Turkey: Innovative Structures

Last Updated: 13 August 2013
Article by Yalçın Özge Okat

Yalçın Özge Okat of Pekin & Pekin examines new challenges for acquisition financing in Turkey following the introduction of the new commercial code

"Securities granted by the acquirer from its own assets will not be null and void"

"Acquisitions play an important role in the efficiency of the economy"

Following the introduction of the new Turkish Commercial Code (TCC) on July 1 2012, certain changes to the legislation have called for innovative transaction structuring by Turkish lawyers.

The new TCC has ignited discussions about the provisions on the prohibition of financial assistance and their effects on acquisition financing transactions. The new provisions of the TCC will be interpreted by the courts in the near future, and supreme court decisions may play a critical role in the application of the TCC and the financial assistance prohibition brought by this law.

Article 380/1 of the TCC prohibits legal transactions with a subject matter of the provision of an advance, loan or security, conducted by a company with another person for the purpose of the acquisition of its own shares. Such transactions will be null and void.

In acquisition financing transactions, the acquirer borrows funds from other parties in order to purchase the shares of the target company. In such transactions, the acquirer may borrow from the target company, especially in cases where cash or liquid assets exist in the company, or receive a loan from a bank or a group of banks. If bank loans were to be in place, banks have to be satisfied by provision of various securities. The acquirers may prefer to use the assets of the target company as securities, in addition to or instead of their own assets, and the flexibility of the acquirer for using the assets of the target company may play a significant role in acquisition financing transactions.

The rationale of Article 380/1 indicates that the phrase "with a subject matter of the provision of an advance, loan or security" should be interpreted in the broadest manner as involving any kinds of such transactions. In this manner, mortgages, commercial enterprise pledges, pledge of receivables, share pledges, guarantees, sureties and any other types of securities will fall under the scope of such clause.

Transactions out of the scope of prohibition

Article 380/1 imposes restrictions on the target only, and not the acquirer. Securities granted by the acquirer from its own assets will not be null and void. In this regard, it should be noted that, as a result of the acquisition transaction, the acquirer will be the owner of the shares of the target company. The acquirer can, therefore, pledge such shares to the bank.

In addition, the TCC article involves two exceptions to the general restriction and stipulates that the prohibition will not apply to transactions that fall under the subject matter of business of the credit or finance institutions (banks or financing companies, for example), and are conducted for the acquisition of the shares of the target company by the employees of the target company or its subsidiaries. The first exception would be applicable if the target is a credit or finance institution. Although a broader interpretation of this exception is sometimes discussed, considering the wording of article 380/1, it does not seem easy to argue that the exception would be a real safe harbour for lenders. The second exception is, as indicated in the rationale of the article, provided for the facilitation of the acquisition of the shares of the target company by its employees. Both exceptions are applicable unless such transactions do not reduce reserves of the target companies below certain levels as indicated in article 380/1.

Purpose, form and timing

For an advance, loan or security transaction to fall under the scope of the prohibition, it must be conducted for the purpose of the acquisition of shares of the target company. A formal agreement is not necessary between the target company and the relevant party. The transactions will fall under the scope of such prohibition regardless of whether the transaction is conducted previous or subsequent to the acquisition, as indicated in the rationale.

Public companies

Public companies are also subject to article 380/1. In addition, pursuant to a Principle Decision of the Capital Markets Board of Turkey (CMB), dated September 9 2009 and numbered 28/780, a listed company may grant securities, pledges and mortgages: (i) in its own name; (ii) on behalf of the companies subject to full consolidation with itself; and (iii) to third parties, provided that such securities, pledges and mortgages are granted to third parties for the purpose of conducting their ordinary course of business.

This Principle Decision does not allow public companies to grant securities to their parents other than for the purpose of conducting their ordinary course of business. The directors of the target will be responsible and an administrative fine of the CMB will be applicable upon a breach of the Principle Decision. This rule works as an additional restriction for the provision of securities, in acquisition financing of transactions where the target is a public company.

Case by case review

In practice, many deals involve international parties and based on the different needs of lenders, acquirers and target companies, various models are discussed. Some cases involve mergers or strings of companies. Such models should be reviewed on a case-by-case basis, keeping in mind that courts may have a tendency to interpret the article in the broadest manner: the rationale of article 380/1 indicates that the article aims to circumvent article 379, which restricts the acquisition of a company's own shares. The heading of article 380/1 is "fraud against law" (headings of the TCC form part of the text of the articles pursuant to article 1534/1).

Be creative

Acquisitions play an important role in the efficiency of the economy. In many cases they are a great way of attracting foreign capital. Some acquisition financing models would, however, not be applicable in view of article 380/1 and the value expected from this regulation may be argued to be lower than its negative effects on acquisition financing transactions.

In this regard, it should be noted that article 23 of EU Directive 77/91/EEC of December 13 1976, from which article 380/1 of the TCC was derived, was changed by Directive 2006/68/EC of September 6 2006. The new version of article 23 of the EU Directive allows such transactions to be conducted in case certain conditions (such as the approval of the general assembly) are met.

It would seem wise for policy makers to review the effects of article 380/1 on the market and consider making necessary amendments on the article in line with the updated version of article 23 of the EU Directive.

This article first appeared in IFLR's Turkey Report 2013.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.