34 / 522
Art. 23 of the Second Directive anticipated that the company may
not provide advances, loans or security to a third party with a view to
acquire its shares by a third party. This prohibition did not apply to the
legal transactions in the ordinary course of business of credit and
finance institutions, and to the legal transactions in which the compa-
ny provides advance funds, loans and security to its own employees in
order for them to acquire the shares of the company.
Art. 23 includes a strict regulation, and has been subject to criti-
cisms due to its restriction on financing possibilities. Accordingly, in
2006, the Second Directive was amended by directive numbered
2006/68/EEC
4
. This amendment sets forth that the companies may
lend financial assistance provided that (i) the advance, loan or security
provision transactions are concluded on an arm’s length basis, (ii) a
detailed written report on the credibility of the person who is party to
the transaction is prepared by the board of directors, (iii) the general
assembly of the company approves the report of the board of directors
with a two-thirds majority, and the report is registered with, and
announced by, the trade registry, and (iv) the financial assistance grant-
ed does not cause diminution of authorized share capital and non-dis-
tributable reserves of the company.
However, the TCC was enacted with the aim to harmonize with the
European Union, and took into consideration the provision of the
Second Directive that was in force prior to 2006. Article 380 of the
TCC did not include the provision that amended directive numbered
2006/68/EEC that enables financial assistance under certain condi-
tions. Within this context, the provision included in Turkish law is
stricter than the current provision of the European Union, and does not
allow leveraged buyout transactions, except for the two limited excep-
tions as foreseen under the law.
Financial Assistance Ban regulated under TCC Art. 380
Pursuant to Art. 380/1 of the TCC, the legal transactions where the
target company provides advances, loans, or securities to a third party
so that its shares can be acquired will be deemed null and void. As stat-
18
NEWSLETTER 2015
4
Directive 2006/68/EC of the European Parliament and of the Council dated 6 September 2006.