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NEWSLETTER 2013
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the transactions made with third parties upon the direction of the parent
company in favor of the parent company or one of its subsidiaries
2
.
The types of the transactions to be mentioned in the affiliation report
are not limited under the TCC. For instance, all sale, rental or service
agreements etc. between the corporate group companies, or provision of
securities in favor of the group companies may be cited as transactions
to be mentioned in the affiliation report. Additionally, the cases stated
in Art. 202, which result in liability of the companies, may be used to
determine the matters which shall be included in the affiliation report.
It should also be determined whether the subsidiary, where it is the
parent company of other companies, shall state the transactions conducted
with its own subsidiaries. In fact, such an obligation is not stipulated for
the affiliation report which shall be prepared in accordance with TCC
Art. 199/1-3; and in practice, this shall not be necessary. The subsidiaries
of a company that are also under the control of another parent company,
and therefore in the position of a subsidiary, shall state those transactions
in the affiliation reports that they will prepare. For instance, in the event
joint stock company (A) is a parent company and joint stock companies
(B), (C), and (D) are its subsidiaries, (B), (C) and (D) shall each prepare
an affiliation report regarding their relations with (A). If (B) controls joint
stock companies (V), (Y) and (Z), (B) shall not mention its relationship
with (V), (Y), and (Z) in the affiliation report that it shall prepare. (V),
(Y), and (Z) shall mention such relationships in the affiliation reports that
they shall prepare.
The parent companies on the other hand are obliged to mention such
information in the “control report” that they will prepare upon request,
in accordance with TCC Art. 199/4. For the example above, (A) shall
prepare a control report for its relationship with (B), (C) and (D); whereas
(B) shall prepare a control report for its relations with (V), (Y), and (Z).
2
It is also argued that, for the transactions that are not made with the parent company or its
subsidiary to be included to the affiliation report, it is not necessary that the conditions of the
transaction being in favor of the parent company or its subsidiaries and the transaction being
made upon the direction of the parent company are cumulative. According to this opinion,
the transactions in favor of the parent company or its subsidiaries and the transactions made
upon the direction of the parent company shall be separately considered and included in the
affiliation report.