The primary piece of legislation governing mergers in Turkey is
the Turkish Commercial Code (the "TCC"). Under the TCC,
mergers of companies may be carried out in two ways: (i)
acquisition of a company by another company (merger by acquisition)
or (ii) consolidation of two companies under a new company (merger
by formation of a new company).
In the insurance sector, mergers are generally done by way of
merger by acquisition. In a merger by acquisition, at the end of
the merger, the transferor company merges into the transferee. It
consequently ceases to exist and is deregistered from the
respective trade registry.
Under the Insurance Law, insurance companies' merger and
acquisition transactions are subject to the Undersecretariat of
Treasury's (the "Treasury") approval. Furthermore, in
principle, since insurance companies can only operate within the
insurance field for which they are licensed (i.e. a life insurance
company cannot hold a non-life license and vice versa), mergers
between life insurance companies and non-life insurance companies
are not possible.
1. Merger Agreement
The merging companies must execute a merger agreement to
implement the merger transaction. Before executing the merger
agreement, both companies' boards of directors must adopt a
board resolution regarding the preparation of the merger agreement
and the application to the Treasury for its approval.
2. Merger Report
In addition to the merger agreement, the boards of directors of
both merging companies must individually or jointly prepare a
merger report. The merger report must address the legal and
economic grounds as well as the purpose and projected results of
the merger, elements of the valuation used in determining the
exchange ratio as well as the liabilities, if any, imposed on the
shareholders due to the new structure.
3. Treasury & Ministry Approval
In practice, the Treasury's approval takes approximately two
months. After the Treasury's approval, the transferee company
must apply to the Ministry of Customs and Trade (the
"Ministry") to obtain the Ministry's approval for
amendment of its articles of association.
4. Shareholders' Inspection
According to the TCC, the merging companies must prepare and
make available the merger documents (i.e. merger report, balance
sheets of the last three fiscal years, activity reports of the last
three fiscal years, interim balance sheet and merger agreement) for
the inspection of shareholders for a 30 day period before the
general assembly meeting.
5. General Assembly Meetings for Approval of the Merger
Following the expiration of the inspection period, the boards of
the merging companies must call the companies' general
assemblies, for approving the merger agreement. Under the TCC, the
merger agreement's approval is subject to a qualified quorum.
Accordingly, the affirmative vote of at least 75% of the votes
represented at the general assembly meeting is required for this
6. Application to the Trade Registry
Upon the merger's approval by the general assembly of each
merging company, each merging company must apply to the respective
trade registry together with required documentation, to have the
merger transaction registered and announced in the Turkish Trade
Registry Gazette. The merger takes effect upon registration of the
merger transaction with the respective trade registry.
7. Notification of the Merger to Creditors
On the registration date of the merger, each merging company
must notify its creditors through an announcement in the Turkish
Trade Registry Gazette. This announcement will be made three times
with seven day intervals. The creditors of the merging companies
participating in the merger are entitled to assert a claim against
the transferee company to secure their receivables from the merging
companies. Such claim must be filed within three months following
the registration date of the merger.
8. Announcement of the Merger in accordance with the Insurance
Under the Insurance Law, the merger must be announced through
the Press Announcement Authority in two of the top ten rated
national newspapers. The policy holders of the transferor company
may terminate their policies within three months as of the date on
which they become aware of the merger.
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