The Communiqué on Common Principles Regarding Significant Transactions and Appraisal Right ("Communiqué No. 11-23.1") introduced by the Capital Markets Board of Turkey ("CMB") defines a number of significant transactions and significance criteria for public companies, stipulating mandatory principles and procedures that public companies must comply with when performing any transaction that bears the significant transaction characteristics and grants appraisal right to the shareholders in case of occurrence of a significant transaction.
In light of the above, simply put, a transaction which is regarded as a significant transaction must be approved at the shareholders level in a general assembly meeting. In such a case, the shareholders, who attend the general assembly meeting and vote against for the proposed transaction and had their against votes recorded in the meeting minutes, are able to exercise the appraisal right separately to sell their shares to the company and leave the partnership, after certain procedures.
Moreover, the Communiqué No. 11-23.1 has exempted a number of significant transactions from the foregoing and generally applied rule. In other words, the Communiqué No. 11-23.1 has exceptionally listed some significant transactions that do not lead to appraisal right for the shareholders. Furthermore, in the event of such a significant transaction, the transaction may be approved by the board of directors rather than the general assembly unless the nature of the transaction itself requires adopting a general assembly resolution. This article, will handle exceptional transactions with significant characteristics.
As per Article 12 of the Communiqué No. II- 23.1, the significant transactions not leading to appraisal right for the shareholders are as follows:
- Any mandatory transaction of a public company in accordance with any other applicable legislation (i.e. merger, demerger required by Banking Regulation and Supervision Agency ("BRSA") pursuant to the Banking Law No. 5411);
- Any transaction of a public company whose management control is held by a public institution;
- Removal of the privileges granted to the shareholders free of charge or limitation of those in terms of matter and scope;
- Changing or termination of investment trust status and accordingly changing the privileges;
- Any transaction of a public company which requires mandatory takeover bids or results in voluntarily takeover bids upon approval of the CMB;
- Any demerger transaction of a public company whose shareholding structure is kept as is upon the demerger and incorporation of a new company as part of the transaction;
- Any merger or demerger transaction of a public company realized as per the simplified procedure;
- Any transaction of a public company conducted in accordance with the decision of a judicial authority as per the Enforcement and Bankruptcy Code No. 2004 or for collection of any public receivable;
- Any transaction of a public company where the target asset is taken back immediately by means of financial leasing,
- Any transaction of a public company having the lease certificate characteristic or related to an asset transfer to issue asset-backed, mortgage-backed or warranted securities;
- Lease of the assets or establishment of a right in rem on those assets which are included in a real estate investment trust's portfolio;
- Establishment of a right in rem on behalf of a public company and in favour of the entities which are subject to full consolidation of the public company;
- Any asset transfer transaction of a public company whose balance sheet affirms that one-half (1/2) of its share capital remains uncovered, provided that the target asset does not have economic value, a special purpose independent auditor report confirms that the asset transfer will recover the share capital loss and the CMB approves the transaction;
- Any merger or winding up transaction of a special purpose acquisition company;
- Any asset transfer transaction of a public company to non-related parties, provided that at least 90% of the fund to be gained by the transaction would be used for repayment of the cash bank loans and/or debts arising from the debt instruments already issued;
From a capital markets law perspective, the lawmaker aims to protect the shareholders as much as possible. In this regard, appraisal right is one of the CMB's protective measures in favour of the shareholders. However, as outlined above, in some instances, the CMB considers the interests of public companies more important and does not find characteristics of the foregoing exceptional significant transactions sufficient to exercise the appraisal right.
This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in June 2019. A link to the full Legal Insight Quarterly may be found here
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