At the end of 2012, the Capital Markets Law No. 2499
("Former CML") was replaced by the new CML No. 6362
("CML" or "Law"), which was published in the
Official Gazette dated 30 December 2012.
According to Article 4 of the Former CML, all capital market
instruments to be issued or offered to the public were required to
be registered with the Capital Markets Board ("CMB").
Now, instead of a registration process, an "approval of the
offering documents system" has been adopted by the CML.
Furthermore, the new Law has brought fundamentally new principles
on the public offering of shares and rights issues. Along with
these innovations of the CML, one of the implementing regulations,
the Communiqué on Share No. VII-128.1
("Communiqué on Share"), was published in the
Official Gazette dated 22 June 2013. Below are the highlights of
the principles envisaged by the Communiqué on Share:
Out of the paid in or issued capital of the company making an
initial public offering, excluding the funds allowed by
legislation, there should be no revaluation funds within the last
In the latest financial statements attached to the prospectus
of the company, the ratio of non-commercial receivables from
related parties to the total sum of the receivables may not exceed
twenty per cent, and the ratio of all non-commercial receivables
from related parties to the total assets may not exceed ten per
cent. However, if the issuer company undertakes certain conditions
that are approved by the CMB, these ratios may be exceeded
If the shareholders, who have control over the management of
the company, sell on the stock exchange within any 12-month period
an amount of shares exceeding (i) ten per cent of the capital of
the company or (ii) 50 per cent of the nominal value of the
actively circulating shares, then these shareholders are required
to issue an information note or form, which is subject to the
principles specified by the CMB and the approval by the CMB.
As of the approval date of the Turkish prospectus for the
shares offered to the public, shareholders holding ten per cent and
more of the shares of the current capital of the company or all
shareholders having control over the management of the company,
regardless of their share percentage, are prohibited from selling
their shares on the stock exchange at a price lower than the
offering price for a period of one year from the date on which the
shares began trading on the stock exchange. All those who purchase
the shares through a private transaction from such shareholders
over the counter are also subject to these restrictions. However,
the company's shares that have been purchased by any
shareholders [on the stock exchange], including those mentioned in
this paragraph, after the shares have begun trading are not within
the scope of this restriction.
Another innovation for shareholders is the right to exit the
company in cases where a capital increase qualifies as a material
transaction under the CML. This right is also granted if the ratio
of the average of the total debts owed to related parties due to
non-cash asset transfers to the average of the company's total
assets exceeds 20 per cent. In this respect, the company's last
four financial statements announced to the public prior to the
capital increase is regarded as relevant. The same is the case even
if the company announces that funds generated by the capital
increase are not to be used for the payment of such debts owed to
the related parties.
Without prejudice to the legal obligations relating to capital
increases, applications made by listed companies for a capital
increase through internal sources, which will result in the
reduction of the stock exchange price of the adjusted shares to
less than TL 2, will not be put into operation by the CMB. In this
regard, the exchange price of the adjusted shares will be
calculated on the average of the weighted average prices made on
the stock exchange within 30 days prior to the announcement of the
capital increase to the public.
A company may increase its share capital from internal sources
after the lowest of its accumulated losses is covered by
setting-off against such internal sources or a resolution by the
board of directors in relation to the recovery of such losses has
been submitted to the CMB. The latest financial statements that
have been prepared pursuant to the legal records of the company and
the regulations of the CMB are relevant in ascertaining the
accumulated losses. However, the following cannot be used to offset
any losses, but rather, can be used as sources for making a capital
increase: (i) real estate sales, (ii) participation sales that are
pending in the equity capital to be added to the capital reserve,
and (iii) the funds that are not allowed to be used in the set-off
of the losses from previous years as per the related
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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Where standard printed terms and conditions of a contract are inconsistent with its special terms and conditions, the special conditions will prevail so as not to defeat the main object and intention of the contract.
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An assignment of rights under a contract is normally restricted to the benefit of the contract. Where a party wishes to transfer both the benefit and burden of the contract this generally needs to be done by way of a novation.
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