Corona Outbreak: New Limits on Dividend Distribution in Turkey

As per the Law on Mitigating the Effects of the New Coronavirus (Covid-19) Outbreak on Economic and Social Life and the Law Amending Certain Laws published in the Official Gazette numbered 31102 on April 17, 2020; a new provisional article was added to Turkish Commercial Code numbered 6102 (“TCC”) highlighting the economic impacts of Covid-19 on the company resources. With this addition, it is aimed to prohibit the distribution of dividends for capital companies (excluding public legal entities and their affiliates) for the portion exceeding twenty-five percent of the net profit for the fiscal year 2019 until September 30, 2020. Accordingly, as per the regarded provisional article, the general assembly shall not authorize the board of directors of the company for such distribution exceeding twenty-five percent of the net profit of the year 2019. In case the general assembly has already resolved to distribute dividends for the fiscal year 2019, however the shareholders have not been fully or partially paid yet, the payments for the portion exceeding twenty-five percent of the net profit for 2019 will be postponed until the end of September 30, 2020. The underlying purpose of the amendment is to bring forth measures to preserve the company resources in an economically vulnerable and risky environment due to Covid-19 outbreak and to ensure the continuousness of the businesses when the crisis passes.

Co-Authors: Deniz Çelikkaya & Ezgi Aysima Kır