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Mergers and Acquisitions in Turkey

27 July 2015
by ketencilaw -- last modified 29 July 2015

Mergers and Acquisitions (“M&A”) is defined as the combining of two or more companies or buying-selling or dividing of two or more companies as a part of corporate finance in order to grow rapidly in business field of activity.


There are many opportunities in Turkey for international investors in particular. In the last decade, Turkey has implemented several reforms in order to improve conditions for foreign investors. Consequently, Turkey attracted foreign direct investment over 70 billion dollars and the number of companies with foreign capital operating in Turkey reached to 20.000. Despite the global crisis, total foreign direct investment in Turkey has reached to 80 billion dollars.

Turkey has recently become a business center for all the investors around the world, accordingly the amount that M&A activities takes place in Turkey has been increased rapidly.

Based on the results of independent reports, the year 2011 is recorded as the year that the most transaction activities in terms of Mergers and Acquisitions activities got realized historically in Turkey. Close to 250 transactions with the total business volume at a level of 15 billion USD dollars have been recorded in the year 2011. Foreign legal investors are involved in nearly %74 of the transactions reported with a transaction volume at a level of 11 billion USD dollars. Foreign investors show interest mostly to health and financial services, production, food-drink, e-commerce and energy sectors in Turkey.

It is also reported that Mergers and Acquisition activities in 2011 got realized mostly through small and medium sized transactions.

Nearly 1/5 of the transactions got realized through private equity funds according to reports. It is seen that private equity funds are keen to operate in health, food and drink and e-commerce sectors in Turkey.

The most active business areas were health, e-commerce and education sectors in 2011. On the other hand, energy, food-drink, financial services and production sectors also enjoyed a fruitful year. In 2012, we expect that retail, energy, e-commerce, real estate, food and drink and finance sectors will be the most active sectors in Turkey.

Despite the negative economical developments all around the world, thanks to new incentives and legal amendments, we do not think that interests of foreign investors and private equity funds will neither cease nor decrease, accordingly merger and acquisitions activities will be increasingly taken place.

M&A Activities under Legal Perspective

M&As are slightly different from each other. An acquisition is, in very simple words, the purchase of one company by another company. Most likely, it takes place as an acquisition of a smaller company by a larger company. On the other hand, a merger occurs more like combining of two or more companies to become just a single separate unit of business.

For an M&A transaction to be sound, legal, operational and financial due diligences should be conducted. Pursuant to such due diligences, condition precedents should be specified and accordingly share sale agreements and shareholders agreements should be fulfilled and performed in order for an M&A transaction to be materialized.

The rules that M&A are regulated under changes country to country. As to how M&A activities are realised in Turkey are specified under Turkish respective codes. Turkish Commercial Code is one of the Turkish laws that M&A activities are regulated. Turkish tax laws, the Law on the Protection of the Competition and Capital Market legislations are other regulations that M&A activities are applied.

M&A under Turkish Commercial Law

Under Article 146/1 of current Turkish Commercial Code; Mergers are defined as the establishment of a new commercial company through uniting of two or more commercial companies with each other or joining of one or more commercial companies to another commercial company.

Thus, this definition means that there are structural elements for the merger;

There should be at least two commercial companies before the merger. At least one commercial company will be transferred to another commercial company with its rights and obligations, Dissolving company or companies’ partners will become the partners of the new established or transferee company. As a result of the transfer, at least one company in case of an establishment of a new company and at least two companies in case of an acquisition will be dissolved. As a whole, all the businesses and assets of the dissolving company/ies with its/their all the rights and obligations will also be transferred to the transferee or to the new company established. At least two commercial companies will become solely one commercial company.

The New Turkish Commercial Code which will become effective as of July 1, 2012 was promulgated in the Official Gazette on February 14, 2011.

Pursuant to Article 136 of the New Turkish Commercial Code, Companies can be merged in two ways:

a) Acquisition of a company by another company, technically called “merger by acquisition” or

b) Union of two companies under a new company, technically called “merger by formation of a new company”.

In the application of Articles 136 to 158 (all related to M&A) of the New Turkish Commercial Code, the company accepting the merger is called “transferee” and the company that is joined is called “assignee”. Merger occurs when the shares of the transferee are acquired by the shareholders of assignee on the basis of an exchange ratio in return for the wealth of assignee. The merger contract can include cash payment for withdrawal, as stated in Article 141/2 of the New Commercial Code. Pursuant to Article 136/4 of the New Commercial Code, it is stated that the transferee takes over the assets of assignee as a whole through merger. The company merged by acquisition collapses and is deregistered from Trade Registry.

The New Turkish Commercial Code also specifies the mergers which will be valid mergers;

According to Article 137 of the New Turkish Commercial Code,

Joint stock companies can be merged with joint stock companies, cooperatives, unlimited liability companies and commandite companies, provided that unlimited liability companies and commandite companies should be the transferee. Personal companies can be merged with personal companies, stock companies and cooperatives. However, it should be noted that on such transactions, cooperatives and stock companies should be the assignee. Cooperatives can be merged with cooperatives, stock companies and personal companies provided that cooperatives are the transferee.

It should be noted that the New Turkish Commercial Code has been amending and clarifying the provisions of M&A matters regulated on the current Turkish Commercial Code.

The shareholders of the assignee have the right to make a claim on the shares and rights in the transferee at a value that matches their existing partnership shares and rights. The value of the assets of companies participating in the merger, the allocation of the voting rights and other significant matters are taken into account while assessing the said right to make a claim. An equalisation benefit can be provided while determining the change in partnership shares, providing that the partnership shares assigned to the shareholders of the transferee do not exceed one-tenth of their actual value. Shareholders with non-voting shares in the assignee are granted non-voting shares or shares with voting rights of the same value. Equal rights at the assignee or a reasonable consideration is given in exchange for preferential rights in the existing shares of the transferee. The transferee must grant equal rights to holders of the dividend shares in the assignee or to purchase such dividend shares at their value on the date the merger contract is signed.

According to the New Turkish Commercial Code, the resolution on the merger should be submitted to the authorised organs of the companies such pursuant to what the law requires, the New Turkish Commercial Code also demands certain majority of the votes in order for such resolutions to be approved. As soon as the merger resolution has been adopted by the companies participating in the merger, managing bodies apply to the Trade Registry to have the merger registered. If the transferee has increased its capital as a requirement of the merger, the amendments to the articles of association are submitted to the Trade Registry. The assignee is dissolved upon the registration of the merger at the Trade Registry.

Current Turkish Commercial Code does not specify any obligatory majority votes for the mergers taking place. It only does specify that the resolution duly approved according to the procedures and conditions on the amendments of the companies’ articles of association should be registered and announced.

The merger takes effect upon the registration at the Trade Registry. All assets and liabilities of the assignee are automatically transferred to the transferee upon the registration.

M&A Activities under Turkish Capital Market Legislation

Under the Capital Markets Communiqué on the Principles Regarding Merger Proceedings, Series: I, No.: 31, (“Communiqué”) the principles to be observed in merger proceedings through acquisition of a corporation or through the establishment of a new corporation, in case at least one of the parties is a publicly held corporation are set forth.

It is required that the financial statements of the merging corporations, which will constitute the basis of the merger proceedings, are to be drawn up in accordance with Capital Markets Board regulations regarding accounting standards, and to be subjected to special independent audits within the framework of Capital Markets Board standards regarding independent audits. In case financial statements to constitute the basis of merger have been subjected to independent audits as per Capital Markets Board regulations, the special independent audits shall not be required. The merging corporations are required to base the merger proceedings on consolidated financial statements if the corporation in question is required to draw up consolidated financial statements, and solo financial statements if otherwise. In case the period between the date of the financial statements to constitute the basis of the merger and the date of the general assembly meeting in which the merger agreement will be given final approval is more than 6 (six) and less than 9 (nine) months, it is required that the most recent financial statements of the merging corporations are required to disclose to the public as of the date of the publication of the notification form regarding corporations of which shares are traded in Istanbul Stock Exchange, are to be drawn up and disclosed to the public as an annex of the notification form. In case developments to affect the shareholders' equities and financial statements on the basis of which the merger ratio was calculated, or causing a change of the merger ratio takes place up until the date the merger agreement and the notification form is approved by the Capital Markets Board;

a) Independent auditor firm to audit the financial statements which will constitute the basis of merger shall draw up a report on the impact of the developments in question on abovementioned financial statements.

b) The report drawn up by the expert institution within the framework of Article 8 of the Communiqué shall be updated within the framework of the developments. In case the general assembly decisions regarding the dividend payments by the merging corporations are taken after the date of the financial statement which will constitute the basis of the merger, it is necessary to take into account the effect of the dividend payment during the calculation of the merger ratio. According to article 324 of TCC, a corporation of which capital is uncovered as per the balance sheet drawn up on the basis of the sale price of its assets shall not be an acquirer in a merger proceeding.

M&A Activities under Turkish Competition Legislation

The Competition Law and the Communiqué No. 2010/4 on Mergers and Acquisitions Requiring the Approval of the Competition Board (“Merger Communique”) are the relevant legislations on merger control in Turkey.

Article 7 of the Competition Law governs M&A activities, and authorises the Competition Board to regulate through communiques which M&A activities should be notified in order to gain legal validity. Merger Communiqué is the primary legal instrument in assessing merger matters in Turkey. The Merger Communiqué sets forth the types of mergers and acquisitions which are subject to the Competition Board’s review and approval.

The Merger Communiqué defines the scope of the notifiable transactions in Article 5/I of the Merger Communiqué as follows:

merger of two or more undertakings; acquisition or control by an entity or a person of another undertaking’s assets or a part or all of its shares or instruments granting it the management rights.

Under Article 5/II of the Merger Communiqué:

“Control can be constituted by rights, agreements or any other means which, either separately or jointly, de facto or de jure, confer the possibility of exercising decisive influence on an undertaking. These rights or agreements are instrument which confer decisive influence in particular by ownership or right to use all or part of the assets of an undertaking, or by rights or agreements which confer decisive influence on the composition or decisions of the organs of an undertaking.”

“Control shall be deemed acquired by persons or undertakings which are the holders of the rights, or entitled to the rights under the agreements concerned, or while not being the holders of the said rights or entitled to rights under such agreements, have de facto power to exercise these rights.”

Therefore, M&A activities resulting in a change of control may be subject to the approval of the Competition Board.

Article 7 of the Merger Communiqué sets new and only turnover based thresholds as follows;

if the total turnover of the parties to a concentration in Turkey exceeds TL 100 million and the respective turnovers of at least two of the parties individually exceed TL 30 million; or the worldwide turnover of one of the parties exceeds TL 500 million and the Turkish turnover of at least one of the other parties exceeds TL 5 million,

the merger transaction may be subject to the Competition Board’s approval.

There is no specific deadline for filing for the approval but it should be made before the closing of the merger transaction. Under Article 10 of the Merger Communiqué, a merger transaction is deemed to be “realised” on the date when the change in control occurs.

Failure to notify when it is required will occur monetary fines, invalidity and termination of the merger transaction.

M&A Activities under Tax Regulations

M&A activities’ tax regulation has been implemented through the Law Regarding Amendments on Certain Laws and Decree-Laws which amended the Law on the Corporate Tax and other laws on various taxes. Under Amended Article 38 of the Law on the Corporate Tax, it is stated that following transactions shall have the force of law as the demerger or exchange of shares. Transfer of all assets, receivables and obligations over value in account of a capital company fully amenable, by means of dissolving without liquidation to a current or newly establishing two or more capital companies subject to full obligations of a legal taxpayer in consideration of granting of participation shares representing the capital of the transferee capital company to the partners of the HYPERLINK "" predecessor company (Cash payment as much as of a part of %10 of the nominal value of the participation shares which will be granted to the partners of the predecessor company does not constitute an obstacle for the transaction to be deemed as a demerger.). Providing real assets and participation shares with the production facilities, service businesses and intangible rights in connection with these facilities and businesses, raw materials, semi-manufactured and manufactured goods stated in the balance sheet of a capital company fully amenable to a current or newly establishing a capital company fully amenable, in order for such assets to be granted to the partners of the transferror company over value in account, as a capital in kind in consideration of participation shares of the transferee company.

Acquisition of shares of a capital company by another capital company fully amenable by means of acquiring the management and the majority of the equity shares of such company in consideration of granting participation shares representing the capital of this capital company fully amenable to the partners of the company (Cash payment as much as of a part of %10 of the nominal value of the participation shares which will be granted to the partners of the predecessor company does not constitute an obstacle for the transaction to be deemed as a exchange of shares.). Regulatory accounts for the assets and obligations shall be transferred with the related asset or obligation account. Amended Article 39-A of the Law on the Corporate Tax states that in the transactions, if the following conditions are met, only the incomes of defunct companies will get taxed until the date of transfer; profits directly resulting from the merger does not get calculated and taxed.

1 - The defunct company and the merged company submit their transfer declaration which is jointly signed by those parties to the tax office that defunct company is subject to within fifteen days as of the date of the merger, and they also attach the balance sheet of transfer to such statement.

2 - The merged company undertakes to pay all the tax obligations payable and will be payable and fulfill all other oblifations through a declaration statement in connection with the transfer declaration statement. accrued and discharged the institution shall pay the tax debts and fulfill other obligations connected with a declaration of transfer declaration is committed. The local authority on goods in this respect may also request collateral from the merged company.

Under Amended Article 39-B, it is specified that in the demergers realized according to Amended Article 38 (1), if following conditions are met, the incomes of the company that became annulled will be taxed only until the date of the demerger, the incomes directly arising from the demerger will not be calculated and taxed.

The divided company and the company/ies who acquired the assets of such company submit a declaration statement signed by them to the Tax Registry where divided compaby is subject to withing fifteen dayes as of the date of the demerger and to such statement, they also attach the written statement of Trade Registry Directorate which displays the balance sheet and income schedule of the date of the demerger, demerger contract and new capital structure of the companies who transferred the assets of the divided company.

The undertakings transferred the assets of the divided company undertake to be jointly and severally liable for the tax obligations accrued or will be accrued until the date of the demerger of the divided company and fulfill their obligations with a covenant in connection with the statement of demerger. Local Authority may request security from the divided company and the undertakings transferring the assets of the divided company on this matter.

Under Amended Article 39-C, it is stated that in the transfers and demergers taken place according to Article 39, in order for the incomes occuring until the date of transfer or demerger to be taxed, earnings calculated as of the date that the resolution of authorised board of company on the transfer or demerger is registered with the Trade Registry are declared with the corporate tax return to the tax office that the company becoming defunct is subject to within fifteen days as of the date such resolution is announced. Balance sheet of transfer or demerger and income table should be attached to corporate tax return. Under Article 29 of the Expenditure Taxes Law dated 13.07.1956 and numbered 6802, the earnings arising out of transactions of merger, transfer, demerger, exchange of shares being done pursuant to provisions of the Law on the Corporate Tax are exempt from the taxes and duties of bank and insurance transactions tax. It should also be noted that the agreements on the merger, transfer and demergers are held exempt from the stamp tax according to Stamp Tax Code dated 1.7.1964 and numbered 488.


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