Mergers and Acquisitions in Turkey

The most common types of companies subject to M&A transactions are joint-stock companies, and limited liability companies. Although the rules set out for these companies under the TCC are similar, in general, there are several exceptions. For instance, the shares in the share capital of a limited liability company can only be transferred by executing a share purchase agreement between the parties before a notary public, unlike joint-stock companies. Further, as per the provisions of the TCC, there are several restrictions on merger transactions in terms of the types of companies. For instance, several types of companies can only be subject to M&A along with those that are specifically set out under the TCC. In practice, non-disclosure agreements generally include provisions for the seller’s protection in such cases and there is no obligation to update such information.

In addition, based on the commercial negotiation between parties, transaction documents mostly include the seller’s liability for their representations of the target company. If any loss and/or damages are suffered due to incorrect or outdated information, the seller may be obliged to compensate the buyer in accordance with the provisions in the transaction documents with respect to the seller’s liability. The principal transaction document is typically a share purchase agreement or asset purchase agreement.

Turkey: Merger Control

However, if the claimant’s losses are higher than the penalty amount, the claimant must prove its losses exceeding the penalty amount established under the agreement, and that the losses were caused by the counterparty. A decade ago, commercial arbitration tended only to relate to construction, distributorship, sale of goods or provision of services, etc. For some time, the arbitration arena has greatly expanded to include M&A transaction disputes. The judicial review period before the Administrative Court usually takes about eight to 12 months. After exhausting the litigation process before the Administrative Courts of Ankara, the final step for the judicial review is to initiate an appeal against the Administrative Court’s decision before the regional courts. The appeal request for the administrative courts’ decisions will be submitted to the regional courts within 30 calendar days of the official service of the justified decision of the administrative court.

An acquisition is, in very simple words, the purchase of one company by another company. On the other hand, a merger occurs more like combining of two or more companies to become just a single separate unit of business. Accordingly, our first tip for buyers is to conduct thorough due diligence in order to consider the new regulatory environment and risks. Article 11 of the communiqué states that a mandatory takeover bid may not be subject to any conditions. Therefore, binding a takeover bid by a target shareholder to accept or vote in favour of a scheme of the agreement is not generally possible in Turkish M&A practice. The bidder applies to the Capital Markets Board within six business days of the acquisition of shares or other transaction which results in it gaining control of the target.

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In case financial statements to constitute the basis of merger have been subjected to independent audits as per Capital Markets Board regulations, the special independent audits shall not be required. According to the TCC; Mergers are defined as the establishment of a new commercial company through uniting of two or more commercial companies with each other or joining of one or more commercial companies to another commercial lawyer company. Turkey has recently become a business center for all the investors around the world, accordingly the amount that M&A activities takes place in Turkey has been increased rapidly. Mergers and Acquisitions (“M&A”) is defined as the combining of two or more companies or buying-selling or dividing of two or more companies as a part of corporate finance in order to grow rapidly in business field of activity.

You’ll only need to do it once, and readership information is just for authors and is never sold to third parties. One of the natural by-products of globalisation is that corporate clients have a wider-than-ever choice regarding where to do business. TMF Group, a leading provider of compliance and administrative services, has today launched the ninth edition of its Global Business Complexity Index . Putting part of the payment into an escrow account for a period of time and signing an escrow agreement. Under the Turkish Code of Obligations, the parties may agree on limitations to liability pursuant to the general principle of freedom of contract. In Turkey, the main pieces of legislation that apply to M&A, namely, the TCC, the TCO and the CML, were revised in 2012 and have been amended from time to time.

The share transfer agreement is subject to stamp tax at 0.948% over the sale and purchase price. If the shares are held by a corporate shareholder, the capital gain will be booked as taxable income and the net income is subject to corporation tax at 22% and no VAT is payable. The assets of the transferor companies are deemed to have been transferred at the market value to the new company which leads to taxable capital gains.

Integrating compliance and procuring acceptance for new policies, procedures and a new company culture is likely to face resistance. By considering possible resistance against change and the potential risks that may arise during this process, companies must act promptly while updating policies, procedures, and internal control mechanisms. The authorities expect acquiring companies to integrate compliance functions both during and after the transaction.

Another point to consider is to carefully draft the wording of a penalty clause to clarify whether the penalty is in lieu of or in addition to damages. The buyer’s preference not to be required to publicly disclose or announce its status as the buyer. Not only does the guide provide answers with respect to the most important issues , it also provides contact details to lawyers who are able to provide in-depth advice and carry out necessary actions. 10.1 Please provide a summary of any relevant new law or practices in M&A in your jurisdiction. March 2017 – The Turkish Competition Authority has recently published a communiqué (number 2017/2) (“the Communiqué”) amending its “Communiqué On Mergers and Acquisitions Requiring the Approval of the Competition Board” (number 2010/4).