Turkey A year of big changes
Dogan Eymirlioglu and Ceyda Aydin of Ersoy Bilgehan examine a number of recent changes to Turkey’s laws which will impact foreign investors
T
urkey is experiencing considerable economic growth despite the global economic down- turn and the debt crisis in the European Union (EU). According to the 2012 report of the United Nations Conference on Trade and Development, in the first half of the year the
amount of foreign direct investment in Turkey reached a level of $8.2 billion and Turkey took its place among the top ten countries with regard to international direct investment. Turkey stood as an exception to regional trends, with inflows registering a 76% increase to $16 billion, maintain- ing the country’s position as the region’s second-largest FDI recipient and increasing its share in the region’s total from 16 to 33%. The increase in inflows was mainly the result of a more than three- fold increase in cross-border M&A sales. Turkey’s performance has been most recently recognised by Fitch Ratings, in the form of a rating upgrade: Turkey’s long-term foreign currency issuer default rating has been upgraded from BB+ to BBB which is an investment grade. The Turkish government and parliament have been very busy, aware of the fact that legislative
action should be supportive of the economic environment. A new Code of Obligations and a new Commercial Code (referred to here as the new TCC) entered into force on July 1 2012. On May 18, amendments to the land registry and cadastre laws were promulgated in a manner to further relax the legal regime on the acquisition of real estate, rights in rem (such as pledges and usufructs) and security interests on immovable property by foreigners. Amendments to the Regulation on Implementation of Foreign Direct Investments Law brought a simplified legal regime for represen- tation/liaison offices of foreign entities. There are also continuing efforts to amend and update the laws and regulations in the capital markets. These legislative efforts provide a good base from which to attract more foreign investors.
New code of commerce The enactment of the new TCC introduces long-expected advantages for local and foreign investors. The adoption of corporate governance principles is the most anticipated one. Corporate governance principles adopted by the new TCC are based on four main pillars compatible with global practices: liability, accountability, transparency and equity. The principles of transparency and accountability are likely to reduce due diligence costs and increase confidence on target businesses. The new TCC highlights professional and proficient management in all of the management
committees and bodies. It also restricts privileged shares, enhances and strengthens the list of minority rights and increases representation opportunities of minorities and shareholder groups in the board of directors. The code also strengthens shareholders’ rights to information or investigation on financial records and audit reports of the company. Another aspect of the reforms is the reduction of bureaucracy related to company formation.
The old Commercial Code required at least five shareholders in a joint-stock company and two in a limited liability company. This provided a practical hurdle, particularly for strategic investors that do not like to find partners or allocate shares to company officers, to set up their Turkish entities. The new TCC, however, allows for the establishment of single-member joint-stock companies and limited liability companies in parallel with EU Regulation 89/667/EEC. Fundamental changes have also been introduced in the composition of the board of directors of
joint-stock companies. The old code of commerce required at least three members, who had to be shareholders of the company. In parallel to the single-member joint-stock company regulations, the new TCC allows a single-member board of directors. Unlike in the old code, this member is not
www.iflr.com IFLR|FOREIGN DIRECT INVESTMENT 033
“
The enactment of
the new code introduces advantages for local and foreign investors
”
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48