News and developments
New Era for Material Transactions and Exit Right
I. General Overview
The Law No. 7222 regarding Amendments to the Banking Law and Certain Other Laws ("Law No. 7222") entered into force on February 25, 2020 with its publication in the Official Gazette on the same date. Among other things, the Law No. 7222 has introduced novelties on the material transactions and exit right mainly regulated under the Capital Markets Law No. 6362. The Communiqué No. II-23.3 on Material Transactions and Exit Right ("Communiqué") entered into force on June 27, 2020 upon its publication in the Official Gazette on the same date, abolishing the Communiqué No. II-23.1 on Common Principles Regarding Material Transactions and Exit Right ("Abolished Communiqué").
Purpose of the Communiqué is to determine the procedures and principals regarding the material transactions, the procedures to be pursued while exercising the exit right and the price to be applied; the procedures and principles on offering exiting shareholders' shares to other shareholders or investors as well as transactions that do not trigger the exit right; and exceptions to these determinations. In this article, our aim is to summarize significant provisions of the Communiqué.
II. What Are the Material Transactions?
The Communiqué re-determines material transactions of publicly-held companies and excludes certain transactions which were deemed material under the Abolished Communiqué. Accordingly, the following transactions will be deemed material transactions according to Article 4 of the Communiqué:
- Certain mergers and spin-offs stipulated in the Communiqué;
- Changing the type of the company;
- Transferring assets or carrying out transactions that have the consequences as the transfer of the assets, or establishment of limited rights in rem in favour of a third person on the assets of the publicly-held companies, provided that they satisfy the materiality criteria specified in the Communiqué;
- Adopting a new privilege or changing the scope and subject of the current privileges.
- the ratio between the value of the assets in question to the total value of the assets of the publicly-held companies, according to the latest financial statements announced to the public; or
- the ratio between the amount of the transaction to the value of the company calculated based on the arithmetic average of the daily adjusted weighted average stock exchange prices in the last six months; or
- the ratio between the financial value gained from the transferred assets to the total of the income items affecting the net profit/loss for the continuing operations period, according to the latest financial statements announced to the public.
- The arithmetic average of the daily adjusted weighted average trading prices for the last one month prior to the disclosure date for the companies whose shares are traded on Borsa İstanbul A.Ş.'s Star Market.
- For other companies, the arithmetic average of the daily adjusted weighted average trading prices for the last six months prior to the disclosure date.