The new Communiqué of Capital Markets Board (CMB)
regarding the Removal from the Company and The Sale Rights (the
Communiqué) numbered II-27.1, dated 2 January 2014, became
effective 1 July 2014. The new Communiqué was prepared in
accordance with the Article 27 (Removal and sale rights)
of the Capital Markets Law, sets out for the first time in capital
markets, the principles and procedures for the exercise of the
rights of controlling shareholder to remove the other shareholders
from the company as well as the sale rights of their shares by the
other shareholders to the controlling shareholder.
Under the Communiqué, the controlling shareholder must
reach %95 of the voting rights in order that such removal and sale
rights become exercisable. In calculation of such proportion, the
direct or indirect shares of the shareholders and the persons
acting in concert with them along with any privileges on the voting
rights will also be counted. The Communiqué stipulates that
the controlling shareholder must apply to the company, in cases
where the controlling shareholder wants to remove the other
shareholders, for the exercise of such removal rights within 3
months after such controlling shareholder reaches to have %95 of
the total voting rights of the company, or following the purchase
of any further shares of the company in the cases where such
shareholder already holds %95 voting rights of the same. The board
of directors of the company to whom such application is made will
initially verify the actual shareholding status of the shareholder
who makes such an application. The Board of directors of the
company will further evaluate the price to be paid for the purchase
and resolve that the shares of the other shareholders are cancelled
and that the new shares are issued to replace such cancelled
shares. Only then, will the company apply to CMB, with the
documents listed under the Communiqué, for the approval of
the issuance certificate in respect to such new shares. As to the
determination of the price to be paid in return for the purchase of
the shares of other shareholders by the controlling shareholder,
the Communiqué sets out that, (i) for the public companies
whose shares are traded in an exchange, the arithmetic average of
the weighted average in the exchange, for each of the share groups
being traded in such exchange, calculated for the last 30 days
before the controlling shareholder status has been acquired or the
additional shares are purchased by the controlling shareholder;
(ii) for the public companies whose shares are not traded in an
exchange, the price indicated in the valuation report prepared for
the determination of the fair and reasonable price in relation to
each share group, will be taken into consideration. Pursuant to
exercise of the removal rights by the controlling shareholder, the
company will, ex officio, be excluded by CMB from the scope of the
Capital Markets Law.
As per the temporary provision 1 of the Communiqué such
right to remove the other shareholders does not arise per se for
the shareholders who already hold such status of controlling
shareholder as of the effectiveness date of the Communiqué.
Also the sale rights of the other shareholders do not arise under
such circumstances. However, if the controlling shareholder makes
an additional share purchase, such rights become exercisable. So
far 5 companies listed in Borsa İstanbul, among the 13
companies publicly traded, fall short %5 of the proportion which
has applied to CMB to benefit from such provision and for the
removal of the other shareholders.
As being one of the reasons and justifications of the
Communiqué, it is indicated that foreign based companies
already listed in their domestic exchanges and subject to their
domestic regulations believe that an additional regulation burden
imposed on them, in particular, despite such a small proportion of
publicly traded shares, is not favorable in any sense. Further,
such companies do not want the price to be determined by such a
small number of investors based on the small proportion of publicly
traded shares, and applied as the total valuation of the company.
However, despite such justifications, the fact that these companies
are now allowed to purchase the shares of the retailer investors,
for whom such investments are among their lifelong savings, with a
price that such retailer investors do not want to sell, is strongly
criticized by several scholars and investors working in the
The question as to whether the Communiqué is designed to
provide more favorable conditions for the controlling shareholders
of the public companies who holds more than % 95 shareholding of
the company, or is it solely an invention to shake off the small
investors is yet to be answered.
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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