The Capital Markets Board of Turkey (“CMB”) has published a Draft Communiqué No. II-23.3 on Significant Transactions and Right to Exit (“Draft Communiqué”) prepared in scope of the secondary regulation works of the CMB with regard to the recent amendments made to the Capital Markets Law No. 6362 (“Capital Markets Law”) on its website on March 16, 2020 . The amendments to the Capital Markets Law were published in the Official Gazette on February 25, 2020 and entered into force effective immediately.

The Draft Communiqué mainly clarifies the amendments made to the Capital Markets Law regarding the scope of significant transactions, use of right to exit with regard to significant transactions, exercise price of exit, and cases that does not lead to right to exit.

The provisions of the current Communiqué No. II-23.1 on Common Principles Regarding Significant Transactions and the Right to Exit that are compliant with the recently amended Capital Markets Law will be applied to the significant transactions disclosed to public before effective date of the Draft Communiqué. As per the Draft Communiqué, determination of shareholders entitled to exit right and the shares subject to such right shall be based on (i) February 25, 2020 for transactions disclosed to public before February 25, 2020 and (ii) the date of disclosure for transactions disclosed to public after February 25, 2020.

Scope of Significant Transactions

In line with the article 23 of the Capital Markets Law, publicly-held corporations to (i) be party to merger, division transactions as specified under the Draft Communiqué, (ii) transfer an important part of their assets or make transactions that result in transfer, establish a restricted real right, (iii) change their type, (iv) create privileges or change the content or subject of existing privileges are deemed significant transactions.

In addition, corporations that are listed and traded in the stock exchange of which the actual outstanding shares ratio is above 50%, excluding the first and second group corporations pursuant to the Communiqué No. II-17.1 on Corporate Governance of CMB, transactions that result in change of scope of activities entirely are deemed significant disregarding the size criteria. Transactions that are considered significant pursuant to communiqués of CMB besides Draft Communiqué remain significant.

As per the Draft Communiqué, a board of directors resolution regarding the principles of the significant transaction must be executed and approved by the general assembly. It is not permitted to fulfil this obligation with a general assembly resolution that authorizes the board of directors to execute such decision. 

Procedures and Principals of the Right to Exit

The CMB was authorized to determine the procedures and principals of retirement right with the recent amendment of Capital Markets Law. The shares held by the shareholders as of the public disclosure date are subject to retirement right. Accordingly, the shareholders are not entitled to exit right for the shares they have purchased after the public disclosure date and if they have sold some of the shares that they have purchased after the public disclosure date, such shares will not affect the shares subject to  right to exit.

Exercise Price of Right to Exit

Exercise price of  exit right in publicly-held corporations is the highest of (i) the average of the weighted average prices in the stock exchange within the last six months, a year and five years before to public disclosure date, (ii) if a compulsory share purchase offer has been made within one year before public disclosure date, the offered price, or (iii) the price determined with the valuation report prepared for each share group. In order to determine the exercise price of retirement right for non-listed corporations, the Draft Communiqué stipulates a validation report based on the public disclosure date to be prepared.

Take-over Bid Due to Use of Right to Exit

As per the Draft Communiqué, regarding corporations that are listed and traded in the stock exchange, prior to purchase of the shares subject to retirement right by the corporation, a take-over bid may be offered to other shareholders or investors with a board of directors resolution.

Cases Not Leading to Right to Exit

With the Draft Communiqué, transactions such as rescue mergers and sale of affiliate shares via public offering have been included to the cases not leading to retirement right. Cases that does not lead to retirement right consisted of transactions such as transactions by companies whose control belongs to a governmental authority, amendment of the status of the investment trusts, cessation of the status of such trusts and change in privileges in this regard.

Author: Simge Kılıç