Newsletter on the Communiqué for the Restriction of Dividend Distribution
In order to reduce the negative impacts of Covid-19 pandemic on social and economic life in our country, a provisional article has been added to the Turkish Commercial Code (“TCC”) on 17.04.2020 where some restrictions on the distribution of dividends, which is aimed to be in force until 30.09.2020, were adopted in this respect.
In this respect, the Communiqué on the Rules and Procedures for the Application of Provisional Article 13 of Turkish Commercial Code Numbered 6102 (“Communiqué”) has been published and this Communiqué has become effective on its date of publishing which is 17.05.2020.
Under Article 4 of the Communiqué, it has been regulated and repeated once again that equity companies,
- may only distribute 25% of the net profit for 2019 in cash as dividend,
- shall not distribute dividends from the previous years’ profits or free reserve funds, and
- the board/managing body shall not be granted authority by the general assembly for the distribution of the advance dividends
from the date of effectiveness of this Provisional Article 13 of TCC, 17.04.2020 until 30.09.2020. It has also been regulated that share capital increases made from through conversion of net assets of the company as per Article 462 of TCC are exempted from this restriction. Therefore, as per the Communiqué, conversion of company’s net assets (e.g. non-distributed dividends) into the share capital is possible. Furthermore, it is stated that, even if the board/managing body of the company has already been authorized (by the general assembly) for the distribution of the dividends, the advance payments will be postponed until 30.09.2020.
If the general assembly has decided to distribute dividends at a date prior to 17.04.2020 yet the payment has not been made to the shareholders either partially or in full, payments with respect to the portions exceeding 25% and if the general assembly has decided to distribute free reserves, all payments with respect to the unpaid portions shall be postponed until 30.09.2020. It has been explicitly stated that interest will not be accrued to the postponed payments.
For companies who fulfill the criteria set forth under Article 5 of the Communiqué, on the condition that prior consent of the Ministry of Trade has been received, exemption has been accepted for these restrictions on dividend distribution. The companies which are exempted from these restrictions on dividend distribution and in other words, which are allowed to distribute dividends, are as follows:
- As per the annex-2 and provisional Article 23 of Non-Employment Insurance Law dated 25/8/1999 and numbered 4447 and based on the act of god arose out of due to the new coronavirus (Covid-19),(i) except for the employers of those who profit from the short-time working allowance and/or unpaid leave absence; and as per the provisional Article 20 of the Law on Public Financing and Regulation on Debt Management dated 28/03/2002 and dated 4749 and relevant (ii) except for the credit surety (supported by the Treasury) users and for those who have ongoing credit debt balance, the companies which have adopted resolution on the distribution of dividends in the amount of TL 120,000 and below.
- The companies which have adopted resolution on the distribution of dividends, on the condition that, more than 50% of the dividend to be distributed which has been agreed by the shareholders shall be used in cash or payment in full of the share capital commitments to be made into another company in accordance with the TCC,
- The companies which have adopted resolution on the distribution of dividends, on the condition that the dividend to be distributed which has been agreed by the shareholders shall be used in cash until the permitted deadline set forth under Article 4/1 for the due/to become due obligations under the executed loan agreements or project financing agreements,
As per the Communiqué, with respect to the calculation of dividends, the relevant financial statements prepared in compliance with Article 88 of TCC of the companies (which are mandatorily required to prepare their financials in accordance with the Public Oversight Accounting and Auditing Standards Authority) and the financial tables of the other companies, which are prepared in accordance with the Tax Procedural Law numbered 213 and dated 04.01.1961 (“TPL”). It has been regulated that dividend to be distributed shall not exceed the total assets that may be used for the dividend distribution as per the records kept in accordance with TPL. Therefore, the restriction of the dividend to be distributed is determined with this.
 It means that joint stock companies, limited companies and commandite companies of which share capital are divided including publicly traded companies regulated under Capital Markets Law numbered 6362.
 In order for the companies which are exempted from this restrictions to discuss dividend distribution within the general assembly, it is required to have prior consent of the Ministry of Trade and it is required from them to submit the relevant documentation set forth under Article 6 of Communiqué. For those companies enlisted under (a), (b) and (c) below, which benefit from exemption shall submit relevant documentation evidencing their situation.
 The payments for the excessive amounts of beyond the shareholders’ obligations are postponed until 30.09.2020.