• It is the spirit and not the form of law that keeps justice alive.
    Earl Warren

IS “PARTIAL SPIN-OFF” EXCLUDED FROM THE SCOPE OF THE TURKISH BANKING AUTHORITY’S JURISDICTION?

The Turkish Banking Authority, Banking Regulation and Supervision Agency (BRSA), has announced its recent changes in the Regulation dated 1 November 2006 and numbered 26333 on Merger, Acquisition, Spin-off and Transfer of Shares by the Banks, and such amendment is published in the Official Gazette dated 16 November 2017 and numbered 30242 (Amendment).

 

Pursuant to the Amendment, the definition of “partial spin-off” is amended to include the scenario where the shares in the new company (transferee) shall be owned by the shareholders of the transferor bank. Accordingly, “partial spin-off” refers to transfer of one or more assets by the transferor bank to a bank, financial institution or other joint-stock company without dissolution of the transferor bank, the shareholders of which shall be the same shareholders as the transferor bank. As a result, the definition excludes the spin-off where the bank forms a subsidiary and transfers the assets, while holding all of the shares of such subsidiary.

 

According to the Amendment, “partial spin-off”, as a result of which a subsidiary by the transferor bank is established, is excluded from the scope of the BRSA Regulation. However, if the transferor bank’s paid-up capital becomes less than TRY 30 million, which is the legal limit for the establishment of a bank in Turkey, the shareholders of such transferor bank shall commit that they will fulfil the deficiency via capital increase in cash within the following three months as per the Amendment.

 

Considering all minor changes in the Amendment, it is clear that the partial spin-off by way of forming a subsidiary by the transferor bank is excluded from the BRSA’s jurisdiction and now is only subject to the general terms and conditions provided in the Turkish Commercial Code No 6102, while any other types of partial spin-off remain within the scope of Article 15 et seq. and shall be concluded under the control and supervision of the BRSA.

 

Despite the rumours on the political reasons behind the Amendment, the BRSA has announced that the purpose of the Amendment is to abolish the repeating control mechanism and to simplify and ease the procedures for the asset transfers by the Turkish banks to their subsidiaries.
Practice Areas:
#Banking and Finance Law
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