NEWSLETTER-2019-metin

47 COMMERCIAL LAW Distribution of Dividends in Public Companies* Att. Yagmur Zeytinkaya The right to dividends under Turkish Commercial Code numbered 6102 (“TCC”) is the primary financial right in joint stock companies, and it motivates future or current shareholders to invest capital in the company by rewarding them with dividends. Furthermore, Capital Market Law numbered 6362 (“CML”) regulates public companies in order to oversee and supervise capital markets to ensure the function- ing and development of capital markets in a secure and transparent environment, and to protect the rights and interests of investors. This newsletter article reviews the provisions on dividends under the TCC briefly, and examines the general principles of distribution of dividends in public companies under the CML and secondary legisla- tion. The provisions on advance dividends will not be addressed in this article. General Principles on Distribution of Dividends under the TCC Pursuant to Article 408 of the TCC, the general assembly is en- titled to dispose the annual profit, to determine dividends and gain margins, and to resolve on the usage of the reserve funds. The divi- dends may only be distributed from the annual net profit and voluntary reserves. Hence, the dividends cannot be determined unless the statu- tory reserves, as well as the voluntary reserves under the articles of association have been allotted. Five percent of the annual profit shall be allotted as a statutory reserve until it reaches twenty percent of the paid in capital (primary reserve). It is also possible to establish a higher percentage under the articles of association. After exceed- ing such percentage, the amounts indicated under Article 519/2 of the TCC shall be added to the statutory reserve (secondary reserve). The * Article of December 2019