What jurisdictional thresholds trigger a review or application of the law? Is filing mandatory?
As noted throughout questions 1, 2 and 3, share transfers in companies conducting activities in certain sectors are subject to certain conditions and approval processes. For example, transfer of shares exceeding certain thresholds pro rata to the aggregate share capital of the relevant company may trigger an approval requirement (ie, 10 per cent for companies operating in the energy sector or 10 per cent, 20 per cent, 33 per cent or 50 per cent for banks). Such requirements are applicable to both domestic and international investors regardless of any turnover or asset size thresholds.
Apart from regulatory approvals, as noted in question 3, transactions resulting in the acquisition of direct or indirect control over a company (by way of share purchase, asset purchase, contract or by any other means) may be subject to the approval of the TCA, provided that the turnovers of the transaction parties exceed certain thresholds (ie, total Turkish turnover of the transaction parties exceeding 100 million Turkish lira and at least two of the transaction parties in Turkey each exceed 30 million Turkish lira; or target company’s turnover exceeding 30 million Turkish lira and one of the transaction parties having a global turnover of at least 500 million Turkish lira).National interest clearance
What is the procedure for obtaining national interest clearance of transactions and other investments? Are there any filing fees?
Pursuant to the principle of equal treatment of domestic and foreign investors set forth by FIDL, there is no requirement to obtain clearance based on national interest grounds. There are certain reciprocity requirements (ie, equal treatment of Turkish investors in the relevant country) under certain laws (eg, the Law on Private Security Services); however, such requirements are not inherently related to national interest grounds.
The General Directorate of Foreign Investment and Incentive Implementation (FIGD) collects annual submission reports from Turkish companies that have foreign shareholders for the purposes of collecting statistics on foreign direct investment in Turkey. Share acquisitions, disposals and subscriptions to newly issued share capital by foreign persons in Turkish companies are reported to the FIGD by the relevant Turkish companies. Such submissions are carried out through standard online forms provided by FIGD and do not give rise to any filing or submission fees.
Which party is responsible for securing approval?
In regulated sectors such as banking, energy or insurance, the acquiring party is typically required to prepare and submit the required documents to the respective authority. However, in certain instances, while the acquiring party prepares the required documents to evidence that it fulfils the shareholder qualifications set forth by law, the correspondence with the relevant authority may need to be conducted through the target company itself.Review process
How long does the review process take? What factors determine the timelines for clearance? Are there any exemptions, or any expedited or ‘fast-track’ options?
For applications regarding sector-specific and regulated companies, there is generally no time limit stipulated for review processes under the relevant laws and regulations or the time limits can be extended by the relevant authority. The duration of the review process, therefore, would vary depending on the specifics and the complexity of the sector, the applicant and the transaction. There is no general exemption (unless otherwise stipulated by the relevant law) or ‘fast track’ application process stipulated under the law.
As for the merger clearance process, the review is conducted in two phases: the pre-examination phase and the final examination phase. Ordinarily, the TCA should render its decision within 30 days from the receipt of the notification. If the TCA does not approve or initiate the final examination phase regarding the contemplated transaction within the 30-day period (either following the submission of the filing or provision of the additional information or document requested by the TCA), it is deemed to have granted its implicit approval to the transaction. However, any official communication during such a period in relation to a document or information request from transaction parties would reset the clock. In most cases, the TCA renders its decision within four to six weeks from the application.
If the transaction is not approved in the pre-investigation phase and is likely to produce anticompetitive effects, the TCA may initiate the final examination phase, which could usually be completed within six months. Such a period can be extended by the TCA for another six months.
Must the review be completed before the parties can close the transaction? What are the penalties or other consequences if the parties implement the transaction before clearance is obtained?
In regulated sectors where share transfers are subject to approval of the relevant regulatory authorities, transaction parties should obtain such approvals before closing the transaction (ie, before actual transfer of shares). For instance, transfer of shares exceeding the relevant thresholds in energy companies must be approved by the Energy Market Regulatory Authority prior to share transfer. Share transfers in banks are also subject to the approval by the Banking Regulation and Supervision Agency. Failure to comply with such requirements would render the share transfer null and void. Also, the transaction parties may be subject to certain pecuniary fines imposed by the relevant authority.
While acquisition of real estate by foreign persons are subject to the prior approval of the relevant authorities, acquisition of shares, by a foreign investor, in a company that owns any real estate is subject to post-closing scrutiny by the relevant authorities as explained in question 6.
Furthermore, merger clearance from the TCA needs to be obtained by the transaction parties prior to the transfer of shares. The TCA is entitled to impose monetary fines ranging from 0.1 per cent to 10 per cent of the turnover of the acquirer pertaining to the latest financial year. Managers or employees of the acquirer whose involvement is determined to be decisive in relation to the infringement could also be held liable by the TCA. If the TCA determines that the impact of the transaction would lead to serious anticompetitive effects, it is also entitled to order actions to unwind the transaction to be taken, so as restore the parties to their pre-completion status (such actions may take the form of requiring the return of shares or assets acquired or prohibiting the acquiring parties’ participation in the management of the target).Involvement of authorities
Can formal or informal guidance from the authorities be obtained prior to a filing being made? Do the authorities expect pre-filing dialogue or meetings?
Turkish authorities do not ordinarily expect any pre-filing dialogue or meetings. However, it is also not unusual for parties to pay courtesy visits to the relevant regulatory authorities and seek informal guidance on the filing process and the potential approach of the relevant authorities to the contemplated transaction. In particular, foreign investors who consider entering into the Turkish market and engaging in activities in regulated sectors are encouraged to touch base with the relevant regulatory authority before initiating implementation of the contemplated transaction. Although the guidance to be obtained from authorities would typically be limited to a generic regulatory framework, it would still be useful in terms of enhancing acquaintanceship and visibility of the potential investor with regard to the relevant authority.
When are government relations, public affairs, lobbying or other specialists made use of to support the review of a transaction by the authorities? Are there any other lawful informal procedures to facilitate or expedite clearance?
Turkish law prohibits lobbying activities in governmental affairs. In this regard, there is no formal procedure to support the review process of a transaction by the authorities. In most cases, transaction parties submit the filing for clearance through assistance of their legal and other advisors. Such advisors may conduct sporadic communications with the relevant authorities to follow up on the status of the review process. Otherwise, there is no structured method to facilitate or expedite clearance.
In addition, potential foreign investors may also consider liaising with the Investment Office of the Presidency of the Republic of Turkey to seek guidance on their envisaged investment activities. The Investment Office is the official organisation for providing assistance to potential investors with an objective to encourage foreign investors to invest in Turkey and to facilitate their activities in Turkey.
What post-closing or retroactive powers do the authorities have to review, challenge or unwind a transaction that was not otherwise subject to pre-merger review?
If the transaction was not subject to pre-merger review, the authorities would not have any discretion to challenge or unwind the transaction retroactively. Nevertheless, the regulatory bodies overseeing the regulated sectors are vested with broad powers and authorities to scrutinise and audit the operations of companies conducting businesses in such sectors. In this sense, review and scrutiny by the regulatory bodies may continue into the post-closing period regardless of any foreign element within the company. In light of the equal treatment principle set forth under the FDIL, domestic and foreign investors are subject to the same terms and conditions prescribed under the law.