Under Article 26 of the Turkish Capital Markets Law ("CML"), acquisition of shares entitling its owner with management or voting rights obliges the acquirer to make tender offers to other shareholders to purchase their shares. The CML authorizes the Turkish Capital Markets Board ("Board") to regulate the procedures and principles regarding such mandatory tender offers pertaining to publicly traded companies. In this regard, the Board`s Communiqué on Tender Offers No II-26.1 ("Communiqué") was published, which regulates the procedures, principles and the exemptions with regard to mandatory tender offers pertaining to publicly traded companies, and recently amended as per below.
II. Obligation to Make a Tender Offer and Exemptions
As per the Article 26 of the CML, in public companies, those shareholders gaining management control or voting rights must make an offer to other shareholders to purchase their shares. Holding directly or indirectly more than fifty percent of the voting rights of the corporation alone or together with persons acting in concert, or holding privileged shares which gives the right to elect the absolute majority of the members of the board of directors or the right to nominate the same number of directors in the general assembly shall be deemed as gaining control of management. However, some exceptions to the tender offer obligation have also been set out in the Communiqué.
According to Article 18 of the Communiqué, upon application, the Board may grant an exemption from the obligation to make a tender offer, in the event of one of the following:
- Acquisition of publicly traded company shares or voting rights in accordance with a capital structure change, which is necessary to strengthen the financial structure of the partnership in financial difficulties;
- Provided that the shares of a publicly traded company are not used in any general assembly meeting or a change is not made in the company's board of directors, if the portion leading to an obligation to make a tender offer out of the shares held in capital of the publicly held company is disposed of or is committed in writing to be disposed of within a period of time to be deemed fit by the Board;
- The change in the management control of the parent company of the publicly traded company did not have the purpose of acquiring the management control of the publicly traded company;
- Sales of shares owned by the state in public companies that are undergoing privatization;
- Change of management control arising from the merger in which the company subject to merger is a party to the merger as the transferee, provided that the shares of the shareholders who cast negative votes at the general assembly meeting where this transaction was approved before the merger took place are bought back, as per the principles and procedures specified in the offering circular issued during the initial public offering;
- In case of defaulting on the bank loans, the shares given to the bank as a guarantee of the loan which become the property of the bank in accordance with the Article 47/4 of the CML, the transfer of such shares to the special purpose entity in which the bank is also the founder, and acquisition of these shares from the bank or special purpose entity by third parties, after the ownership of these shares is transferred to the bank or the special purpose entity;
- Transfer of shares to comply with a legislative provision that determines the nature of shareholding; or
- Control is transferred as a result of the inheritance of an estate or the legal matrimonial property regime between the spouses.
The draft Communiqué No. II-26.1.ç amending the Communiqué on Tender Offers No. II-26.1 on the above matters, among others, was first issued by the Board in February 2021 for public consultation and came into force upon its publication in the Official Gazette on October 16, 2021.
Under Article 18 of the Communiqué, applications for exemption requests must be made to the Board by relevant parties within 6 (six) business days following the obligation for tender offer to arise. If, as a result of the examinations of the evaluation of the information and documents requested by the Board, it is concluded that the exemption conditions have been met, the relevant parties may be exempt from the obligation to make a tender offer. According to the Article 19 of the Communiqué, in case the application to be exempted from the obligation to make a tender offer is not approved by the Board, a tender offer will have to be made within 1 (one) month following the Board's decision not to grant the exemption.
According to the Turkish Capital Market Law, in the public companies, shareholders gaining management control or voting rights must make an offer to other shareholders to purchase their shares. The important point here is that the particular shareholder must have control of management. In case the shareholders have such a control, they have the obligation to make a tender offer. However, the Board`s Communiqué on Tender Offers No II-26.1 does provide some exceptions to the tender offer obligation. If the shareholders meet one of the exemption conditions listed in the Communiqué, then an application must be made to the Turkish Capital Markets Board within 6 (six) business days following the obligation for tender offer to arise. After the examinations of the Board regarding the exemption, if the Board gives an unfavorable decision, a tender offer will made by the shareholders.
This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in December 2021. A link to the full Legal Insight Quarterly may be found 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.