The Communique on Procedures and Principles Regarding the Application of the Provisional Article 13 of the Turkish Commercial Code (“TCC”) numbered 6102 (“Communique”) has been published in the Official Gazette dated 17 May 2020 and numbered 31130 and the procedures, principles and exceptions regarding the limitation of dividend distribution for companies which has been regulated under the Omnibus Bill numbered 7244 have been determined.

It has been set forth within the Omnibus Bill which was published previously that, it shall only be possible for companiesto decide on the distribution of maximum 25% of the net profit for the year of 2019 as of the effective date of the provisional article of TCC until 30.09.2020;it shall not be possible to grant the board of directors the power to distribute advance dividend by the general assembly until 30.09.2020 and; it shall not be possible to decide on the distribution of the profits of the previous years and the free capital reserve. It has also been stated in the Communique that this limitation shall not apply to capital increases made from internal resources as per article 462 of the TCC.

Furthermore, if it has been decided to distribute dividend for the 2019 financial year in the general assembly meeting before the effective date of the Omnibus Bill, but the payment has not been made to the shareholders or a partial payment has been made, the payments exceeding the 25% of the net profit for the year 2019; and if a company has decided to distribute dividend from the free reserve funds before the effective date of the Omnibus Bill, despite having incurred a loss, payments for the unpaid portion;shall be postponed until 30.09.2020as per the Communique. It has also been regulated that no interest shall accrue for the distribution amount postponed until 30.09.2020 and if the board of directors has been granted with the power to distribute advance dividend, the advance payments shall be postponed until 30.09.2020.

Under the Communique;the limitations regarding the dividend distributions shall not be applicable to companies fulfilling the below conditions,subjectto the approval of the Ministry of Commerce (“Ministry”):

  1. Companies which decided on dividend distributions equal to or less than TRY 120,000 except for the companies who employ individuals put on unpaid leave andbenefit from pecuniary wage support and/or benefit from the short-term working payment because of a compelling reason due to COVID-19; and companies whichused loan guarantees supported by the Treasury and currently have an unpaid loan balance.
  2. Companies which decided on dividend distribution on the condition that the shareholders of such companiesshalluse more than half of the distributed dividend to pay their capital subscription debts to another company in cash and full, as per the provisions of the TCC.
  3. Companies which decided on dividend distribution on the condition that the shareholders of such companies shall use the dividend which has been decided for distribution, to perform their liabilities in cash which will be due until 30.09.2020 within the scope of the executedloan and project finance agreements.The companies which decided on dividend distribution under this article shall postpone the payments exceeding the fulfillment liabilities of the shareholders until 30.09.2020. 

It is required for the companies, which are within the exception scope, to obtain the approval of the Ministry in order to include the dividend distribution within the agenda of the general assembly.During the application for the Ministry’s approval, the companies shall submit to General Directorate of Domestic Trade; a notarized copy of the board of directors’ resolution for conducting the general assembly meeting, the relevant fiscal year’s financial statement, its profit or loss statement along with the documents evidencing that the mentioned companies are within the scope of the exception.

It has been set forth that the calculation of the dividend amount shall be based on the financial statements prepared in accordance with article 88 of TCC for companies which are obliged to prepare their financial statements in line with the standards determined by Public Oversight, Accounting and Auditing Standards Authority and on the financial statements prepared in accordance with Tax Procedure Law for any other companies.  As a final note, it has been regulated that the dividend amount to be distributed shall not exceed the total amount of the funds that are subject to dividend distribution which are stated in the records kept in accordance with the Tax Procedure Law.

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