ANA METIN ingilizce.17

intent of the code states that Article 380 has been introduced to prevent

any bypassing of such limitations. Pursuant to this article, the provi-

sion of advance funding, loan or securities to third persons by target

companies in order for such third persons to acquire shares of the com-

pany is prohibited. The justification of this article states that such

transactions will be deemed as an indirect share buyback of companies.

The Reasons of Promulgating Article 380

The justification of the Article 380 of the New TCC imposing ban

on financial assistance states that the Second Council Directive num-

bered 77/91 of the European Union

with respect to companies

(“Directive”) has been taken as basis for this article. In England,

numerous companies have declared bankruptcy during the financial

crisis of 1920-21 after entering into leveraged buy-out transactions by

using the funds of the target company after the First World War. As a

result of these events, the financing of share purchases provided by the

company for the acquisition of its shares has been considered danger-

ous and a rule prohibiting such financial assistances has been estab-

lished in the British Company Act promulgated in 1929. The EU Law

and EU member states adopted this rule, which is still in force in

English Law.

Consequently, pursuant to the Directive prior to the amendment

made on 2006, a company was not able to provide any advance fund-

ing, loans or security to third persons for purchasing its own shares.

Nevertheless, facilities granted as part of the ordinary business activi-

ties of banks and other credit institutions; and advance funding, loans

or security to the employees of the company (and subsidiaries) for their

acquisition of company shares are not within the scope of this prohibi-

tion. Article 380 of the New TCC has adopted these provisions and

stated that the transactions contradicting with this provision will be

invalid.

Nevertheless, this ban has been criticized for limiting the possibil-

ities of financing to an extent exceeding the pursued aims and objec-

tives. Therefore the Directive has been amended with the directive

COMMERCIAL LAW

Second Council Directive 77/91/EEC dated 13 December 1976.