Government Controlled Public Companies Exempted from Several Merger Regulations in Turkey

Communique No. II-23.2.B on Amendment of the Communique on Merger and Demerger No. II-23-2 (“Amending Communique”) entered into force  on May 30, 2020. By virtue of the Amending Communique, the public companies whose controller is a public institution or organization shall be exempted from several requirements arising from the Article 12 of the Communique on Merger and Demerger No. II-23-2 (“Communique No. II-23-2”). According to the announcement of the Capital Markets Board of Turkey (“CMB”) on the Amending Communique, such exemption will ease publicly held companies which are controlled by public to be a party to mergers and restructurings.

Scope of Exemptions

Pursuant to the Amending Communique, “Management Control” is defined as “directly or indirectly being holder of more than fifty percent of voting rights by alone or together with persons whom act jointly, electing the majority of the members of board of directors, and being holder of privileged shares to nominate the majority of the board of directors in the general assembly”. If the management control of a publicly held company is owned by a public institution or organization, it shall be exempted from the requirements of Article 12(4), (5), (6), and (7) the Communique No. II-23-2.

Relevant Articles of the Communique No. II-23-2

According to the Article 12(4) of the Communique No. II-23-2, a publicly held company, the shares of which are traded on the exchange, (“Publicly Traded Company”) and a publicly held company, the shares of which are not traded on the exchange, (“Non Publicly Traded Company”) shall not fulfill a merger transaction:  a) in merger transactions by way of acquisition, to result in capital increase at a rate more than 100% of the Publicly Traded Company, b) in merger transactions by way of new foundation, in a way that the shares to be allocated to the shareholders of the Publicly Traded Company constitute less than the half of the share capital of the new company to be founded.

According to the Article 12(5) of the Communique No. II-23-2, in cases where number of companies being a party to the merger is more than two, a Publicly Traded Company and a Non Publicly Traded Company shall not fulfill a merger transaction a) in merger transactions by way of acquisition, in a way that the capital increase amount to be made for each acquired Non Publicly Traded Company exceeds the share capital amount of the Publicly Traded Company before merger, b) in merger transactions by way of new foundation, in a way that the shares to be allocated to the shareholders of the Publicly Traded Company constitute less than the share amount within the share capital of the new company, to be granted to the former shareholders of each party to the merger.

According to the Article 12(6) of the Communique No. II-23-2, in Merger transactions in which a Non Publicly Traded Company is the acquirer, acquirer companies shall not carry conditions for exclusion from the scope of the Capital Markets Law No. 6362 specified in the Article 5(2) of the Communique on Shares No. VII-128.1. Moreover, the shares of the acquirer company before merger shall not be offered in the exchange for the 6 months term after the shares of such company are initiated to be offered in the exchange. Such shares may be offered in the exchange limited to the amount of acquiree Publicly Traded company’s shares which were in the free float as of the date of public disclosure of the merger transaction within the term between 6th and 12th months after the shares of such company are initiated to be offered in the exchange. Same number of shares may also be offered within the term between 12th and 24th months. The share rates of the Non-Publicly Traded Company shareholders as of the date of general assembly in which the merger is voted shall be taken into consideration in respect of determination as to how much share may be sold at the exchange by each of the shareholders of the Non-Publicly Traded Company. In cases where the shares are to be sold out of the exchange within the relevant terms, the limitations set forth herein regarding the sale of such shares at the exchange shall be valid. 

Aslı Naz Ünlü