60 / 516
The Prohibition against Financial Assistance
under the New TCC
*
Att. Ozgur Kocabasoglu
In general, share buybacks activity of companies is forbidden
under the Turkish Commercial Code numbered 6762 (“TCC”) except
from certain exceptional cases. The Turkish Commercial Code num-
bered 6102 (“New TCC”) introduces an important innovation enabling
the companies to buy back their shares or to accept as a pledge there-
on under certain conditions. Nevertheless, article 380 introduced pro-
hibition on a company to provide an advance funding, loan or security
to third persons, for the purchase of its own shares (briefly, the “prohi-
bition of financial assistance”). This provision entering into force as of
1 July 2012 is of a significance with respect to the future and validity
of company share sale and purchase transactions through benefiting
from the company assets which frequently took place (leveraged buy-
out). The prohibition of financial assistance, which concerns the com-
panies and private equity investors, shall be analyzed in our newsletter
article.
Share Buyback of Companies and the Prohibition of Financial
Assistance
Article 329 of the TCC prohibits the share buybacks or acceptance
of pledges on the shares by companies except from five exceptions
specified under the article. The New TCC limits the scope of the cur-
rent prohibition. Pursuant to article 379 and the following articles of
the New TCC, joint stock companies may buy back their own shares
(directly or indirectly through third persons). The possibility for the
companies to buy back their shares is reviewed in another article in our
newsletter.
New TCC sets out certain limitations and conditions to the share
buyback. For instance, shares acquired pursuant to article 379 shall not
exceed ten percent of the share capital of the company. The legislative
46
NEWSLETTER 2012
*
Article of April 2012