An EMRA Decision: Capital Increase Obligation For Electricity Market Companies In Share Transfers To Foreign Investors

1. Current Regulation The Energy Market Regulatory Authority ("EMRA" or the "Authority") regulates the transfer of shares in the capital of companies operating in the electricity market under Article 57 of the Electricity Market Licence Regulation ("Regulation").

According to the provision of this article;

Article 57(1) of the Regulation, regarding pre-licensed legal entities regulates the following;

General Rule. Except for the exceptional situations listed in the relevant article, the general rule is regulated as follows; until the license is obtained, except for the reasons of inheritance and bankruptcy, the shareholding structure of the pre-license holder legal entity cannot be changed directly or indirectly, the transfer of its shares or transactions and transactions that will result in the transfer of shares cannot be carried out.

Exceptions. Although the general rule for pre-licensed legal entities in the relevant article is transactions that will change the shareholding structure or result in the transfer of shares or the transfer of shares cannot be carried out, certain exceptions to the general rule are also listed in the relevant article. Unless otherwise specified in the Regulation, the exceptions set out in Article 57(1) of the Regulation shall not be subject to the general rule.

However, specifically, according to Article 57(1) of the Regulation, in the situations listed below, which are regulated under exceptional circumstances, the planned direct shareholding changes and indirect shareholding structure changes of 10% or more are subject to the approval of the Energy Market Regulatory Authority ("Board") each time:

• "Indirect shareholding changes in the shareholding structure of a legal entity holding a pre-license due to changes in the shareholding structure of shareholders established abroad,
• Changes that result in all indirect shareholders included in the pre-license of the pre-license holder legal entity becoming direct shareholders without changing their shareholding ratios and changes that result in all direct shareholders becoming indirect shareholders without changing their shareholding ratios,
• Direct or indirect share changes that do not constitute a change of control in the shareholding structure of the pre-license holder legal entity,
• Direct or indirect changes in the shareholding structure of legal entities holding pre-license, more than half of the capital of which is directly or indirectly owned by public institutions and organizations, arising from capital increase and/or change of shareholders, provided that no new shareholder other than the shareholder having the qualification of public institution and organization is taken,
• Within the scope of the provisions of the Turkish Commercial Code No. 6102, direct or indirect changes in the shareholding structure of the legal entity holding the pre-license as a result of the acquisition of its own shares by the legal entity holding the pre-license and the direct and indirect legal entity partners of this legal entity,
• Direct or indirect share acquisitions in the pre-license holder legal entity by using foreign resources by legal entities established abroad or legal entities controlled by these legal entities and established within the scope of the Turkish Commercial Code No. 6102, and
• Direct or indirect shareholding structure changes in the shareholding structure of the legal entity holding the pre-license as a result of the share transfers made between real persons who have direct or indirect shares in the shareholding structure of the legal entity holding the pre-license and who have first degree blood relationship with each other and their spouses."

In this respect, in the event of a change in the shareholding structure without the approval of the Board, the preliminary license will be cancelled.

Moreover, such amendments must be notified to the Authority via EMRA Application System within six months from the date of their implementation.

2. Decision of EMRA

Pursuant to the decision of the Authority dated 07/11/2024 and numbered 12993, the following decisions were adopted by the Board regarding the EMRA approval requests for;

1. due to the changes in the shareholding structure of the shareholders established abroad, a new indirect shareholder becomes a shareholder with a change of 10% or more in the shareholding structure of the pre-license holder legal entity, and
2. direct or 10% or more indirect share acquisitions in the pre-licensed legal entity by using foreign resources by foreign partnerships or Turkish legal entities controlled by foreign partnerships

1. The paid-in capital of the pre-licensed legal entity shall be increased by 25% of the total investment amount related to the main source, in addition to the existing paid-in capital and regardless of the share transfer rate, within 6 months from the date of notification of the Board's decision regarding the approval, and the relevant documents shall be submitted to the Authority,
2. In the calculation of the aforementioned paid-in capital amount, the following amounts shall be taken as the unit investment amounts on the basis of resources related to the main source,

3. To certify that the amounts determined within the framework of the capital increase in question are provided through the use of foreign resources,
4. In the event that the share transfer subject to the approval is realized, if such capital increase obligation is not realized within the specified 6-month period, the mentioned approval shall be deemed invalid and the preliminary license and/or preliminary licenses in question shall be cancelled,
5. The increased paid-in capital amount shall not be reduced below the specified amount until the generation license is obtained, otherwise the approval shall be deemed invalid, and the preliminary license shall be cancelled,
6. To proceed within the scope of such board decision for the share transfers to be made to foreigners within the framework of direct or indirect share changes that do not constitute a change of control in the shareholding structure of the pre-licensed legal entity.

You may access relevant regulation from here.

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.