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

RECENT UPDATES ON SQUEEZE-OUT AND PUT OPTION RIGHTS IN PUBLICLY-HELD COMPANIES

The Communiqué on Squeeze-Out and Put Option Rights No: II.27.1 (“Old Communiqué”) published in Official Gazette dated 02.01.2014 and numbered 28870 has recently been repealed by the Communiqué on Squeeze-Out and Put Option Rights No:II-27.2 published in Official Gazette dated 12.11.2014 and numbered 29173 (“New Communiqué”). 

Undoubtedly, the most remarkable changes introduced by the New Communiqué are the raise of threshold for triggering the exercise of squeeze-out and put option rights through which it is intended to prevent the delisting in Borsa İstanbul A.Ş and also the change of the calculation formula to be applied on the put option rights. 

Accordingly, the new threshold for triggering the squeeze-out for controlling shareholders and put option right for minority shareholders has been introduced as 95% until the end of 2014, 97% until the end of 2017 and 98% as of 1st of January 2018.

Although the calculation formula for squeeze-out has remained same as in the Old Communiqué, as unlisted entities, listed public entities are now required to obtain a valuation report for determining the price of shares subject to the put-option requests of minority shareholders.  The put option price shall be the higher of (i) the squeeze-out price, (ii) the price of shares determined in such mandatory valuation report, (iii) the price applied for the mandatory tender offer conducted within the one-year period prior to the on which controlling shareholder status is gained or the disclosure date on which the controlling shareholder discloses the exercising of the further share purchases, (iv) arithmetic average price within six-month period as of the date on which controlling shareholder status is gained or the disclosure date on which the controlling shareholder discloses the exercising of the further share purchases, (v) arithmetic average price within one year period as of the date on which controlling shareholder status is gained or the disclosure date on which the controlling shareholder discloses the exercising of the further share purchases, and (vi) arithmetic average price within five-year period as of the date on which controlling shareholder status is gained or the disclosure date on which the controlling shareholder discloses the exercising of the further share purchases. 

On the other hand, with respect to the squeeze-out, the calculation of the share price of the listed shares will still be calculated over the arithmetic average price per share occurred within the thirty-day period as of the date on which controlling shareholder status is gained or the disclosure date on which the controlling shareholder discloses the exercising of the further share purchases. 

Moreover, as in the Old Communiqué, the squeeze-out and put option right are not allowed to be exercised during the two-year period as of the date on which the shares become listed.

Those real person and/or legal entity shareholders of publicly-held companies who would be regarded as a controlling shareholder on the date on which the New Communiqué enters into force (i.e. 12.11.2014), shall not be able to exercise their squeeze-out right until a further share purchase is exercised by such controlling shareholder. Neither does the put right of the minority shareholders shall be exercisable until a further share purchase is conducted by the controlling shareholder which may give rise to the right of squeeze-out.

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