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Leveraged Buyouts within the Context of
Financial Assistance Ban
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Prof. Dr. H. Ercument Erdem
In General
Article 380 of Turkish Commercial Code numbered 6102
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(“TCC”) bans the legal transactions of a joint stock company that are
intended to finance the purchase of its own shares by third parties, or
supporting third parties, by granting loans or providing security for the
acquisition of its own shares (“financial assistance ban”). This provi-
sion is regulated just after art. 379 that regulates the company’s pur-
chase or pledge of its own shares. TCC art. 379 prohibits the acquisi-
tion or acceptance of a pledge of a company of its own shares that
exceeds ten percent of the registered or issued capital. The ban regu-
lated under art. 380 of the TCC is an extension of this article. The law
maker determines financial assistance, such as a company’s buy back
of its own shares.
The ban brought by TCC art. 380 bears importance with respect to
the leveraged buyout method that is used in large-scale share purchase
transactions. In a leveraged buyout, the financing used in the purchase
of the target company is ultimately met using the capital and income
of the target company. The financial assistance ban set forth in the TCC
prohibits leveraged buyout transactions. This newsletter article exam-
ines the financial assistance ban that closely concerns investors, and
the effect of this ban on leveraged buyouts.
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NEWSLETTER 2015
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Article of April 2015
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Published in the Official Gazette dated 14 February 2011 and numbered 27846 and entered into
force on 1 July 2012.