Newsletter-21

33 COMMERCIAL LAW determined pursuant to the annual balance sheet. Net profits for the year are determined as per the law and the provisions of the articles of association. Nonetheless, dividends to be distributed may not be determined before statutory and voluntary reserves are allotted (TCC, Art. 523/1). Hence, dividends may be distributed from the annual net profit for such period and only from voluntary reserves allotted for this purpose, or from those that have no purpose (TCC, Art. 509/2). As distinct from the former Commercial Code numbered 6762 (“former TCC”), the TCC uses the wording ‘net profit of the period,’ instead of ‘gross earnings to determine dividends.’Therefore, as speci- fied in the preamble of the TCC, this wording facilitates the embodi- ment of dividends, since it is a term used in the Turkish Accounting Standards. Art. 507/2 of the TCC is an exemption to the principle of equal treatment with respect to a shareholder’s participation in the profit. Accordingly, certain shares may be privileged through the articles of association. For instance, obtaining more profit from the non-privi- leged shares, or primarily benefiting from the profit, may be privileges granted to certain shares. In such case, the shareholder’s dividend is calculated according to privilege under the articles of association, and distribution is primarily made to privileged shares. Body Authorized to Distribute Dividends Art. 408/2 of the TCC regulates the non-delegable duties and authorities of the general assembly. This Article specifies that it is the general assembly’s non-delegable duty to resolve issues relating to financial tables, annual report of the board of directors, disposal of the annual profit, determination of the dividends and gains margins, including addition of reserves to the capital or to dividend to be dis- tributed. Therefore, the general assembly is the only authorized body to determine and distribute dividends, and it may not delegate such duty to the board of directors. As distinct from the former TCC, the TCC does not comprise any provision that entitles the board of directors to make a proposal on dividend distribution. Likewise, this power is not enumerated under