Turkey: Share Buybacks Under Turkish Law

(This article was first published by Dünya Executive)

Under the former Turkish Commercial Code, only public companies were permitted to acquire their own shares. The Turkish Commercial Code entered into force in 2012 allowed share buybacks also for private companies, subject to certain conditions and limitations. However, the share buyback's implementation in private companies is still grey area for Turkish companies.

In a share buyback, the company acquires its own shares from its shareholders in return of a consideration. But, why would a company buy back its own shares? Although it may seem unconventional for a company to buy its shares back and return the shareholders' investments, share buybacks may create or boost share value of the company in different ways.

A company may buy back its own shares to benefit from share valuation. The company can repurchase some of its shares at a reduced price and then re-sell them once the share value increases. Therefore, by using the buyback, the company increases its equity capital without issuing any additional shares. The other reason would be paying off the shareholders without making a dividend distribution. Shareholders expect to receive dividends in return of their investments in the company and buying back some or all shares can be a way for the shareholders to access to the company's profits without awaiting the actual distribution. Another reason would be strengthening the management. Each share represents one right to vote at the company's general assembly meeting and the company may reduce the number of votes at the general assembly meetings by buying back its own shares.

While a share buyback would provide benefits to the company, the Turkish Commercial Code applies strict limitations on this mechanism. First, the company can only buy back shares up to 10% of its share capital, which are fully paid-in. There are limited circumstances in which the company may buy back shares exceeding 10% of its share capital such as share capital decrease, transfer of assets through merger, spin-off or inheritance, but the company must dispose of such shares as soon as practically possible and no later than three years after the acquisition date.

In addition, to perform a share buyback, the company must have at least two shareholders; the company should not be converted into a single-shareholder company because of the buyback. Second is that the company must financially be capable to perform a buyback. When the company pays the consideration to buy back the shares, the total value of the company's remaining net assets must be at least equal to the sum of its share capital and statutory reserves. In other words, the company must have sufficient assets to perform a buyback. Furthermore, the company must allocate reserves in the amount equal to the buyback price. The allocated reserves are only released when the company sells or cancel those bought back shares. It is worth noting that the share buyback is subject to different regime for public companies under the supervision of the Capital Markets Board of Turkey.

The general assembly of shareholders must authorize the board of directors to take any action with respect to the share buyback. However, this authorization is also subject to certain limitations. The general assembly of shareholders may authorize the board for a maximum five-year period and must determine in its authorization, the upper and lower limits of the buyback price and number of shares to bought back. The board of directors, as the main responsible corporate body to perform the share buyback, must state in each authorization request, that all conditions for the buyback are duly met. Another aspect to consider is the buyback price. The buyback price must be based on the market value of shares and other objective criteria. Otherwise, the board of directors is held liable for damages. Shares bought back by the company do not grant any shareholding right thus, the voting rights attached to such shares cannot be exercised at the general assembly of shareholders. Therefore, such shares are not taken into consideration in the calculation of a general assembly meeting and decision quorum. All the foregoing restrictions apply if a subsidiary acquires the shares of its parent company.

Once the company buy its shares back, it may retain such shares for unlimited period. However, if the company performs a buy back without complying with the foregoing criteria, although it is arguable how effective this remedy would be, it must dispose of such shares bought back without meeting the conditions within six months after the buyback date.

The Turkish Commercial Code, while allowing the share buyback for private companies, sets out certain conditions, which obliges the company to protect its equity. The shareholders' investment in the company constitutes the principal asset of the company and provide security to its creditors. Return of the company's share capital to the shareholders without being subject to any limitations as a buyback price would reduce the company's free reserves and thus, harm both the company's assets and its creditors' interests. Therefore, all restrictions set out in the Turkish Commercial Code serve for the protection of the company's assets.

The share buyback may be useful for companies to boost their share value if it is performed in accordance with the conditions set out in the Turkish Commercial Code. We expect that more investors will benefit from this tool in private companies. On the other hand, the implementation will bring new questions to address, such as to whom the shares may be sold, whether the shareholders have preemption rights in the disposal of these shares, or the company will provide warranties under the sale agreement.

© Kolcuoğlu Demirkan Koçaklı Attorneys at Law 2017

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.

Similar Articles
Relevancy Powered by MondaqAI
Kolcuoglu Demirkan Kocakli Attorneys at Law
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”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Kolcuoglu Demirkan Kocakli Attorneys at Law
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions