Company mergers are the union of two existing companies that become a single operational legal form. This process is subject to more negotiation between the parties as per the shareholding agreements that will be concluded. Before entering into a company merger, investors are advised to perform a company due diligence in order to determine the true financial and legal situation of the company. The Turkish Commercial Code contains provisions for the merger or acquisition process as well as definitions between the two. According to law, the merger is the establishment of a new commercial company after two or more firms have merged.
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Under the TCC, if the target company’s articles of association include provisions stating that the share transfer will be valid upon adoption of the target company’s board of directors’ resolution, the target company’s board may withhold approval of such share transfer. However, the target company’s board must have an important reason for not approving such a transfer. Moreover, in any event, the target company’s board may offer to purchase such shares from the seller at their market price by using its pre-emption right under the TCC. However, for target companies that are publicly held, any information that may affect possible investment decisions must immediately be disclosed via the Public Disclosure Platform; under very limited circumstances may these companies postpone such disclosure.
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However, they must be limited in sense of their scope, duration and geographical location, and should be reviewed carefully. An increasing number of sellers pursue pre-sale vendor legal due diligence to identify and assess the potential risks of the transactions, where there is a bidding process involved in the transaction. Instead of simply relying on the documents prepared by the buyer side, pre-sale vendor legal due diligence gives a clearer perspective to the seller side in negotiating the terms of transactions. This due diligence may be provided to the buyer side on either a reliance basis or a non-reliance basis. However, requiring or providing a reliance letter from the seller side is not yet common practice in the Turkish M&A market. Under Turkish law, there are no specific rules restricting a buyer from directly negotiating with a seller.
Notably, the country’s first ‘unicorn transaction’ – the acquisition of an Istanbul-based mobile gaming company for $1.8 billion – closed in 2020. In 2020, the Turkish Wealth Fund acquired shares of six public insurance companies for $936.7 million to consolidate them under one roof. The Turkish Wealth Fund was also involved in a transaction to obtain a controlling stake in Turkcell, one of the most reputable mobile companies in Turkey.
Is it usual practice to engage in pre
The sale of assets of an entity is subject to corporate tax on the gains realized from the sale of the assets. The Capital Markets Board oversees transactions where at least one of the parties is a publicly held company. The Capital Markets Board is authorised to impose administrative penalties provided that a publicly held company does not comply with the requirements of the Capital Markets law firm Law. The Capital Markets Board is also authorised to oversee the requirement of public disclosure through the Public Disclosure Platform. Additionally, the approval or authorisation of the relevant sectoral authority may be required for regulated sectors. In order to complete a valid acquisition, it is fundamental to comply with the provisions of the related legislation under Turkish law.
Immediate integration of compliance and control mechanisms for identified risks must not be overlooked due to the fact that a transaction period creates control gaps during the integration of different businesses, operations, and company cultures that may be exploited by employees. A transaction is evaluated, valued, and structured according to the results of the pre- M&A DD process. The transactional risks is represented in the deal documents, such as in the terms and conditions of the contract, the design of representations and warranties, and the allocation of liabilities. In M&A deals in Turkey, financial due diligence, tax due diligence, and legal due diligence are usually carried out. As a result of the commitments submitted by the parties to the Commission, it has been decided that there is no possibility of impeding effective competition in the relevant markets within the framework of Article 7 of the Law No. 4054, and the Board approved the transaction. As per Law No. 6352, the administrative sanction decisions of the Board can be submitted for judicial review before the administrative courts in Ankara by the filing of an appeal case within 60 calendar days upon receipt by the parties of the justified decision of the Board.
However, if this transaction is realised via stock exchanges, an independent valuation will not be necessary. Another important tip is to understand that the Turkish Commercial Code has mandatory rules which do not allow all terms of shareholders’ agreements to be reflected in the articles of association of joint stock companies. This means that the good-faith rights of third parties may be protected only in some instances, and several terms and conditions may not be applicable, which could affect the rights of the shareholders.
Any requests for information and responses to these will also go under one electronic platform in the near future. This aims to allow the applicants to complete the missing information requested by the Authority in the filings more practically and quickly, and thereby, to be subject to a shorter review process. In the meantime, the Amending Communiqué provides for a positive legal base regarding the use of the Authority’s Application Portal via e-government platform for filings, which was launched in 2018 and has already been widely used since the beginning of the COVID-19 outbreak.
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If the application is approved, an announcement is made by the bidder on the Public Disclosure Platform and on the website of the target as part of the disclosure requirement. Where applicable, any licences and authorisations held by the target subject to specific regulations relating to its field of activity. As it is not possible to provide a complete list of points for every scenario, the answers below are summarised to emphasise specific points of Turkish law that may differ from those in other jurisdictions in general; they do not include a list of all points that a buyer should consider during due diligence. Subsequently, a term sheet may be negotiated and executed by the parties which determines the conditions with respect to the final documents. The same structures also apply to public M&A transactions; however, there are additional regulations to comply with regarding public M&A transactions.