Legal Journal

Share Transfers Subject to Permission of Administrative Institutions

Share  transfer is a procedure regulated by the Turkish Commercial Code in which all rights and obligations transfer to the assignee; in case of limited liability companies transfer procedure is subject to registration and in case of joint stock companies transfer procedure varies depending on whether the share is connected to the bond or not. All obligations related with the shares also transfer to the assignee with such transfer.

Some of the share transfers in our country require special permissions from administrative institutions and/or various restrictions apply to such share transfers. The administrative institutions requiring such permissions can be exemplified as, the Capital Markets Board, the Competition Authority, Banking Regulation, Supervision Agency, Energy Market Regulatory Authority and the Supreme Board of Radio and Television.

It is stated in the Law No. 4054 on the Protection of Competition Article 2 that “all kinds of legal transactions and behaviors that will undertake merger and acquisition which will significantly reduce competition” are subject to authorization procedure. Communiqué No. 2010/4 Concerning the Mergers and Acquisitions Calling for the Authorization of the Competition Board envisages some thresholds for share transfers which need permission and regulates that the share transfers falling within the scope of the stated Communiqué require permission from the Competition Board for validation. If the Competition Board becomes aware of such a transaction even though no one has noticed them, the Board is able to make a compliance audit through the transaction ex-officio. In addition to the fine to be sentenced in case of transfers made without a notification to the Board, the Board can also rule that all actions and results arising from such transfer which are not in accordance with law can be nullified.

Banking Law also includes restrictions for share transfers. Any acquisition of shares that result in the acquisition by one person directly or indirectly of shares representing ten percent or more of the capital of a bank or if shares held directly or indirectly by one shareholder exceed ten percent, twenty percent, thirty-three percent or fifty percent of the capital as a result thereof, and assignments of shares that result in shares held by one shareholder falling below these percentages, shall require the permission of the Board. Regardless of the aforementioned ratios, transfers which gives privilege to the Board of Directors or to the audit committee on assignment of members shall be subject to the approval of the Board.

The principles regarding the public joint stock companies and their share certificates are regulated by the Capital Markets Law No. 6362 and in some cases a permission of the Capital Markets Board is required for share transfers. The relevant specific legislation applicable to public joint stock companies, if any, must also be considered in case of share transfers of such companies. In cases where permission is required, share transfers made without obtaining permission cannot be recorded in share register and even if it is recorded such records shall be treated as  null and void.

The Electricity Market Law states that for energy generation facilities based on wind and solar energy where installed capacity is based on one megawatt of renewable energy sources, the share transfer cannot be done except for the exceptions determined by the regulation, which has been issued  by the Board, until the provisional acceptance of all production facilities subject to the application is made.  In the event of a share transfer, it is explicitly indicated in the connection agreement of the legal entity that the invitation letter shall be annulled.

In the Scope of the Law No. 6112 on Establishment of Radio and Television Enterprises and their Media Services, Radio and Television Supreme Council require a notification in case of share transfers. According to Article 20 (1) of the above mentioned Law, the transfer of the shares of an incorporation to which a broadcasting licence has been granted, shall be notified to the Supreme Council within thirty days from the transfer date together with the information about names and surnames of the shareholders, shareholding structure and vote proportions subsequent to the transfer of shares.

In summary, according to Turkish legal system, obligations such as prior authorization and notification must be fulfilled for share transfers in certain areas of activity which are determined by Law. Otherwise, it may invalidate the transaction and cause the companies to face serious administrative penalties.

Av. Haluk İnanıcı