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Share Buyback of Companies Pursuant to the New TCC
*
Att. Leyla Orak
The Turkish Commercial Code numbered 6102, which will come
into force on 1 July 2012 (“New TCC”), has introduced important
reforms through article 379 and the following articles. As of the entry
into force of the New TCC, the companies will be able to acquire their
own shares or accept as pledge in exchange for securing a debt. This
article shall briefly analyze the current prohibitive measures on share
buyback instrument and the easing off provisions to the stringent rules
of the capital markets legislation and then shall focus on the possibili-
ty introduced by the New TCC, the conditions of share buyback of the
companies and the consequences for the transactions in violation of the
code.
TCC and the Principle Resolution of the CMB
Pursuant to article 329 of the Turkish Commercial Code numbered
6762 (“TCC”), it is forbidden for the joint stock companies to buy back
its own shares in exchange for any consideration or accept pledges
thereon. Transactions in violation of this prohibition shall be null and
void. This prohibition was intended to protect the structure of share
capital, interest of creditors and unequal treatment of shareholders of
the companies and aims to prevent inconveniences such as the main
shareholder charging its capital market debts to the company and the
withdrawal of share capital. Nonetheless, the possibility of the compa-
ny to protect itself (for example prevention of manipulation) through
share buybacks is also abrogated by this prohibition
1
.
Article 329 exhaustively lists exceptions to this prohibition. These
exceptions are the share buyback for the purpose of share capital
reduction to boost leverage -any money paid to company to acquire
COMMERCIAL LAW
51
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Article of April 2012
1
See
Prof. Dr. Ünal Tekinalp
,
Yeni Anonim ve Limited Ortaklıklar Hukuku ile Tek Kişi
Ortaklığının Esasları
, 2. Bası, İstanbul, 2011, par. 9-18 to 9-21; Dr. Alihan Aydın,
Anonim
Ortaklığın Kendi Paylarını Edinmesi
, İstanbul, 2008, p. 66 onwards, for the advantages and dis-
advantages of share buybacks.