Turkey: A Preliminary Step For Share Buy-Backs

The Capital Markets Board of Turkey (the "CMB") issued a resolution, on September 1, 2009 through its Weekly Bulletin, which sets forth a framework for share buy-back programs that may be carried out by brokerage firms and investment companies listed on the Istanbul Stock Exchange (the "ISE") (the "Resolution").

The Resolution finds its roots in Article 329 of the Turkish Commercial Code which, as a general rule, prohibits joint stock companies to acquire their own shares, but which at the same time, as an exception, authorizes joint stock companies dealing with securities trading to execute such acquisitions.

The share buy-back process is regulated in detail for the first time and such detail is especially significant as it illuminates the principles to which other type of joint stock companies will be subject in the upcoming period. The Draft Turkish Commercial Code, expected to enter into force in 2010, provides all types of joint stock companies the opportunity to acquire their own shares under certain conditions and softens the currently applicable limitations on share buy-backs to a certain extent.

In practice, companies use share buy-backs for returning excess cash to their shareholders. Such payment is an alternative to periodical dividend payment and gives the signal to the market that investment in company shares is more profitable than any other alternative investment option. Also, repurchase of shares by the issuer decreases the number of outstanding shares representing share capital which in turn increases earnings per share. An increase in earnings per share often gives the impression to the investors that the stock is undervalued and has the potential for increase in value. With the Resolution of the CMB, listed brokerage firms and investment companies have the chance to benefit from price support advantages and to provide security for long-term investors during times of volatility.

As per the Resolution, following principles shall apply to share buy-backs that may be carried out by listed brokerage houses and investment companies (the "Company"):

Structure of the Share Buy-Back Program and General Assembly Approval

The Board of Directors shall draft a share buy-back program (the "Program") and shall submit it to the General Assembly for approval. The Program to be proposed shall cover (i) purpose of the share buy-back, (ii) resource and amount of the fund to be used for share buy-back, (iii) maximum number of shares that may be repurchased, (iv) minimum and maximum price limits determined for share buy-back, (v) persons authorized for repurchase, (vi) duration of the Program to be conducted, (vii) date of the General Assembly on which the Program will be discussed and (viii) summary of the last executed share buy-back program.

Upon review of the proposal, the General Assembly may approve, reject or amend the Program. If the General Assembly approves or amends the Program, then it shall authorize the Board of Directors for the implementation of the same.

It should be noted that the approval of the General Assembly is valid only for a maximum period of 18 months. If, upon expiration of the 18 month period, continuation of the share buy-back is deemed necessary, the Board of Directors must submit the same Program or a revised version to the General Assembly for approval.

Exemption from General Assembly Approval

As a rule a share buy-back program shall be initiated upon approval of the General Assembly. However, if it is necessary to prevent a serious and imminent harm, the Board of Directors may carry out share repurchase without the authorization of the General Assembly.

The following steps shall be taken, in cases where the Board of Directors decides to conduct any share repurchase without General Assembly authorization:

  • Two days before the commencement of the repurchase, the Company shall disclose;
    • The purpose and the reason of the share buy-back,
    • The number of shares planned to be repurchased,
    • The maximum amount to be paid in relation to the operation.
  • On the first business day following the repurchase date the Company shall disclose;
    • Total nominal value of repurchased shares,
    • Transaction price,
    • Transaction date,
    • The ratio of total amount of repurchased shares to the share capital of the Company,
    • Privileges, if any, attached to the repurchased shares.
  • In addition to the above, the Board of Directors shall inform the General Assembly regarding (i) the purpose and the reason of the share buy-back, (ii) transaction date, (iii) total nominal value of repurchased shares, (iv) cost of repurchase, (v) the ratio of total amount of repurchased shares to the share capital of the Company, and (vi) if any, privileges attached to the repurchased shares.

Limitations on Share Buy-Backs

The Resolution, while drawing the structure of the share buy-backs, envisaged certain limitations in order to prevent any abuses. Accordingly, the total nominal value of shares to be repurchased plus the total nominal value of shares already repurchased shall not exceed 20% of the paid in/registered capital of the Company. If such percentage is exceeded, the surplus shall be disposed within a period of six months.

In addition, share buy-backs shall not be structured in a way to damage the equity capital of the Company. Accordingly, any share buy-back program to be conducted shall not decrease the equity capital of the Company below the total amount of share capital plus restricted reserves. In case of a capital increase, the Company shall not buy back its shares between the date on which the capital increase decision is made and the date on which the capital increase transactions are completed.

Furthermore the Company shall not buy back its shares and/or shall not dispose repurchased shares, in case there is an inside information the disclosure of which is deferred by the Company or there is an undisclosed material information which may potentially effect the share price.

Also, in an attempt to prevent the Board of Directors from manipulating any decisions to be made in the General Assembly, exercising voting rights arising from repurchased shares is prohibited.

Share Buy-Back Orders

As per the Resolution, any repurchase transaction must be carried out through the ISE and accordingly only shares tradable at the ISE may be the subject of share buy-back operations.

The Resolution sets the following principles, in addition to the transaction rules that may be envisaged by the ISE, for share buy-back orders:

  • Share buy-back orders shall not be placed during (i) the opening session, (ii) the last 15 minutes of the first session, and (ii) the first and the last 15 minutes of the second session,
  • The price of the share buy-back orders shall not be higher than the price of the existing orders and the price of the last executed market order.
  • The total amount of shares to be repurchased in a given day shall not exceed 25% of the relevant shares' average daily trading volume observed within the preceding three months.
  • For each transaction day the Company shall appoint only one brokerage firm for the execution of share buy-backs.

Disclosure Requirements

In relation to the share buy-back programs the following information shall be disclosed to the public:

  • The Board of Directors shall prepare a share buy-back program proposal and shall publish the same on the corporate web site at least fifteen days before the designated General Assembly date.
  • If the General Assembly amends the proposed share buy-back program, the amended program shall be disclosed to the public and shall be published on the corporate website on the business day following the General Assembly date.
  • At least two days before the implementation of the program, a disclosure shall be made in order to notify investors about (1) the commencement of the implementation, (i) the title of the brokerage firm which will provide intermediary services in relation to the share buy-back program, and (ii) the information regarding the commission to be paid to the brokerage firm.
  • On the first business day following the execution day of each transaction (i) total nominal value of repurchased shares, (ii) transaction price, (iii) transaction date, (iv) the ratio of total amount of repurchased shares to the share capital of the Company, and (v) privileges, if any, attached to the repurchased shares shall be disclosed to the public.
  • Within 5 business days after the termination of the share buy-back program, the Company shall disclose (i) average and maximum price paid for a share, (ii) cost of repurchase, (iii) total number of repurchased shares, (iv) transaction dates, (v) privileges, if any, attached to the repurchased shares, and (vi) the ratio of total amount of repurchased shares to the share capital of the Company. Such disclosure must be made separately for shares cancelled after the acquisition and for shares hold after the acquisition. In addition, such information shall also be presented to the shareholders in the General Assembly.
  • If the approved program is amended by the General Assembly at a later stage through a new resolution, the amended program shall also be disclosed to the public along with the reasons of amendment.

Disposal of Repurchased Shares

The Company may determine a lock-up period for repurchased shares and bonus shares acquired in connection with repurchased shares freely provided that such lock-up period does not exceed three years. The share capital of the Company must be decreased, if such shares are not disposed until the end of the designated period.

The repurchased shares and bonus shares acquired in connection with repurchased shares shall solely be disposed at the ISE and such disposal shall only be conducted after the completion of the share buy-back program.

Upon execution of each disposal transaction, the following information shall be disclosed to the public on the first business day following the transaction date:

  • The total nominal value of disposed shares,
  • Transaction price,
  • Transaction date,
  • The ratio of total amount of disposed shares to the share capital of the Company,
  • Privileges, if any, attached to the repurchased shares.


As per Turkish Accounting Standard No: 32, repurchased shares shall be registered as a deduction item under the equity capital and any profits or losses arising from disposal of repurchased shares shall not be reflected into the income statement.

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.