Turkey: Highlights From The Recent Amendments To The Capital Markets Legislation

Last Updated: 1 October 2004
Article by Kayra Üçer and Serkan Gül

Throughout late 2003 and early 2004, the Turkish Capital Markets Board (the "CMB") promulgated a number of new regulatory acts.

Below are the highlights from the new regulatory acts of the CMB.

Public Offering

Communiqué on Sale and Registration of Shares with the Capital Markets Board, Serial I No. 261 has been amended by the Communiqué Series I, No. 322.

According to the Communiqué as amended, in case of an initial public offering or a secondary public offering through the book building method, if the demand exceeds the number of shares offered to sale, offerors would be entitled to sell additional shares, provided that the relevant announcement is published in the prospectus. However, the total amount of the additional shares cannot be more than 15% of the shares offered to public prior to the issuance of such additional shares.

In addition, upon offering of the shares to public, the Communiqué authorizes the broker companies that are listed in the prospectus and involved in the public offering, to purchase the offered shares from the Istanbul Stock Exchange ("ISE") in order to establish price stability, provided that the relevant announcements are published in the prospectus.

Broker companies are entitled to realize such purchases only for a period of 30 (thirty) days starting from the date of trading of the shares in the ISE. Broker companies can initiate such purchase if and when the trading price of the shares is below the public offering price and they cannot sell those shares below the public offering price within the 30-day period.

Cumulative Voting

The Law on Capital Markets No. 24993 authorizes the CMB to issue regulations regarding the cumulative voting system in order to establish a balance between the majority shareholders and the minority shareholders of publicly held companies, and to secure the rights of the minority shareholders by enabling them to be represented in the board of directors and statutory auditors.

The Communiqué Related to the Cumulative Voting Principles to be Applied at General Assembly Meetings of Undertakings Series IV No. 294, which was prepared to implement this principle and granted a discretion for the applications of cumulative voting in publicly held companies, has recently been amended through Communiqué Series IV No. 315

According to the Communiqué, publicly held companies willing to apply the cumulative voting principle at their general assembly meetings must amend their articles of association to that effect. Companies whose shares are not traded in the ISE but the number of whose shareholders has continuously been over 500 for the past 2 years ("Undertaking") are required to implement the cumulative voting system and thus amend their articles of association accordingly at their first ordinary general assembly meeting to be convened.

Furthermore, the Communiqué, as amended, indicates that if a vacancy occurs in the board of directors or statutory auditors due to any reasons other than dismissal, all the board members should be elected at the same general assembly.

Currently, the Communiqué requires the application of the cumulative voting principle only in Undertakings, since unlike the shareholders of publicly held companies whose shares are being traded in the ISE, the minority shareholders of Undertakings that are not satisfied with the management policies do not have the flexibility to sell their shares whenever they wish to do so.


Turkish legislation does not provide clear guidance regarding the procedures to be followed for the delisting of a public company. Additionally, although the Capital Markets Law permits delisting of publicly held companies subject to certain conditions, in practice, the CMB is reluctant to accept the delisting demands of companies.

However, very recently the CMB approved the delisting request of a company and there is a pending procedure for the preparation of a legislation to clarify the details of this matter.

Distribution of Profit

Pursuant to the resolution dated 30 December 2003 of the CMB, publicly held companies are required to distribute at least 20% of the distributable profit from the activities held during 2003.

The CMB's resolution states that mandatory dividend distribution can be made (i) in cash; (ii) by distributing bonus shares to be issued through increase of the company's share capital in an amount not less than 20% of the distributable profit; or (iii) by distributing a certain amount of cash and a certain amount of bonus shares.

The CMB bases this decision on (i) Article 15 of the Capital Markets Law, which states that "the ratio for the first dividend to be stated in the articles of association of listed companies cannot be less than the ratio determined and announced by the CMB", and (ii) Article 5 of the Communiqué on the Principles of Distribution of Dividends in Listed Joint Stock Corporations, which empowers the CMB to oblige publicly held companies to distribute in cash the first dividend to be set aside from the profits of the preceding year.

Prior to the issuance of this decision, the decision regarding distribution of profit was left to the discretion of the general assembly of shareholders.

Credit Rating Activities and Agencies

In December 2003, the Communiqué Related to the Rating Activities and Rating Corporations6 has been amended by the Communiqué Series VIII No. 407

The Communiqué, as amended, enables credit rating agencies to evaluate the compatibility of the public companies activities with corporate governance principles. However, public companies are not obliged to have their activities rated from a corporate governance point of view. Nevertheless, the CMB may require public companies to have their activities rated.

According to the Communiqué, credit rating agencies are no longer required to obtain the CMB’s permission prior to their establishment. However, they should be included in the list to be prepared by the CMB in order to carry out rating activities.

In addition, credit rating agencies are not required to obtain the CMB’s approval before amending their articles of association, provided that such amendments are notified to the CMB within five business days.

Furthermore, pursuant to the Communiqué, credit rating agencies are required to have a share capital of at least 200 billion Turkish Liras8. The Communiqué indicates that credit rating agencies must amend their organizations and activities in a manner to fulfill these requirements within two years following the announcement of this Communiqué. Therefore, credit rating agencies whose share capital are less than 200 billion would be obliged to increase their share capital accordingly.


According to the Communiqué on the Principles of the Distribution of Dividends in Listed Joint Stock Corporations, publicly held companies are required to inform their shareholders of any previous year donations at the relevant ordinary general assembly meetings. Previously, publicly held companies used to fulfill this obligation in different ways, i.e. by including it as a general assembly meeting agenda item or by inserting such information in the annual activity report.

In order to ensure consistency, the CMB issued a declaration requiring public companies to inform their shareholders of previous year donations by including an item in their general assembly meeting agenda. Accordingly, all public companies are required to insert such an item in their general assembly meeting agenda, if they have made any donations in the previous year.

International Financial Reporting Standards

The Communiqué on Accounting Standards Series XI No. 25, which is also one of Turkey’s undertakings under the Letter of Intent dated 30 July 2002 to the IMF has been issued in order to comply with the European Union directives requiring all listed corporations to prepare their consolidated financial tables in accordance with the International Financial Reporting Standards ("IFRS") until 1 January 2005, at the latest.

The Communiqué will enter into force on 1 January 2005. However, corporations are entitled to apply the provisions of this Communiqué and prepare their financials according to IFRS rules starting from their annual or interim accounting year-end as of 31 December 2003.

According to the Communiqué, corporations are required to prepare balance sheets, income, cash flow and equity charts together with their footnotes. The corporations’ mid-year (6 months) and annual financial statements would be fully prepared, whereas the quarterly financial statements would be in summary form. Additionally, mid-year financials would be subject to a limited audit, whereas annual financials would be subject to permanent audit.


1. Published in the Official Gazette on 15 November 1998

2. Published in the Official Gazette on 17 December 2003

3. Published in the Official Gazette on 30 July 1981

4. Published in the Official Gazette on 18 February 2003

5. Published in the Official Gazette on 21 December 2003

6. Published in the Official Gazette on 6 March 1997

7. Published in the Official Gazette on 4 December 2003

8. Approximately USD 130,000 as of the publishing date.

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”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions