Turkey:

Significant Amendments and Novelties to Turkish Capital Markets Legislation during

the First Half of 2018

This article will address significant

amendments and novelties introduced for Turkish capital markets legislation

during the first half of 2018 as in line with specific needs and interests of public

and private institutions, companies, shareholders and/or investors being

subject to such legislation.

In this

respect, the following legislation will be examined in this article toward the

past:

-

Communiqué

on Takeover Bids (Communiqué No. II-26.1)

-

Communiqué

on Real Estate Investment Trusts (Communiqué No. III-48.1)

-

Istanbul

Settlement and Custody Bank (Takasbank) - Central Clearing And Settlement

Regulation

-

Communiqué

on Common Principles Regarding Significant Transactions and Appraisal Right

(Communiqué No. II-23.1)

-

Communiqué

on Material Events Disclosure (Communiqué No. III-15.1)

I.        Amendments and Novelties

1.       Communiqué

on Takeover Bids (Communiqué No. II-26.1)

The Communiqué

No. II-26.1 mainly focuses on share takeover bids in companies. Within this

scope, the communiqué stipulates that in case any person or persons acting in

concert acquire(s) management control of a company through share transfer(s)

partially or wholly, then such person(s) shall be liable to make a takeover bid

to other shareholders of the target company by protecting their rights.

Article 18

of the Communiqué No. II-26.1 stipulates certain circumstances that the Capital

Markets Board ("CMB") may grant exemption for the foregoing takeover bid

requirement, upon application of the relevant parties and as the case may be.

In

accordance with the recent amendments published on the Official Gazette on June

5, 2018 which was entered into force on the same date, two new circumstances

have been inserted to Article 18 of the Communiqué No. II-26.1. As per these

changes, the CMB may grant exemption for the takeover bid requirement in case

of the following circumstances as well:

-

As a result of a default of repayment a loan which has

been secured by the shares granted to the bank, transfer of those shares to a special

purpose vehicles (SPV) incorporated by the bank; acquisition of those shares by

third parties from the bank or SPV;

-

Transfer of shares to fulfil a regulatory requirement which

determines shareholding qualification.

2.  Communiqué

on Real Estate Investment Trusts (Communiqué No. III-48.1)

According

to Article 45/2 of the Communiqué No. III-48.1, real estate investment companies

are not allowed to distribute cash dividend before public offering or sale of

the shares to qualified investors. However, in accordance with the recent

amendment published on the Official Gazette on May 10, 2018 and which was

entered into force on the same date, the foregoing limitation will not be

applied for the real estate investment companies which operate a portfolio

consisting of exclusively infrastructure investments and services until December

31, 2019. Before this amendment, the foregoing date was stipulating in the

Communiqué No. III-48.1 for such real estate investment companies as December

31, 2017. The amendment has extended that term for 2 (two) years more.

3.       Istanbul

Settlement and Custody Bank (Takasbank) Central Clearing and Settlement Regulation (Central Clearing and Settlement

Regulation)

As per the

amendments published on the Official Gazette on May 8, 2018 which was entered

into force on the same date, Central Bank of the Republic of Turkey ("Turkish

Central Bank") has been introduced as de facto member of central clearing and

settlement institution and it has been ruled that the Turkish Central Bank is

not subject to provisions of the Central Clearing and Settlement Regulation and

relevant market directives and procedures.

Furthermore,

two new transaction collateral types have been defined in Article 38 of the

Central Clearing and Settlement Regulation. Within this scope, (i) publicly

traded precious metals and (ii) electronic product securities are accepted as

new types of transaction collaterals.

4.       Communiqué on Common Principles regarding Significant

Transactions and the Appraisal Right (Communiqué No. II-23.1)

In general,

provisions of the Communiqué No. II-23.1 are related to types of  significant transactions, obligatory

procedures of those, concept of appraisal rights granted to the shareholders

and mandatory takeover bids in companies.

This being

the case, Article 12 of the Communiqué No. II-23.1 defines certain significant

transactions which do not grant appraisal right to shareholders. In accordance

with the amendments published on the Official Gazette on April 18, 2018 and which

was entered into force on the same date, a new significant transaction - which

does not grant appraisal right to shareholders - has been inserted to Article

12 as follows:

-

Asset transfers to third parties (other than related

parties), on the condition that at least 90% of the funds arising from the

asset transfer will be used for payment of the cash loans and/or other debts

arising from the issued debt instruments within 1 (one) month, for the purpose

of strengthening financial position of the company. However, if entire of funds

will be used for payment of the cash loans and/or other debts arising from the

issued debt instruments, the foregoing ratio (i.e. 90%) is not taken into

consideration.

In parallel

of said amendment, Article 12/3 of the Communiqué No. II-23.1 has been revised

as stipulating that the board of directors of a company engaging a significant transaction

as explained above shall adopt a board resolution and disclose that resolution

together with details of payment(s) (i.e. payment amounts, realization of

payments etc.) to the public.

5.       Communiqué on Material Events Disclosure (Communiqué

No. III-15.1)

According

to the amendment published on the Official Gazette on February 13, 2018 and which

was entered into force on the same date, it has been stipulated in Article 12/4

of the Communiqué No. III-15.1 that in case a real person or legal entity

directly reaches or falls below 5%, 10%, 15%, %20%, 25%, 33%, 50%, 67% or 95%

of shares representing share capital of a publicly traded company, the relevant

disclosure liability is performed by the Central Registry Agency (MKK) without

prejudice to other disclosure requirements of said real person or legal entity

arising from other paragraphs of Article 12.

II.     Conclusion

Capital

markets have sensitivities and may rapidly be affected by economic circumstances.

Therefore, as a consequence of global and/or domestic economic developments (i.e.

economic turmoil, cash deficiency etc.), Turkey frequently amends and updates

its capital markets legislation. While some of those amendments are related to

internal functioning of capital markets institutions, many of them are related

to direct interests and rights of the companies, shareholders and/or investors.

Authors: Gönenç

Gürkaynak, Esq., Damla Doğancalı and Selen Sakar, ELIG Gürkaynak

Attorneys-at-Law

(First published by Mondaq on July 9, 2018)