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)