22 April 2020

Within the scope of the measures taken due to COVID-19 outbreak, Provisional Article 13 has been added to the Turkish Commercial Code with the Law No. 7244 published in the Official Gazette dated April 17, 2020 and through this addition, certain limitations regarding the distribution of dividends have been introduced. The reasons behind such limitations are to avoid decreases in the resources of the companies through cash dividend distributions, to maintain the current equity structures of the companies and not to create additional financing needs as required by prudence principle.

Pursuant to the amendment, until September 30, 2020;

o  companies cannot distribute dividends more than 25% of their net profit of 2019,

o  companies cannot distribute the retained earnings of previous years and free reserve funds, and

o  the general assembly of shareholders cannot grant the authority to distribute advance dividends to the board of directors.

The President is authorized to reduce and extend the indicated period for three months. It must be noted that the companies, in which the State, special provincial administration, municipality, village and other public legal entities and/or more than 50% publicly owned funds hold more than 50% shareholding, directly or indirectly, are exempt from this requirement.

In cases where the general assembly has already decided to distribute dividends for the fiscal year 2019, but the payments have not yet been made or partially made, the payments exceeding 25% of the net profit of 2019 must be postponed until the relevant date (September 30, 2020 or the date determined by the President).

Lastly, the Ministry of Trade is authorized to determine the exceptions regarding the companies that fall within the scope of this amendment as well as the procedure and principles regarding the implementation of the amendment upon receiving the opinion of the Ministry of Treasury and Finance.

If you have any questions regarding our note above, please do not hesitate to contact us.

Kind regards,
Güner Law Office