Turkey: Overview Of Recent Significant Changes In Turkish Law

Last Updated: 23 August 2016
Article by Arzu Aksaç

Applications by Companies for Postponement of Bankruptcy during the Current State of Emergency Not Permitted

As it is known following the unsuccessful military coup attempt on 15.07.2016, the Turkish government has declared a state of emergency ("SoE"), which came into force upon the announcement in the Official Gazette dated 21.07.2016 and numbered 29777 of a Cabinet Decree to this effect. The SoE shall continue for a period of 90 days, and may, if deemed necessary, be extended for another 90 days according to applicable laws. During the term of the SoE, the Government will be exceptionally entitled to make regulations by way of issuing Decrees in force of Law ("Decree Law"). Following the expiry of the SoE, the Parliament will resume its post as law maker.

The Cabinet's authority to declare a SoE derives from (I) the Turkish Constitution of 1982, and (ii) the State of Emergency Law No. 2935 ("Law No. 2935"). Although the ongoing SoE in Turkey does not currently hinder daily life and trade activities, Law No. 2935 entrusts the Cabinet with the authority to take appropriate measures as from 21.07.2016 for providing public order and security, which include, by way of example, (i) subjecting the holding of possession to, producing and transferring of, among others, explosive or inflammable materials to prior-permission of the official authorities, (ii) regulating road, sea and air traffic and (iii) prohibiting entry of transportation vehicles into the Turkish territory all together or in part. In principle, these measures would potentially have a negative impact on trade activities and hinder the performance of obligations under commercial contracts. However, the Turkish Government publicly announced before the commencement of the 90-day period that it would only take measures that relate to the post-coup attempt investigations and the restoration of public security, and that daily life and trade activities would not be impaired.

Of the several measures that have been taken so far within the ambit of SoE, the one which is related to commercial life has been introduced by the Decree Law No. 669 which was published in the Official Gazette on 31.07.2016. According to this Decree Law, for so long as the SoE continues, corporate entities with financial difficulties shall not be able to apply to courts for the postponement of their declaration as bankrupt, a remedy which is otherwise available under the Execution and Bankruptcy Law No. 2004.

Amendments to the Electricity Market Law No.6446:

Turkish electrical energy market has recently undergone significant changes that are introduced by the Law Amending the Electricity Market Law No. 6446 ("EML") and Certain Other Laws ("the Omnibus Bill") that was published in the Official Gazette dated 17.06.2016 and numbered 29745. Significant amendments also have been made to the Law No. 5346 on the Use of Renewable Energy Resources for Electricity Production ("REL") and the Law No. 3154 on the Organization and Functions of the Ministry of Energy and Natural Resources. Within the context of amendments to the EML, a new procedure for privatising certain assets of the Electricity Generation Corporation ("EÜAŞ"), or its affiliates, as appropriate for the purposes of developing power plants based on renewable energy resources and coal of local origin has been introduced. Moreover, retail sale companies are now empowered by law to charge their customers special fees for technical and non-technical line losses. Apart from the foregoing, some of the rules governing licensed and unlicensed generation have been amended. Some of these major changes in law are;

  • Wind and solar measurement data for pre-license applications is now required to be obtained for the last 5 years preceding the subject application. As an exception to the above measurement requirement, if any wind or solar power plant was proposed to be installed on any designated "renewable energy resource area" as defined in the regulation, then no pre-license application phase measurement data shall be required.
  • In case there are multiple applications for connecting to the same connection point and/or to the same connection site within the grid, Turkish Electricity Transmission Corporation ("TEIAS") will now organize a competition for determining the winner who will qualify for connecting to the grid up to the announced capacity. In determining the winner, the lowest electricity sale price offered over the legally permissible maximum sale prices i.e., the feed-in tariffs, as set forth under Annex I of the REL will be taken as a basis. Previously, the winner of the competition was the applicant who proposed to pay the highest total contribution fee per megawatt to TEIAS within a maximum period of 3 years following the commissioning.
  • To underpin the latest amendments which were made to the Unlicensed Electricity Generation Regulation on 23 March 2016, it is stipulated that shareholders in unlicensed generation companies operating wind or solar power plants of maximum 1MW capacity, each are prohibited from doing any share transfers until the provisional acceptance of the subject power plant by the Ministry of Energy and Natural Resources. In case of a breach of this prohibition, the invitation letter sent to the generation company concerned for executing a grid connection agreement with the related network operator may be cancelled.
  • Prohibitions from applying for unlicensed wind and solar power generation have been introduced in respect of those persons and entities who are described by law as being "related" to distribution companies or to designated supply companies, as the case may be, which operate in any given distribution region.

Large Scale Changes in Turkish Commercial Law Tax Legislation

Law No. 6728 on the Amendments to Certain Pieces of Legislation for the Enhancement of the Investment Environment ("Law No. 6728") has been put into effect on 09.08.2016 by way of its announcement in the Official Gazette numbered 29796.

Law No. 6728 has introduced significant changes in the provisions of the Turkish Commercial Law No. 6102 ("TCC") and Turkish Cheque Law No. 5941 ("Check Law"). Amendments to the TCC can be summarized as follows; (i) company incorporation costs have been significantly reduced by removing the requirement for the notarization of the articles of association, (ii) the process for changing legal form of corporates has been improved, (iii) an easier and economic way for drawing up signature circulars for corporates has been introduced, (iv) liquidation process of corporates is accelerated and (v) a new barcode system which is going to include necessary information regarding check account owners has been introduced for the checks. In parallel with the foregoing, criminal sanctions are going to be imposed on the issuers of bad-checks pursuant to the amendments on Check Law.

In addition to the above, certain provisions of the Execution and Bankruptcy Law No. 2004 concerning application for the postponement of bankruptcy, the cure project that needs to be presented for court approval, the appointment of trustees who will run the company during postponement term and the measures which may be taken by court to protect and preserve the company's assets during postponement period have been amended.

Apart from the foregoing, there have been made significant and far-reaching amendments to a number of Turkish Tax laws namely, to the Income Tax Law No. 193, the Tax Procedure Law No. 213, the Stamp Tax Law No. 488, the Value Added Tax Law No. 3065 and the Corporate Tax Law No. 5520 with a view to facilitating new investments.

New Law No. 6735 on International Labour Force

International Labour Force Law No. 6735 ("Law No. 6735 "), which regulates, among others, work permit applications for foreign nationals has become effective through its announcement in the Official Gazette of 13.08.2016 numbered 29800. Save for the exception which shall apply throughout the transition period as further explained below, Law No. 6735 has repealed and replaced the Law No. 4817 on Work Permits of Foreigners dated 27.02.2003 ("Abrogated Law") and re-arranged the work permit application process and the assessment criteria. According to Law No. 6735, Turkish Ministry of Labour and Social Security ("Ministry"), which is in charge of assessing and deciding on work permit applications will set up international labour force policies which shall be taken into account in assessing whether an applicant is eligible for working in Turkey. In determining international labour force policies, the Ministry will take into consideration the decisions of the International Labour Force Consultancy Committee, which is yet to be established and the Immigration Policies Committee, as well as factors, such as regional developments, industrial and economic changes, and social, cultural and economic relations between Turkey and the applicant's country of origin. Law No. 6735 defines three types of work permits namely, (i) ordinary work permit, (ii) freelance work permit and (iii) permanent work permit subject to the satisfaction of the respective statutory conditions. In addition to the foregoing permits, the concept of "Turquoise Card" has been introduced which shall be issued, subject to the prior approval of the Ministry and the Labour Force Consultancy Committee, exclusively to highly qualified, resourceful foreigners whose level of education, professional experience, contribution to science and technology, and to foreign investors whose investments in Turkey would create employment and contribute to the development of the Turkish economy. Turquoise Card holders shall be able to permanently work in Turkey and also their dependents shall be able to permanently reside in Turkey.

Certain exceptions shall apply to (a) foreign individuals who i) seek international protection or, ii) apply for conditional immigration, and (b) foreign engineers and architects. However, these exceptions have not yet been determined and are yet to be announced through secondary legislation.

In the transition period i.e., until detailed secondary legislation shall be issued to regulate the implementation of the provisions of Law No. 6735, provisions of the Abrogated Law and its underlying secondary legislation shall be applicable to the extent that they do not conflict with the provisions of Law No. 6735.

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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