- INTRODUCTION
In its letter dated 1 April 2020 and submitted to all chambers and commodity exchanges, the Turkish Union of Chambers and Commodity Exchanges ("TOBB") referred to the letter of the Ministry of Trade submitted to it on 31 March 2020 and announced that the Ministry of Trade highlighted the importance for corporations to preserve their equity capital due to the spread of the COVID-19 pandemic and requested that the decree with respect to the restriction of dividend distributions should be complied with by all companies.
- MEASURES SET OUT IN THE LETTER
Pursuant to article 13(5) of the Regulation on the Principles and Procedures of General Assemblies of Joint Stock Companies and the Representative of the Ministry of Trade to be Present at such General Assemblies (the "Regulation"), the Ministry of Trade is authorised to add items on the agenda discussed during general assemblies of corporations. As such, in its abovementioned letter, the Ministry of Trade requested that the following items should be included in the list of issues to be discussed with respect to dividend distributions during general assemblies to be convened for the 2019 financial year:
- the suspension of dividend distributions in relation to the past year's profit;
- the distribution amount not to exceed 25% of the net profit of 2019; and
- not to authorise the board of directors to distribute advance dividends.
On the basis of the Ministry of Trade's authority derived from article 13(5) of the Regulation, corporations will therefore be obliged to include such items on dividend distributions in the agenda of their general assemblies with respect to the 2019 financial year.
- CONCLUSION
The intention behind this measure is the limitation of dividend distribution in order to preserve equity and prevent any possible financial duress or bankruptcy scenarios that may distort the balance of payments in the market due to the challenges resulting from the outbreak of the COVID-19 pandemic.
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