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The concept of squeeze-outs has been introduced to Turkish law
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required be a shareholder or reside in Turkey. Legal entities may also be appointed as directors of the Turkish subsidiary. One of the crucial pillars of the new TCC is
the adoption of Turkish Financial Reporting Standards (TFRS), which have been published by the Turkish Accounting Standards Committee and are in complete compliance with International Financial Reporting Standards. All trading companies must comply with TFRS while preparing their consolidated financial statements; this is expected to increase Turkish companies’ integration with global markets. Having said that, a significant number of market players such as lawyers and deal makers also argue that the adop- tion of TFRS is a good step forward but still somewhat wanting due to the exclusion of com- mercial books which prevents the integration of tax accounting and commercial accounting prac- tices of Turkish companies. Another novelty is that company groups are now obliged to prepare consolidated balance sheets and have those audit- ed by independent financial auditors. The new TCC imposes on Turkish companies,
whether listed or privately held, an obligation to publicly declare any and all acquisitions or dispos- als of shares of other companies when such acqui- sition or disposal corresponds to 5%, 10%, 20%, 25%, 33%, 50%, 67% or 100% of the issued share capital of the acquired or sold company. This is a direct reflection of the transparency prin- ciple adopted by the new TCC and is expected to reduce – at least to a certain extent – due diligence costs on shareholding structures of Turkish com- panies. The new code also introduces an obligatory
shareholders electronic general assembly meeting (e-GAM) and e-voting with regard to listed com- panies. On the other hand, e-GAM may be adopt- ed by all other joint-stock companies voluntarily. As of October 1 2012 shareholder general assem- bly meetings of listed companies are being held on the Central Registry Agency’s e-GAM portal. This
has been conceived by the market as an innovative and much practical approach in the sense that it has removed or at least reduced the practical bar- riers to the voting process. Under the new TCC, the procedure for estab-
lishing branches of foreign companies is easier. Under the previous regime, a foreign entity want- ing to establish a branch office in Turkey had to complete two processes: an authorisation by the ministry and registration with the local trade reg- istry. The new regime requires only the registra- tion of the branch with the competent trade registry. The concept of squeeze-outs has been intro-
duced to Turkish law by allowing shareholders controlling at least 90% of a company’s issued share capital to squeeze out the minority subject to the satisfaction of certain conditions. M&A and corporate law practitioners have almost unan- imously welcomed the concept given that it is likely to reduce shareholder disputes, in particular those triggered by mala fide minority sharehold- ers. Having said that, the process is not straight- forward as it requires the involvement of the courts, where the majority will have to prove that the minority is acting in bad faith and significant- ly disturbing or damaging the company’s business. Although the concept of control over a compa-
ny has long been a feature of Turkish law from a competition law perspective, the new TCC has extended its scope to the day-to-day operations of companies by formally introducing the concept of group companies. Controlling shareholders can now be held responsible for the actions and/or losses of their subsidiaries and using the corporate veil defence is now practically impossible in some cases. On the other hand, management bodies of fully-owned subsidiaries are now obliged by law – subject to caveats – to carry out the instructions of the controlling shareholders, even if these instructions are likely to result in losses or reduc- tion in the assets of the subsidiary. Another important change, concerning mostly
large conglomerates, is the introduction to the companies law sphere of the principle of liability for trust. Although the concept was not foreign to Turkish contracts law, the new TCC has formally introduced the liability of the controlling share- holder for damages arising out of the abuse of the trust or group reputation generated in the public opinion by the group of companies.
Acquisition of real estate and rights in rem Recent amendments to the Land Registry Law and Cadastre Law abolished the long disputed reciprocity principle set forth by the Land Registry Law which theoretically restricted for- eign investors’ acquisitions of real estate or real estate related interests but was, in practice, more in the form of additional bureaucratic hurdles due to the investor’s burden to prove reciprocity. Under the new regime, the Council of Ministers will determine the citizens of the countries enti- tled to acquire real estate or rights in rem or secu- rity interests over real estate in Turkey. This effec- tively substitutes the reciprocity principle, which will in fact be based on a list to be declared by the Council of Ministers. Furthermore, the former regime provided for a cap of 25,000m² per investor in the entire country. Following the amendments, this limit was significantly increased and now stands at 10% of the total surface area subject to private property in a given district pro- vided that the total real estate holdings of the investor do not exceed 300,000m² in the entire country. The Council of Ministers is authorised to increase these limits by up to 200%. Foreign investors are still required to obtain
the approval of the local Governor before acquir- ing real estate or rights in rem but significant improvements have been made. The definition of foreign investor has been amended to clarify that in order to qualify as a foreign investor – and therefore for approval obligation – a company will have to be controlled either at shareholder or management level by a foreign investor. Mere shareholding or minority representation in man- agement does not trigger the application require- ment. More importantly, the following transac- tions by foreign investors no longer require approval from the local Governor: • granting pledges over real estate; • acquisition of rights in rem based on the fore-
About the author Dogan Eymirlioglu is a partner at Ersoy Bilgehan specialising in joint ventures and M&A, private equity, real estate and competition law matters. He also advises lenders and borrowers in various types of finance transactions including issuance of securities. He has been heavily involved in foreign direct investment projects in the
form of green field investments, joint ventures, private equity investments and mergers and acquisitions. His work includes antitrust clearance matters arising in connection with M&A projects. Eymirlioglu is described by recent editions of international directories as a solution-oriented lawyer who is rated for his great commercial acumen and is excellent to work with. He is the author of Corporate and Tax Aspects of the Legal Framework for
Investments in Turkey, and Financing Commercial Property Investments in Turkey: new trends and securitisation methods (co-authored with Gulistan Baltaci). He speaks English, French and Spanish.
Contact information
Dogan Eymirlioglu Ersoy Bilgehan
Maya Akar Center, Buyukdere Cad. No:100-102 K:26 34394 Esentepe, Istanbul, Turkey T: +90 212 213 23 00 F: +90 212 213 36 00 E:
info@ersoybilgehan.com W:
www.ersoybilgehan.com
034
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