e-book2011

NEWSLETTER 2011

does not fall within the scope of activities of the company. Pursuant to

article 15 of the Application Act, the provision in relation to abolishing

the

ultra vires

rule shall immediately be applicable as of the entry into

force date; therefore, provisions in the articles of association delimiting

the competence of a company to the scope of activities will be deemed

unwritten as of the entry into force of the New TCC.

3. Group Companies

Group companies are regulated for the first time by the New TCC.

Pursuant to article 202 of the New TCC, the controlling company shall not

exercise its control over the subsidiary company without compensating

the damage to be incurred by such subsidiary. In case damage is incurred

by the subsidiary as a result of exercise of control, such loss shall be

compensated within two years.

Shall controlling companies be obliged to compensate losses

incurred by the subsidiary deriving from exercise of control during the

period in which the Current TCC is in force? Pursuant to article 18 of the

Application Code, in case a loss is incurred as of July 1, 2012 as a result

of exercise of control shall be compensated until July 1, 2014. Failure of

such compensation shall result in the possibility to file certain lawsuits

foreseen with respect to group companies as of July 1, 2014.

4. Cross-Shareholding

Article 197 of the New TCC introduces a new provision in relation

to cross shareholding of companies stating that if two companies both

hold 25% of the shares of the other company, the shareholding rights of

the company causing such cross-shareholding (the company acquiring

25% of the shares of a company who holds 25% of its shares) shall be

decreased to 1/4

. The Application Code regulates in its article 19 that

the provision in relation to decreasing the voting rights shall come into

effect on July 1, 2014, whereas all other provisions with regards to cross-

shareholding shall immediately come into force. However, provisions

governing cross-shareholding of the New TCC shall not be applicable

in case of subsidiary company’s acquisition of parent company shares or

both companies’ dominance to each other.