64 / 516
not however decrease the reserves of the company, and shall comply
with articles 519 and 520 governing the deposit and usage of reserves.
The justification for article 380 states that the financing should be pro-
vided from the available assets of the company with even where finan-
cial assistance is permitted. The transactions falling within the scope of
these exceptions are allowed and are not null.
The exception governing the credit and financial institutions has
been introduced by adopting the provisions in the Directive; neverthe-
less the scope of this exception is disputed. Some views in the doctrine
declare that the banks may grant a facility to third persons for the
acquisition of the shares of a company, with the company providing
collateral to the bank for this transaction. Nevertheless, bearing in
mind both the purpose and the justification of article 380, and the prac-
tice in the European Union, it must be stated that the dominant opin-
ion in the doctrine regarding this exception to be limited to the banks
providing facility and financing to third persons in order for such per-
sons to acquire their own (the bank’s) shares.
Conclusion
Article 380 of the New TCC has a material impact to the future of
the leveraged buy-out transactions. In general the financial assistance
by a company for acquisition of its own shares has been prohibited,
save for the financing provided to third persons by banks for them to
acquire the bank’s shares and the financing provided to company
employees for them to acquire the company’s shares. Any transaction
of the company providing advance funding, loan or security (the
financing transaction) to third persons for the acquisition of its own
shares, other than the aforementioned exceptions, are deemed null and
void.
This provision creates a material obstacle with respect to financing
of share purchase transactions. The Directive has been amended in the
year 2006 to enable such financing under certain conditions in order to
circumvent this obstacle. Nevertheless, the New TCC has not adopted
this amendment.
In the light of this provision, the assets or resources of the compa-
ny may not be used or presented as collateral for the sale and purchase
of its own shares.
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NEWSLETTER 2012