Mandatory Tenders Offers

On 1 February 2021, the Capital Market Board made an announcement with respect to the proposed amendments to the Communiqué on Tender Offers No. II-26.1 (“Communiqué No. II-26.1”) and published the draft of the Communiqué Regarding the Amendments to the Communiqué on Tender Offers No. II-26.1 (“Draft Amendment to the Communiqué No. II-26.1”) on its official website.

The List of Attendees for Bearer Shares in Joint Stock Company General Assemblies Will Now Be Obtained from CRA

In parallel with the amendments made to the Turkish Commercial Code (“TCC”) regarding the obligation to notify and register bearer share certificates to the Central Registry Agency…

The First Crypto Asset-Related Regulation of Turkey Has Been Published: Payment Institutions Will No Longer Engage in Crypto-Related Transfers!

The first crypto asset regulation of Turkey, the Regulation on Non-Use of Crypto Assets in Payments (the “Regulation”) has been published in the Official Gazette dated April 16, 2021. So, does cryptocurrency trading have been banned with the Regulation as of April 31, 2021?

Have You Registered Your Bearer Share Certificates with CRA?

Communiqué on Notification and Registration of Bearer Share Certificates to the Central Registry Agency (“Communiqué”) entered into force on April 6, 2021…

Amendments Made to the Capital Movements Circular

Capital Movements Circular (“Circular”) has been amended with a letter of T.R. Ministry of Treasury and Finance on 16.03.2021.

RECENT DEVELOPMENTS REGARDING VARIOUS LEGISLATIONS

1) MOVABLE PLEDGE

Article 5 of the Law No. 6750 on Movable Pledge in Commercial Transactions (“Movable Pledge Law”) has been amended with Article 24 of the Law No. 7263 on Amendment to the Law on Technology Development Zones and Some Other Laws dated 28 January 2021. Accordingly, as of 03 February2021;

  • in case a pledge is established over the entire commercial enterprise or small business, all types of assets allocated to the activities of such enterprise at the time of establishment of the pledge, shall be deemed to have been included within the scope of the pledge, and
  • in case a specific movable asset group of a company is pledged as a whole, then all assets belonging to that specific asset group shall be deemed to have been included within the scope of the pledge. In such case, item (c) of the sixth paragraph of article 4 of the Movable Pledge Law shall not be applied; and thus, information such as the serial number, brand, production year, chassis number, document serial number, GTIP or PRODTR industrial product codes which indicate the distinguishing characteristics of the pledged assets shall not be required to be included in the movable pledge agreement.

2) FOREIGN EXCHANGE

i) Ambiguity regarding accounts to be used for foreign currency loans utilized by Turkish residents from abroad is now clarified with the recent amendments made to the Capital Movements Circular

Pursuant to Article 17 of the Decree No. 32 on Protection of Value of Turkish Lira (“Decree“), Turkish residents are entitled to utilize foreign currency loans from abroad, provided that such loans are transferred to Turkey through Turkish intermediary banks. Before the amendment was made to the Capital Movements Circular (“Circular“) with the letter of the Ministry of Treasury and Finance dated 25 January 2021 and numbered 49024, there was an ambiguity regarding to which account the foreign currency loans obtained from abroad by Turkish resident borrowers would be transferred through Turkish intermediary banks. With the amendment made to the Circular, a provision is added to the first paragraph of Article 23 of the Circular, and it is now clarified that the foreign currency loans obtained from abroad can only be transferred to the borrowers’ bank accounts opened before the relevant intermediary bank in Turkey.

In addition, with the amendment made to the second paragraph of the same article of the Circular, it is determined that in case the foreign currency loan obtained from abroad is initially paid to the account opened in the name of the Turkish resident borrower at the creditor bank and then sent to such borrower’s bank account opened at the Turkish intermediary bank; for the loan to be considered as duly transferred to Turkey with respect to the Decree and the Circular, a letter by the foreign creditor stating that the loan has been transferred to the account opened in the name of the Turkish resident borrower is required to be submitted to the Turkish intermediary bank.

ii) Scope of the exceptions on forex measures is extended with the amendments made to the Capital Movements Circular and the Communiqué on Decree No.32

  • Private public partnership (“PPP”) projects

The Ministry of Treasury and Finance amended the Circular on 08 December2020 and 21 December2020 (“Amendments”)  and extended the scope of the exemption provided for the utilization of offshore and domestic loans denominated in foreign currencies (“FX Loans”) by Turkish residents (i.e. natural and legal persons residing or established in Turkey). In principle, the Circular does not permit Turkish residents to utilize offshore or domestic FX Loans unless they have an FX income save for the instances where they fall under the exemptions provided thereunder (“Exemptions”).

Prior to the Amendments, pursuant to the Exemptions , Turkish companies which operate in PPPs (“Project Company”) were already permitted to utilize FX Loans regardless of the FX income requirement. However, following the Amendments, the scope of this Exemption is extended to cover Turkish resident shareholders of the Project Companies. Accordingly, Turkish resident shareholders of the Project Companies are now entitled to utilize FX Loans regardless of the FX income requirement, provided that the FX Loan is injected to the capital of the Project Company or is utilized by the borrower shareholder for the financing of the relevant PPP project or is transferred to the Project Company for utilization within the scope of such projects.

In order for the Turkish resident shareholder to utilize an FX Loan as a (i) ‘capital injection’ to the Project Company or (ii) ‘financing for the PPP project’, the below documents are required to be submitted to the Turkish lender or intermediary bank:

  • a copy of the Trade Registry Gazette certifying the incorporation of the Project Company,
  • an original or notarized copy of the relevant pages of the PPP implementation agreement (“Implementation Agreement”) specifying the parties, subject, amount, date and signatures,
  • an approval letter to be obtained from a relevant public institution including the consideration of the Implementation Agreement,
  • (i) a resolution on the capital increase of the Project Company or a written declaration of the Turkish resident shareholder undertaking the injection of the FX Loan amount to the capital of the Project Company or (ii) a written declaration of the Turkish resident shareholder undertaking that the total amount of the FX Loan is or will be utilized or transferred to the Project Company for financing within the scope of the PPP project.

The amount of the FX Loan provided for ‘capital injection’ will be transferred to the borrower shareholder following the submission of the letter of the Trade Registry evidencing the capital increase to the lender or intermediary bank. In addition, with respect to the FX Loan provided from abroad, the Turkish intermediary bank will keep the loan amount in a blocked account until the abovementioned letter of the Trade Registry is submitted.

In case the FX Loan is provided for ‘the financing of the PPP project’, then the FX Loan can be utilized following the submission of the written declaration to the lender or the intermediary bank. In addition to this written declaration;

  • if the loan amount is to be utilized by the borrower shareholder or transferred to the Project Company for its utilization within the scope of the PPP project after the drawdown of the loan, the documents evidencing this (e.g. such as swift messages, bank receipts, official correspondence with the Project Company etc.) are required to be delivered to the lender or intermediary bank until the termination of the construction term determined under the Implementation Agreement;
  • if the loan amount is to be set off against the amounts which are already used or transferred to the Project Company for utilization within the scope of the PPP project before the drawdown of the loan, documents evidencing this (e.g. such as swift messages, bank receipts, official correspondence with the Project Company etc.) are required to be delivered to the lender or intermediary bank until the termination of the construction term determined under the Implementation Agreement. Such documents must be related to the transfers or payments made at most within the past 1 (one) year.

If the abovementioned documents are not delivered to the lender or intermediary bank until the construction term determined under the Implementation Agreement, the relevant bank will be obliged to notify the Ministry of Treasury and Finance accordingly.

In any case, the total amount of the FX Loan cannot exceed the amount of the capital increase determined under the resolution or the written declaration, or the amount determined in the Implementation Agreement.

  • Service Contracts

Communiqué No: 2008-32/34 has been amended with the Communiqué No: 2021-32 / 59 published in the Official Gazette numbered 30380 and dated 30 January.2021 (“Communiqué No: 2021-32 / 59”) in order to extend the scope of the exceptions provided for the ban on determining the contract price of service contracts to be executed between Turkish residents in foreign currency. Accordingly, with the addition made to Article 8 (Contracts in Foreign Currency and Indexed to Foreign Currency) of the Communiqué No: 2008-32/34, as of 30 January2021, the contract prices and other payment obligations arising under the accommodation service contracts executed between Turkish residents can be determined in foreign currency or indexed to a foreign currency, provided that;

  • The service contracts are executed by and between the accommodation facility certified by the Ministry of Culture and Tourism and the persons residing in Turkey, and
  • The contract is qualified as an “Accommodation Service Contract”.

3) CAPITAL MARKETS

CMB has recently issued a new decision regarding extension of sale periods foreseen for initial public offerings.

In order to minimize the adverse effects of COVID-19 pandemic in the financial markets of Turkey, and to facilitate initial public offerings, and prevent congestions in the initial public offerings to be performed between February – May 2021, CMB has extended the sale periods foreseen under Article 11 of the Communiqué on Prospectus and Issue Document (II-5.1) (“Communiqué”) with its decision dated 04/02/2021 (“Decision”). Accordingly, the sale periods in relation to the financial statements to be included in the prospectus and subject to independent audit shall be applied as follows as of 04/02/2021:

Sales Period Financial Statements to be Included in Prospectus and Subject to Independent Audit
1 1 January – 1 March Yearly financial statements for the last three years or for the three years prior to the current year and Q3 financial statements
2 2 March  – 31 May Yearly financial statements for the last three years

In addition, following the sale period of 1 January – 1 March, the grace period of 15 days where the Q1 financials can be annexed to the Prospectus prepared with the yearly financials is extended to 30 days.

Should you request further information on the new amendments, please contact our team at:

Fatoş Otcuoğlu, LLM

Junior Partner

Banking & Finance | Capital Markets | Corporate

f.otcuoglu@pekin.com.tr

Buse Tunçel

Associate

Banking & Finance | Capital Markets | Corporate

b.tuncel@pekin.com.tr

Berke Demircioğlı

Associate

Banking & Finance | Capital Markets | Corporate

b.demircioglu@pekin.com.tr

Amendments made to the bearer share regime of non-public companies

The Law No. 7262 on Preventing the Financing of Proliferation of Weapons of Mass Destruction (“Law No. 7262”) was published in the Official Gazette dated December 31, 2020 and numbered 31351, in order to implement the United Nations Security Council’s decisions regarding the prevention of proliferation of financing of weapons of mass destruction. Accordingly, Law No. 7262 amends, alongside other laws, certain provisions of the Turkish Commercial Code No. 6162 (“TCC”) regulating the bearer share regime of non-public companies.

Before this amendment, as per the TCC, the bearer shares were to be transferred by way of delivering the share certificate and there was no formal monitoring mechanism for such transfer. However, since this transfer procedure was not easily traceable and may; therefore, facilitate the financing of the weapons of mass destruction through companies established in Turkey having shareholders with bearer shares, Law No. 7262 brought notification and registration obligations with the view of facilitating the monitoring of such transfers.

With the amendments brought by Law No. 6272, as of April 1, 2021;

  • The existing owners of bearer shares will be obliged to apply until 31 December 2021 to the companies, which they are a shareholder of, with their share certificates for the company to notify the Central Registry Agency (“CRA”)., The companies will then be obliged to notify the information of the these shareholders to the CRA within 5 business days as of the application of the relevant shareholders. The shareholders who fail to fulfil this notification obligation cannot exercise their rights arising out of the share certificates until they apply to the company, and will be imposed with an administrative fine up to TL 5,000. The companies which fail to fulfil their notification obligation will be imposed with an administrative fine up to TL 25,000.
  • In case of a transfer of a bearer share, the transferee will be obliged to notify the CRA; otherwise the transferee cannot exercise their rights arising out of the share certificates towards the company which they are a shareholder of, or towards any other third party. In order for the transferee to exercise such rights towards the company or a third party, the date of the notification made to the CRA shall be taken into consideration. In case the transferee fails to fulfil this notification obligation, they will be imposed with an administrative fine up to TL 5,000.
  • For the issuance and delivery of bearer shares, companies will be obliged to notify the CRA on the information of the shareholders of the bearer shares and the shares held by them, before delivering the bearer share certificates to the relevant shareholders. In case the companies fail to fulfil this notification obligation, an administrative fine up to TL 25,000 will be imposed on them.
  • In order to determine the holders of bearer and/or dematerialized shares who will attend the general assembly meetings, the Board of Directors of non-public companies will be able to prepare the list of attendees in accordance with the shareholder table provided by the CRA. Therefore, the holders of bearer share certificates will no longer be required to obtain an entrance card in advance of attending the general assembly meetings.
  • The CRA will be entitled to submit relevant records regarding the bearer shares and their holders to the pertinent authorities.

It should be noted that, the secondary legislation to be published by the Ministry of Trade, which will regulate the rules and procedures of notification and registration of bearer shares to the CRA and the fess to be paid within this scope, is still pending.

Should you request further information on what the new amendments bring, please contact our corporate team at: f.otcuoglu@pekin.com.tr