The new Turkish Commercial Code1 (the
"TCC") has introduced the "group of
companies" concept into Turkish corporate law. Under the TCC,
a "group of companies" is formed by (i) a controlling
commercial company (i.e. the parent company) and (ii) at
least two commercial companies, directly or indirectly, controlled
by the parent company. The TCC determines the instruments granting
control to the parent company, and sets forth certain obligations
for the members of the group of companies.
To this end, the TCC sets forth a registration obligation for
share transfers in the members of the group of companies. The
details of this process are elaborated in the Trade Registry
Regulation (the "TRR").2
Although share transfers in joint stock corporations are normally
not required to be registered, the TRR provides that share
transfers in companies involved in the group of companies must be
registered with the relevant trade registry and announced in the
Turkish Trade Registry Gazette.
According to Article 198 of the TCC, if a company (the
"Notifying Company"), directly or
acquires shares representing 5%, 10%, 20%, 25%, 33%, 50%, 67%
or 100% of the share capital of another company (the
"Target Company") or
the Notifying Company's shareholding ratio in the Target
Company falls below the above-mentioned thresholds,
the Notifying Company must inform the Target Company of such
transaction, in writing, within ten days following completion of
the share transfer.
Once the Target Company receives this notification, it must
submit an application to the relevant trade registry, within ten
days following its receipt of the notification, for registration of
the share transfer and its announcement in the Turkish Trade
Registry Gazette. These share transfers must also be explained in
detail in the Target Company's annual activity report and the
audit report. If the share transfer falling within the scope of
Article 198 is not registered with the relevant trade registry
within the ten-day period, the rights vested in the transferred
shares, including voting rights, will be suspended until
Although Article 198 provides a simple notification process in
relation to share transfers, failure to make such notification
prevents the transferee from benefiting its shareholding rights in
the Target Company. Accordingly, in M&A transactions, the
parties must assess whether or not any of the transaction parties
is a member of a group of companies and, if so, the registration
obligation under Article 198 should be included as a closing action
in the transaction documents.
1 Law No. 6102 published in the Official Gazette dated 14
February 2011 and numbered 27846.
2 Published in the Official Gazette dated 27 January 2013
and numbered 28541.
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