Turkey: Cross Shareholding In Group Of Companies


Cross shareholding means, in general terms, the participation of two companies to each other's capital. In various jurisdictions, including Turkey, this concept is dedicated to the situations where the cross shareholding ratio is above a certain percentage. Cross shareholding below such percentage is considered beyond the scope of the legal framework, and no consequences are attached thereto. It is also common that special sanctions apply to situations where one of the companies in the cross shareholding structure is dominant over the other, or both companies are in a dominant position against each other. In legal doctrine, situations where there is no dominant relationship between the two companies are referred to as "simple cross shareholding" and where there is as "qualified cross shareholding." This newsletter addresses the provisions of the Turkish Commercial Code1 ("TCC") regarding simple and qualified cross shareholding.

Purpose of the Regulation

Cross shareholding has certain drawbacks in terms of principle of protection of capital, transparency of financial statements and independency of management. Jurisdictions usually permit cross shareholding while introducing various sanctions. In the preamble of Articles 197 and 201 of the TCC, it is stated that the sanctions set forth under the Turkish law aim to "prevent issues, such as dilution of capital (fictitious capital), hesitation on trueness of the balance sheet" and "restrict the effects of the shares of the same origin on the management". According to the preamble, again, existence of Article 197 of the TCC does not guarantee legal compliance for all events, and does prevent enforcement of the sanction of such incompliance, especially if high cross shareholding is in breach of balance sheet principles2.

Simple Cross Shareholding

Cross shareholding provisions were not regulated under Commercial Code No. 6762, and have been directly adapted from Article 19/1 of the German Stock Corporation Act (Aktiengesetz, "AktG") in the preparation of the new law. As per Article 197 of the TCC, "Stock corporations that hold at least one fourth of each other's shares are in cross shareholding." Accordingly, the situations only where both companies hold at least one fourth of each other's shares are deemed as cross shareholding within the scope of the TCC. Situations where the participation ratio is below one-fourth do not technically count as cross shareholding. For example, if company X holds 30% of the shares of company Y, and company Y holds 20% of the shares of company X, there is no cross shareholding, and consequences linked thereto do not apply. For the calculation of the participation percentage, Article 196 of the TCC regarding the calculation of share and voting ratios shall be taken into consideration. For the relationship to be deemed as a simple cross shareholding, there should be no dominant relationship between the said two companies.

Consequences of Simple Cross Shareholding

While Article 197 of the TCC only makes a definition of cross shareholding, consequences linked thereto are regulated under Article 201 of the TCC. According to the first paragraph of the Article that regulates the consequences of simple cross shareholding, "A stock corporation that knowingly gets into a cross shareholding situation by acquiring the shares of another stock corporation can only use one-fourth of its total votes arising from the shares subject to participation and of its other shareholding rights; all other shareholding rights, except for the right to acquire the gratis shares, shall be frozen." Accordingly, enforcement of this limitation is subject to the condition that the subject stock corporation gets into cross shareholding situation knowingly, and applies not to both of the companies, but only to the company that knowingly gets into this situation. For example, if company X holds 30% of the shares of company Y, and has informed company Y as per Article 198 of the TCC, and if company Y, despite knowing this, acquires 40% of the shares of company X, company Y encounters the sanction of shareholding rights being frozen, and can only use its rights arising from one-fourth of its shares, i.e. 10%. The frozen 30% shares do not count in the calculation of the general assembly meeting and decision quorum. If there are 100 shares in company X, the meeting and decision quorum shall be calculated over 70 shares.

Even if company X, which holds 30% of the shares of company Y, has not notified company Y as per Article 198 of the TCC, if company Y is made known of this situation otherwise, it shall, again, be subject to the same sanction. This is because Article 201/1 of the TCC does not refer to any special notification requirement, but only seeks the condition to "know". If company Y participates in company X in the amount of 40% without knowing that 30% of its shares are held by company X, it shall be entitled to use all of its rights arising from its shares, and shall not be subject to any sanction. Notifications to be made as per Article 198 of the TCC, and consequences of failure thereof are not the subject of this article and, therefore, are not examined herein3.

From the expression "all shareholding rights", one should understand the entire rights connected to shares, such as voting rights, liquidation and profit sharing rights, and pre-emption rights. Only the right to acquire gratis shares, which is clearly left outside the scope of the law, shall not be frozen.

Another point that should be analyzed is the start and end time of the share freeze. Shareholding rights shall freeze at the time of the intentional acquisition of the shares that have created the cross shareholding situation, and shall continue until the end of the cross shareholding situation, e.g. until the shareholding of one of the companies in the other company falls below one-fourth. Unused rights do not disappear, they freeze, and by the transfer of these shares, the new acquirer is entitled to use the frozen rights4. There is no explicit provision in the TCC regarding whether or not any claims may be asserted for the rights arising from the frozen rights after the freezing is lifted. However, it is argued by several scholars that frozen rights cannot be claimed, products belonging to the frozen rights should be distributed to the non-frozen rights on a pro rata basis in the general assembly meetings convened regardless of the frozen rights, and provisions to the contrary cannot be adapted by the articles of association or general assembly resolution5.

It is stated under the preamble of the TCC that although Article 201, regulating the consequences of cross shareholding, was inspired by Article 328 of the German AktG, it is a genuine provision completely different therefrom, and the purpose of the two regulations are the same, but the consequences are different6. Indeed, if we adapt the explanation in the preamble to the above example, while calculating the ratio of company Y's frozen shares as per the German AktG, the total shares of company X shall be taken into consideration instead of the total shares owned by company Y, and company Y shall be entitled to vote up to 25% of the total votes of company X. For example, if there are 100 shares in company X, and company Y holds 40% of the shares of company X, i.e. 40 votes, company Y can use 25 shares from among these. This is because the limit is 25% of the total votes of company X. On the other hand, in the same example, as per the TCC, company Y shall be entitled to use only 10 votes, i.e. 25% of the votes it owns.

Qualified Cross Shareholding

If one of the companies in a cross shareholding situation is dominant over the other, the second one is deemed at the same time a dependent company, and this situation is referred to as a "unilateral qualified cross shareholding". If both of the companies in a cross shareholding situation are dominant over each other, both of them are deemed a dominant and a dependent company and "bilateral qualified shareholding" occurs. This regulation is parallel with Article 19/2-3 of the German AktG.

In the determination of a dominant relationship, not only the majority of the voting rights, but also other situations specified under Article 195 of the TCC, shall be considered. Accordingly, if a company holds the right to appoint the members to the management body of another company as per the articles of association in a number that constitutes the majority to make decisions, or constitutes, among its own voting rights, the majority of the voting rights, alone or together with other shareholders or partners based on an agreement, or keeps such company under its dominance pursuant to an agreement, or otherwise, the first company is deemed as dominant, and the other is the dependent company. Ownership of more than 50% of a company's shares is the presumption of law to the existence of a dominant relationship.

Consequences of Qualified Cross Shareholding

In the event of a qualified cross shareholding, the provisions of Article 201/1 of the TCC applicable to the simple cross shareholding as explained, above, do not apply; instead, provisions of Articles 389 and 612, which are explicitly reserved under such first paragraph of Article 201/1, come in to play. Since the consequences connected to dominance shall apply to the companies in qualified cross shareholding situations, legislators preferred not to aggravate these conditions, and decided not to enforce the sanction of the freezing of shares.

As per this Article, those that will be especially applicable among the consequences linked to dominance are related to the acquisition of its own shares by a company. Pursuant to Articles 389 and 612 of the TCC, the parent company's shares acquired by the subsidiary company shall not be taken into consideration in the calculation of the meeting quorum of the parent company's general assembly meeting, and voting rights belonging to the parent company shares acquired by the subsidiary company and related rights shall freeze. This means that shares acquired by the company, itself, and the parent company shares acquired by the subsidiary company, are considered to be the same in terms of consequences attached thereto. Despite the cross shareholding situation, not all of the rights arising from the shares of the subsidiary company, but only the voting rights, freeze. However, this does not cover only 25% of its shares, but all of them.

Finally, it should be mentioned that if there is no dominant relationship, it is irrelevant that the subsidiary company holds at least one-fourth of the parent company's shares, in terms of the attached consequences. No matter in which ratio the subsidiary company acquires the shares of the parent company, shall it be subject to the provisions of Articles 389 and 612 of the TCC. This consequence means stepping outside of the scope of the definition of cross shareholding in terms of Article 197 of the TCC in the existence of a dominant relationship.


Although cross shareholding brings with it several drawbacks, various jurisdictions have chosen to make it subject to sanctions, instead of prohibiting it. Within the scope of the TCC, technically, stock corporations that hold at least one-fourth of each other's shares are deemed to be in a cross shareholding situation. Cross shareholding is addressed in two different categories that may be identified as simple and qualified, and different consequences are attached thereto. In simple cross shareholding situations where both companies hold at least one-fourth of each other's shares, but are not in dominant positions against each other, the company that has knowingly created the cross shareholding situation can only use one-fourth of its total votes arising from the shares that it holds in the other company and of its other shareholding rights; all of its other shareholding rights freeze. In qualified cross shareholding situations where at least one company is dominant over the other, instead of the sanction of shares freezing, consequences attached to dominance, and especially to the acquisition by the subsidiary company of the parent company's shares, apply.


[1] Official Gazette February 14, 2011, No. 27846. It has entered into force on July 1, 2012.

[2] Preamble of Article 197 of the TCC.

[3] See Notification and Registration Obligations for Groups of Companies, http://www.erdem-erdem.com/en/articles/notification-and-registration-obligations-for-groups-of-companies/ (Access date: 24 February 2014) for information on notification and registration obligations within the scope of group of companies.

[4] Preamble of Article 201/1 of the TCC.

[5] Ünal Tekinalp, New Law of Stock Corporations, 3rd Edition, İstanbul 2013, p. 562.

[6] Preamble of Article 201/1 of the TCC.

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”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.