ACQUISITION OF COMPANY SHARES BY COMPANY ITSELF (FEBRUARY 2019)

This article focuses on acquisition of company shares by company itself at joint stock companies which is specially regulated by both annulled Turkish Commercial Code numbered 6762 (“the annulled TCC”) and by the new Turkish Commercial Code numbered 6102 (“the new TCC”) since such acquisition has important results in terms of shareholders and creditors.  The new TCC extends the limits of the right of acquisition of company shares by the company in contemplation of a price.  

The company is neither entitled to acquire nor accepts pledge of its shares exceeding one-tenth of company shares pursuant to article 379 of new TCC. In this regard, the company is entitled to acquire up to 10% of total company capital. The mentioned limitation is also applicable for third parties who may acquire or accept pledge of company shares on behalf of the company. In other words, third party transactions are not allowed.

Since the company itself is not allowed to commit shares at joint stock companies, company itself can acquire the company shares by means of derivative acquisition provided that; the value of all company shares must be paid. The company itself is also not allowed to hold all shares of the company.

The joint stock company can only acquire company shares subject to authorization of board of directors by shareholders’ general assembly. The meeting and decision quorum foreseen under article 448 of TCC is applicable for such resolution (authorization) unless higher quorum agreed under articles of association of the company. The mentioned authorization shall be valid maximum for 5 years. The nominal value of the shares and minimum or maximum sales prices of shares subject to acquisition or pledge must be specified within the scope of such authorization. The shareholders’ general assembly cannot assign the mentioned duty (authorization) unless it is mandatory due to an oncoming and serious loss. In such a case shareholders’ general assembly must be informed in written at the first meeting (ordinary or extra ordinary meeting) about the reason and purpose of the acquisition, payment terms, number of the acquired shares, total nominal value and ratio of the acquired shares at the total capital.  

The remaining net company assets must be equal to at least sum of company reserves which are not allowed to be distributed after deduction of value of acquired shares.

The legal transactions such as loan agreement executed by and between the company and third parties in order to acquire the company shares shall be deemed null and void as per the new TCC (article 380). The shareholders and board of director members are also included to mentioned restriction. Any kind of acquisition of company shares which executed contrarily to law must be disposed or any pledge on shares must be released within 6 months’ period starting from date of acquisition or establishment of pledge. Otherwise, such shares must be reimbursed immediately through capital decrease. The Board of Directors of the company is obliged to fulfill the mentioned requirement.

Consequently, the new TCC aims to prevent illegal practices and foresees dispose of shares within 6 months’ period contrarily to law while extending the limits of the right of acquisition of company shares by the company itself.