Newsletter-21

28 NEWSLETTER 2016 knowingly, and applies not to both of the companies, but only to the company that knowingly gets into this situation. For example, if company X holds 30% of the shares of company Y, and has informed company Y as per Article 198 of the TCC, and if company Y, despite knowing this, acquires 40% of the shares of company X, company Y encounters the sanction of shareholding rights being frozen, and can only use its rights arising from one-fourth of its shares, i.e. 10%. The frozen 30% shares do not count in the calculation of the general assembly meeting and decision quorum. If there are 100 shares in company X, the meeting and decision quorum shall be calculated over 70 shares. Even if company X, which holds 30% of the shares of company Y, has not notified company Y as per Article 198 of the TCC, if com- pany Y is made known of this situation otherwise, it shall, again, be subject to the same sanction. This is because Article 201/1 of the TCC does not refer to any special notification requirement, but only seeks the condition to “know”. If company Y participates in company X in the amount of 40% without knowing that 30% of its shares are held by company X, it shall be entitled to use all of its rights arising from its shares, and shall not be subject to any sanction. Notifications to be made as per Article 198 of the TCC, and consequences of failure thereof are not the subject of this article and, therefore, are not exam- ined herein 3 . From the expression “all shareholding rights”, one should un- derstand the entire rights connected to shares, such as voting rights, liquidation and profit sharing rights, and pre-emption rights. Only the right to acquire gratis shares, which is clearly left outside the scope of the law, shall not be frozen. Another point that should be analyzed is the start and end time of the share freeze. Shareholding rights shall freeze at the time of the intentional acquisition of the shares that have created the cross shareholding situation, and shall continue until the end of the cross 3 See Notification and Registration Obligations for Groups of Companies, http:// www.erdem-erdem.com/en/articles/notification-and-registration-obligations-for- groups-of-companies/ (Access date: 24 February 2014) for information on notifi- cation and registration obligations within the scope of group of companies.