Structure and process, legal regulation and consents


How are acquisitions and disposals of privately owned companies, businesses or assets structured in your jurisdiction? What might a typical transaction process involve and how long does it usually take?

A typical private M&A transaction process in Turkey follows customary international practices, although more often than not there is a single potential buyer, especially in smaller deals. Where there are multiple potential buyers, an auction process similar to that commonly conducted in jurisdictions like the UK and the US may be undertaken. There are no specific Turkish laws or regulations pertaining to private auctions.

A typical private M&A process includes the following main steps:

  • the buyer and the seller negotiate and execute a term sheet, which will outline the major terms to be included in the final transaction documents;
  • the prospective investor and its advisers conduct their due diligence of the target company;
  • while due diligence is ongoing, the main transaction documents and any ancillary documents (eg, seller’s disclosure letter, executive employment agreements) are negotiated (and normally finalised following the completion of due diligence);
  • the transaction documents are executed;
  • any consents and approvals are obtained; and
  • closing occurs.

The principal transaction document will typically be a share purchase agreement, asset purchase agreement or subscription agreement (SPA). In cases where less than the entire company or the business is being acquired, a shareholders’ agreement (SHA) will also normally be executed. In deals involving one or more non-Turkish parties, the language of negotiations and the transaction documents is most commonly English, the SPA and SHA are generally modelled after UK and US precedents in style and content, and international arbitration is commonly selected as the method of dispute resolution (although the jurisdiction of Turkish courts is sometimes seen, too). It is also not uncommon for the transaction documents to be governed by a foreign jurisdiction’s law (in many instances, England’s), but Turkish law is increasingly becoming the norm. The preference for international arbitration and foreign governing law is often motivated by the fact that certain customary terms such as tag-along rights, drag-along rights, and rights of first offer and refusal are of questionable enforceability under Turkish law, and most Turkish courts do not have extensive experience with such terms and clauses or with cross-border M&A documentation in general.

In recent years, it has become more common for sellers to hire an M&A adviser, prepare information memoranda for prospective buyers and, in some instances, undertake vendor due diligence.

Legal regulation

Which laws regulate private acquisitions and disposals in your jurisdiction? Must the acquisition of shares in a company, a business or assets be governed by local law?

The primary pieces of applicable legislation are the following:

  • the Turkish Commercial Code (Law No. 6102);
  • the Code of Obligations (Law No. 6098);
  • the Corporate Tax Law (Law No. 5520);
  • the Labour Law (Law No. 4857); and
  • the Law on the Protection of Competition (Law No. 4054).

Other laws (eg, relating to banking, intellectual property and data privacy) and secondary legislation promulgated under such laws and the laws specified above may also apply to the transaction.

There is no general rule that the acquisition of shares or assets in a company or a business be governed by Turkish law, and parties may agree that the law of a foreign jurisdiction govern an acquisition or part of it (and sometimes do) and for disputes related to an acquisition to be resolved through arbitration (and often do). Such preferences have to do with what is considered to be a grey area in Turkish law with respect to common exit-related provisions such as drag-along and tag-along clauses (even though the widespread view within the M&A bar is that such rights are valid), as well as the speed and the perceived lack of relevant experience of Turkish courts. Many parties believe that if Turkish law is agreed as the governing law, then there is no guarantee that a Turkish court will enforce such provisions because the Commercial Code, which governs such transactions, does not specifically mention (except for certain references with respect to limited companies) or provide for the ability of parties to such agreements to contract away standard shareholder rights provided for in the law, and there is a lack of sufficient binding or persuasive jurisprudence on this question.

Having said all this, while the parties are free to choose a foreign law and agree on arbitration, certain Turkish law provisions will always be binding on the parties and the target company, for example, formalities regarding share transfers, statutory minority rights and corporate governance. Furthermore, there are some recent court decisions invalidating certain arbitration provisions in SHAs on the basis that they relate to statutory corporate governance issues among the company and the shareholders (ie, not just among the shareholders). Such decisions suggest that parties may also face difficulties in enforcing certain arbitration awards. Accordingly, governing law and dispute resolution clauses must be drafted carefully in order for them not to run afoul of binding Turkish law provisions. In particular, in the case of SHAs, good practice may dictate that the target company be a party to the agreement whenever feasible.

Legal title

What legal title to shares in a company, a business or assets does a buyer acquire? Is this legal title prescribed by law or can the level of assurance be negotiated by a buyer? Does legal title to shares in a company, a business or assets transfer automatically by operation of law? Is there a difference between legal and beneficial title?

If shares of joint-stock companies are issued as bearer share certificates, a person who has physical possession of the share certificates has title to the shares, whereas if the shares are issued as registered share certificates, they must be endorsed in the name of the buyer in order for the buyer to hold title. On the other hand, in limited companies, a share transfer deed or SPA must be executed in the presence of a notary public, and the relevant trade registry must approve and register the share transfer in order for the transfer of title to be effective. Additionally, the board of directors of joint-stock companies must approve the share transfer and the acquirer registered in the share ledger in order for the transfer to be perfected against the company. Similarly, in limited companies, the share transfer must be approved by a resolution of the general assembly of shareholders (unless the articles of association allow for transfers without such approval) and the acquirer must be registered in the share ledger.

As long as there are no encumbrances on the shares being transferred, the buyer will acquire the shares in the same manner; it is also possible to transfer encumbered shares (eg, pledged shares) with the buyer also assuming such encumbrances. Note that there is a difference between legal and beneficial title under Turkish law. Holders of beneficial title must be registered in the share ledger of the company in the same way that holders of legal benefits are. If not recorded, the holder of beneficial title may not exercise voting rights as a shareholder against the company.

In asset transfers, certain formalities may need to be followed for some assets (eg, land) but others (eg, computers) may be transferred without such formalities. As with shares, encumbrances on assets may normally be assumed along with the underlying asset by the buyer.

While the passing of legal title to shares, assets or the business is a matter of statutory law, the SPA will contain customary warranties and indemnification provisions relating to title, encumbrances and the relevant sale.

Multiple sellers

Specifically in relation to the acquisition or disposal of shares in a company, where there are multiple sellers, must everyone agree to sell for the buyer to acquire all shares? If not, how can minority sellers that refuse to sell be squeezed out or dragged along by a buyer?

In private M&A transactions, there is no requirement that a buyer buy (or offer to buy) all shares or that all shareholders agree to the sale. Having said that, in particular where there are minority shareholders, buyers generally prefer to get them aboard, too. While existing SHAs or a company’s articles of association, or both, may provide for drag-along rights or other forced sale provisions, as discussed above, there is no guarantee that such provisions will be enforced (or enforced sufficiently swiftly) by Turkish courts if they have jurisdiction over the relevant contracts.

Turkish law provides for squeeze-out rights of majority shareholders under very limited circumstances. Relevant to private mergers and acquisitions, the following types of squeeze-out rights are prescribed by law (different rules apply to public companies):

  • in joint-stock companies, shareholders that are part of the same group of companies and own 90 per cent or more of shares of the joint-stock company may squeeze out the minority shareholders if the minority shareholders violate the principle of good faith, cause significant problems in the company, act recklessly or prevent the company from performing its functions; and
  • in mergers of two corporate entities, where the merging entities agree to such terms, majority shareholders holding 90 per cent or more of the entity that will cease to exist post-merger may squeeze out the minority shareholders of that entity by way of the minority shareholders being paid cash proceeds in lieu of shares in the surviving entity.
Exclusion of assets or liabilities

Specifically in relation to the acquisition or disposal of a business, are there any assets or liabilities that cannot be excluded from the transaction by agreement between the parties? Are there any consents commonly required to be obtained or notifications to be made in order to effect the transfer of assets or liabilities in a business transfer?

Pursuant to article 202 of the Turkish Code of Obligations, when assets constituting a commercial enterprise (including a line of business) are transferred in a transaction, the liabilities of that enterprise may not be excluded from the transfer. Specifically, all tax liabilities and encumbrances are transferred along with the enterprise. It should be noted that the seller remains jointly and severally liable for debts of the enterprise for two years following the transaction.

Similarly, with respect to employees, pursuant to article 6 of the Turkish Labour Law, in the case of a transfer of a business (or part of a business), all existing employment contracts will pass on to the buyer along with all rights and obligations therein. For the purposes of calculation of employment entitlements of the transferred employees based on seniority, the buyer is legally required to make the calculations based on the date on which employees started work for the seller prior to the transaction. For a period of two years following a transaction, both the seller and the buyer remain jointly responsible for liabilities to the transferred employees that accrued prior to the transaction.

Key contracts of the company may contain special change of control provisions or other provisions requiring that the counterparty be notified of, or consent to, the transaction in order for the seller to avoid being in breach of contract.


Are there any legal, regulatory or governmental restrictions on the transfer of shares in a company, a business or assets in your jurisdiction? Do transactions in particular industries require consent from specific regulators or a governmental body? Are transactions commonly subject to any public or national interest considerations?

Except for the formalities described in question 3, there are no general statutory restrictions on the transfer of shares, a business or assets. However, regulated sectors such as banking, financial services, energy and media may require approval of a share transfer by the relevant regulatory authority. Additionally, for transactions resulting in a change of control where the parties to the transaction surpass statutory revenue thresholds, one party or both parties together must apply to the Turkish Competition Board for approval of the transaction. The triggering revenue thresholds are as follows:

  • total revenues of the transaction parties in Turkey exceeding 100 million Turkish lira, and revenues of at least two of the transaction parties in Turkey each exceeding 30 million Turkish lira; or
  • the asset or activity subject to an acquisition transaction, or at least one of the parties of the transaction in merger transactions having revenues in Turkey exceeding 30 million Turkish lira, and at least one other party to the transaction having a global revenue exceeding 500 million Turkish lira.

There is no general restriction on foreign investment or foreign ownership of shares in Turkey. With very limited exceptions, foreign investors are treated the same as domestic investors under the law, and a company partially or fully owned or controlled by foreign shareholders has the same legal standing and rights as a company owned or controlled by domestic shareholders. Accordingly, a Turkish company may be fully foreign-owned, and only certain sectors such as media and aviation have restrictions on foreign investment. There are also limited restrictions on the ability of companies containing foreign capital to purchase and hold title to some real estate, and certain post-acquisition clearances of existing real estate ownership by the target company if it becomes at least 50 per cent foreign-owned. Post-transaction, it is important to keep in mind that companies containing foreign capital are required to provide periodical reports on the details of the foreign shareholding in the company to the General Directorate of Incentive Implementation and Foreign Investment.

Are any other third-party consents commonly required?

Other than the consent of shareholders required for the transfer of limited company shares discussed in question 3, and any contractually required notifications or consents to be made or obtained by the seller or the company (eg, under lease contracts or credit agreements), there are no general third-party consents required by law to undertake a private M&A transaction.

While sellers and buyers remain jointly and severally liable to creditors of the enterprise for a period of two years following a transaction, the creditors’ consent to a transaction is not statutorily required. Similarly, while employees are transferred with the enterprise, their consent, or any special notification to them, is also not normally required. However, in asset transactions involving the transfer of a line of business, the transferred employees generally have the right to terminate their employment contracts owing to their unwillingness to be transferred, in which case the employees are due any unpaid employment benefits to date and any severance payments earned for which they make a claim. Having said that, in the case of any merger or transfer of the company’s shares, wholly or partially, the transferor or transferee is not authorised to terminate the employment contract solely because of the merger or transfer of the company; nor shall the transfer ordinarily entitle the employee to terminate the contract for just cause.

Regulatory filings

Must regulatory filings be made or registration (or other official) fees paid to acquire shares in a company, a business or assets in your jurisdiction?

In deals involving joint-stock companies, there is no requirement that transaction contracts be filed, registered or notarised, and share transfers in joint-stock companies are not subject to registration with a trade registry unless the share transfer results in there being a sole shareholder in the company. There are also some notification requirements with the trade registry for share transfers resulting in certain shareholding thresholds being exceeded (or falling below such thresholds) by a group company holder of such shares.

On the other hand, asset sale and purchase agreements for the sale of a commercial enterprise must be filed with the relevant trade registry and announced in the trade registry gazette to enter into force. In limited companies, a share transfer deed or SPA must be executed in the presence of a notary public, and the relevant trade registry must approve and register the share transfer for the transfer of title to be effective. Trade registry filings and notarisations are subject to fees.

In the event a capital increase is part of the transaction structure, a general assembly meeting must be held to amend the articles of association of the company. The general assembly decision and the amendment to the articles must be registered with the trade registry, approved and announced in the trade registry gazette, for which certain fees apply. Any general assembly meeting where the shareholders resolve on a capital increase (or, similarly, merger or demerger) must be attended by a government observer who will attest to the due approval of such resolution.