance sheet shall be primarily used for the deduction of the loss. If these reserve funds do not cover the loss, the whole advance dividends distributed within the period shall be returned to the company by the shareholders upon notification by the Board of Directors,

2) After the deduction of the general legal reserve funds and free reserve funds from the loss for the financial year, remaining amount of free reserve funds shall be extracted from advance dividends. In consequence of extraction, if the amount of advance dividend distributed within the financial year exceeds remaining amount of free reserve funds the exceeding part shall be returned to the company upon the notification by the Board of Directors.

In order to resolve for the distribution of advance dividend, the general assembly convenes with the presence of the shareholders or their representatives holding at least one fourth of the capital and this quorum must be maintained throughout the meeting. The resolution is taken with the majority of the votes present in the meeting.

It is required that the advance dividends paid before the related accounting period must be deducted from the net profit of the related year. The general assembly cannot resolve to distribute dividends or to pay dividends without completing this transaction.

Pursuant to Article 8 of the Communiqué, advance dividend is paid to the shareholders in proportion to their shares (pro rata) as of the distribution dates, without taking into account the privileges of the privileged shares. Advance dividend cannot be paid to the dividend shareholders, the members of the board of directors who are not shareholders and persons participating in the profit other than shareholders.

If shareholders are in debt to the company other than capital subscription, the aforesaid debt is deducted from the advance dividend paid to the shareholder.

Furthermore, Article 8 of the Communiqué states the required principles in cases the company desires to re-distribute advance dividend in the same accounting period if the relevant companies subsequently concluded capital increase in that accounting period. Pursuant to such article, new shareholders are given priority in the payment of advance dividend after the capital increase. This priority continues until the total amount of advance dividends received for each share within a period by the old and new shareholders are equalized. After the equalization of the total amount of advance dividends received for each share within a period by the old and new shareholders, remaining amount of advance dividend or the amount of advance dividend to be paid in the following interim period is paid to the shareholders in proportion to their shares.

Article 9 of the Communiqué states the duties of the board of directors. Pursuant to this Article, those below shall be performed respectively,

a) A report relating to advance dividend distribution is prepared and in this report it is indicated that:

1) The interim period financial statements forming a basis on advance dividend distribution are prepared in accordance with the principles stated under Article 515 of the Law numbered 6102,

2) The amount of advance dividend to be distributed is calculated pursuant to Article 7 of the Communiqué. The documents forming the basis of performance of the calculations and other conditions are added to this report.

b) Board of directors resolves on the payment of advance dividend determined in the report to the shareholders and the procedures regarding these payments.

c) The advance dividend is paid to the shareholders within 6 weeks following the resolution at the latest pursuant to Article 8 of the Communiqué.

The board of directors provides necessary assurance during the payment of advance dividend to the bearer shareholders.

In cases where the circumstances explained above in Article 6/1 of the Communiqué arises, board of directors carries out the actions regarding the repayment of the advance dividends paid in extra by collecting them from the shareholders to the company.

For the companies distributing advance dividend regarding the accounting period of 2012, the calculation of the amount of advance dividend is based on the balance sheets prepared pursuant to Turkish Commercial Code numbered 6762. In the report prepared by the board of directors pursuant to Article 9 of the Communiqué, it is clarified that the interim balance sheet forming the basis of advance dividend distribution is prepared in compliance with real situation.


As is explained in detail hereinabove, advance dividend distribution is possible within the scope of rules stated in the Communiqué and with the resolution of the general assembly.

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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