Turkey Extended the Limitation on Dividend Distribution to Reduce the Economic Impacts of Coronavirus

With the Presidential Decree numbered 2948 published in the Official Gazette dated September 18, 2020, limitations on dividend distribution have been extended for the period of three months. Accordingly, limitations on dividend distribution will be in effect on December 30, 2020.

Background

With the Law on Reducing the Effects of Coronavirus on Economic and Social Life numbered 7244 published in the Official Gazette numbered 31102 and dated April 17, 2020, the Provisional Article 13 was included in the Turkish Commercial Code numbered 6102 (“TCC”) stipulating that:

• Stock companies are prohibited from distributing any dividend exceeding twenty-five percent of the net profit for the fiscal year 2019 until September 30, 2020. Accordingly, Board of Directors cannot be authorized to distribute any dividend for the mentioned time period.
• The companies, more than 50 % capital of which are directly or indirectly owned by the state, special provincial administration, municipality, village, other public legal entities, or funds, more than 50 % capital of which are owned by the state, are exempted from such limitation.

Following the Provisional Article 13 to the TCC, the Communiqué on Procedures and Principles Regarding the Application of the Provisional Article 13 of the Turkish Commercial Code (“Communiqué”) was published in the Official Gazette numbered 31130 and dated May 17, 2020. The Communiqué regulated further details and exceptions of limitations on dividend distribution as well type of financial statements to be taken into consideration regarding the limitations.

(See for more detail on the Communiqué; herdem.av.tr/corona-outbreak-procedures-and-principles-of-limitation-on-dividend-distribution-in-turkey)

Aslı Naz Ünlü