Corporate and M&A

Turkish Corporate Law Update

Contents:

  • Holding Company Structure under Turkish Law
  • Lifting the Corporate Veil: An Exceptional Concept of the Shareholders’ Limited Liability Principle
  • Share Buy-Back by Listed Corporations
  • Termination of Subscription Agreements
  • European Commission Preliminary Report on the E-commerce Sector Inquiry
  • The Code on Movable Pledges and Its Innovations
  • UEFA Financial Fair Play Regulations

 

Holding Company Structure under Turkish Law

The term “holding,” which is regarded as the framework that consists of more than one corporation, was legally defined as “companies with the sole purpose of joining with other companies” under Article 466(2) in the repealed Turkish Commercial Code numbered 6762 (“rTCC”). There is no definition for holding companies in the Turkish Commercial Code in force, numbered 6102 (“TCC”). A holding is a joint stock company[1] as regards its activities, and is engaged, solely, with joining other companies in terms of its subject matter[2].

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Lifting the Corporate Veil: An Exceptional Concept of the Shareholders’ Limited Liability Principle

One of the main motivations to form a legal entity is to limit the liability of its members and controllers for the obligations of the business of the legal entity. As a separate entity, a company is set up to shield the shareholders of a company from personal liability for the debts or negligence of the business. Thus, shareholders are not liable for the company’s debts beyond their initial capital investment, and have no proprietary interest in the property of the company[i] as per the limitation of liability and separation principle. Such principle is that the shareholders are held liable only toward the legal entity and not toward third parties, virtually creating a “veil” between the shareholders and third parties. However, in certain circumstances, such veil may be lifted by a court order where a fraudulent and misleading use is made of the legal entity as an exception of the principle of a separation and limited liability principle. While this view appears in the Anglo-American Law, it has also been adopted in civil laws, including Turkish Law. This article examines the grounds upon which the corporate veil can be pierced under Turkish law.

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Share Buy-Back by Listed Corporations

Turkish Commercial Code numbered 6102 (“TCC”) regulates the principles for joint stock companies to buy-back its own shares and accept pledges through Article 379 and its following articles, while the Capital Market Law (“CML”) numbered 6362, communiqués and decisions of the Capital Markets Board (“CMB”) set out the rules for publicly held and listed corporations. Furthermore, in cases where there is no provision in capital market legislation, TCC Art. 379 and the following articles shall be applicable to the extent they comply with the capital market legislation. The legal process that shall be pursued by listed corporations on shares buy-back will be discussed on this article.

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Termination of Subscription Agreements

Through digitalization and technological advancement, subscription of telecommunication services has become popular. According to the Turkish Statistical Institution, as of 2016, 76.3% of the households in Turkey have access to the internet. Accordingly, subscription agreement related disputes between consumers and services or goods providers have increased significantly in recent years. In practice, some persons have claimed non-pecuniary damages for the deficient internet service[1]. Under this article, subscription agreements in terms of Turkish law are represented.

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European Commission Preliminary Report on the E-commerce Sector Inquiry

The European Commission (“Commission”), on May 6, 2015 introduced a sector inquiry with regard to electronic commerce (“e-commerce”) of consumer goods and digital content in the European Union (“EU”). This inquiry is part of the Commission’s Digital Single Market Strategy that is designed to provide some leverage in the digital economy. It aimed to understand new market trends, as well as possible competition restrictions that could emerge with the development of e-commerce and business practices.

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The Code on Movable Pledges and Its Innovations

The Code on Pledges of Movables in Commercial Transactions No. 6750 (“Code”) published in the Official Gazette dated October 28th, 2016 and numbered 29871 will enter into force on January 1st, 2017. The preamble of the Code states that along with globalization, the role of Small and Medium Sized Enterprises (“SMEs”) in the world economy rises each day, that SMEs are significant elements of the economic and social development, that the Code is prepared in order to ease the access of SMEs to financial sources, in order to improve their competitive power with large enterprises, and to contribute to the development of the world economy.

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UEFA Financial Fair Play Regulations

Football's economic growth, astronomical transfer fees, and neglected youth development seem to be considered not only by us but also the UEFA. Thus, the implementation of Financial Fair Play (“FFP”) Rules started in the 2014/15 season, two years after a long preparation phase. With the investigations, the financial tables and indebtedness of the clubs in the 2011/12, 2012/13, 2013/14 seasons were checked and the expenditures of Turkey’s big four clubs came under the radar of the UEFA.

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