The Communiqué on the Principles regarding the Removal of the Privileges on Voting Right and Representation at the Board of Directors (“Communiqué”) was published by the Turkish Capital Markets Board (“Board”) in the Official Gazette dated 10.01.2020 and numbered 31004.
As per the Communiqué, without prejudice to the conditions necessitated and rationalized by the activities, the privileges regarding voting rights and representation at the board of directors in public joint stock companies, that have suffered losses for five (5) consecutive years in accordance with the financial statements prepared pursuant to the legislation, shall be cancelled by the decision of the Board. The period of five (5) years shall commence as of the first annual accounting period following the acquisition of the public company status.
The Communiqué defines the privileges on the voting rights as different voting rights granted to the shares having equal nominal value as regulated under Article 479 of the Turkish Commercial Code numbered 6102 and the privileges on the representation at the board of directors as the privileges granted to certain share groups, the shareholders forming a certain group with their characteristics and qualifications and the minority as regulated under Article 360 of the Turkish Commercial Code numbered 6102.
The determination whether the companies have suffered losses shall be evaluated by taking into consideration the following financial statements;
a) for the companies subject to independent audit, the determination shall be made on the basis of the audited financial statements disclosed to the public.
b) for the companies having the obligation to prepare consolidated financial statements, the determination shall be made on the basis of the consolidated financial statements,
c) for the companies which do not have the obligation to prepare consolidated financial statements, the determination shall be made on the basis of the individual financial statements.
In the event that such losses are necessitated and rationalized by the activities of the Company, the public joint stock companies that have suffered a loss for five (5) consecutive years shall submit their explanations regarding the conditions that caused the loss for the entire period or in any year within those five (5) accounting years, if any, to the Board within twenty (20) working days from the date of public disclosure of their financial statements for the fifth accounting year. In the assessment to be made by the Board regarding the existence of a reasonable and compulsory condition, the adversities that develop beyond the control of public joint stock company’s management affecting the economy, sector or company and similar situations shall be taken into consideration. In such case, the Board may exempt such Company from cancellation of the privileges.
Following the decision of the Board regarding the cancellation of the privileges, such privileges cannot be used and the provisions of the articles of association contrary to this decision shall not be applicable. The boards of directors of the companies are responsible for the compliance with the procedures and principles set out in this Communiqué.
Within two (2) months following the notification of the Board decision to the relevant company, the company has to apply to the Board to make the necessary amendments in its articles of association and the amendment of the articles of association as approved by the Board shall be included in the agenda of the first general assembly meeting to be held.
In the event that no application is made to the Board within this time period or the amendment of the articles of association is not included in the agenda of the first general assembly meeting, the Board shall be entitled to add the relevant agenda item to the agenda of the general assembly meeting in accordance with paragraph 4 of Article 29 of the Capital Markets Law so that the amendment of the articles of association be discussed at the general assembly meeting of such company.
Following the cancellation of the privileges by the Board, the Central Registry Agency (“MKK”) shall be notified by the Board to ensure that the shares of the public joint stock companies monitored by MKK are converted to ordinary shares. Moreover, in order to prevent the use of the cancelled privileges at general assembly meetings, the Board shall notify the Ministry of Commerce.
The provisions of this Communiqué shall not apply if the shares granting the right to vote and/or representation at the board of directors belong to public institutions and organizations.
The Board has regulated a transitional period for the public joint stock companies which are subject to this Communiqué. Accordingly, the calculation of the five year period shall commence as of the accounting period ending on 31/12/2013 for the public joint stock companies whose fiscal year is a calendar year and the special accounting period ending in 2014 for the public joint stock companies whose fiscal year is a special accounting period.