Introduction
Mergers are one of the most significant tools in corporate law to achieve growth, restructuring, and market consolidation. The legal framework of mergers in Turkish law is mainly governed by the Turkish Commercial Code (Türk Ticaret Kanunu – TTK), supplemented by the Competition Law and the Capital Markets Law. Understanding the regulatory landscape is crucial for both domestic and foreign investors considering mergers and acquisitions in Turkey. This article provides a comprehensive overview of the relevant legislation, types of mergers, and practical implications in real life.
Legal Sources of Mergers in Turkey
- Turkish Commercial Code (TTK) No. 6102
- The backbone of corporate mergers.
- Regulates the definition, types, procedures, and effects of mergers.
- Articles 136–158 specifically deal with mergers, spin-offs, and transformations.
- Law on the Protection of Competition (No. 4054)
- Ensures that mergers do not distort competition or create monopolistic structures.
- The Competition Authority (Rekabet Kurumu) supervises and approves mergers that exceed turnover thresholds.
- Capital Markets Law (No. 6362)
- Applies to publicly traded companies.
- The Capital Markets Board (SPK) issues detailed communiqués on disclosure, valuation, and investor protection.
- Other Relevant Legislation
- Tax Procedural Law (Vergi Usul Kanunu).
- Labor Law provisions regarding employee rights and obligations.
- Enforcement and Bankruptcy Law in cases of distressed mergers.
Types of Mergers under Turkish Law
1. Merger by Acquisition (Devralma Yoluyla Birleşme)
- One company transfers all its assets and liabilities to another.
- The transferring company ceases to exist.
- Example: Company A acquires Company B; B dissolves, and A continues.
2. Merger by Formation of a New Company (Yeni Kuruluş Yoluyla Birleşme)
- Two or more companies combine to establish a new legal entity.
- All rights, obligations, and assets are transferred to the newly formed company.
- Example: Company X and Company Y merge to form Company Z.
3. Cross-Border Mergers
- Turkish law allows mergers between a Turkish company and a foreign company, provided that the foreign jurisdiction recognizes such a merger.
- Requires additional approvals from both Turkish authorities and relevant foreign regulators.
Key Principles of the TTK on Mergers
- Universal Succession Principle
- The acquiring or newly formed company automatically assumes all assets, rights, and obligations of the merging companies.
- This includes contracts, receivables, and debts without requiring third-party consent, unless otherwise stipulated.
- Shareholder Protection
- Shareholders of the dissolved company receive shares or compensation in the surviving company.
- Minority shareholders are protected through exit rights and fair value calculations.
- Creditor Protection
- Creditors may demand guarantees before the merger becomes effective.
- Public announcements are made in the Trade Registry Gazette to inform third parties.
- Employee Rights
- Employment contracts automatically transfer to the surviving entity.
- Employees retain their acquired rights without interruption.
Procedural Steps in a Merger
- Preparation of the Merger Agreement
- Drafted in writing and signed by authorized representatives.
- Must contain details such as exchange ratios, valuation methods, and rights of stakeholders.
- Board and General Assembly Approvals
- Boards of directors prepare reports justifying the merger.
- General assemblies of each company approve the transaction.
- Regulatory Approvals
- Competition Authority: If turnover thresholds are exceeded.
- Capital Markets Board: For publicly traded companies.
- Registration and Announcement
- Registration with the Trade Registry is mandatory.
- Announced in the Turkish Trade Registry Gazette for transparency.
Competition Law Considerations
- The Competition Authority’s Communiqué on Mergers and Acquisitions sets financial thresholds.
- If combined turnovers exceed these limits, notification and approval are mandatory.
- Unnotified or unauthorized mergers may result in administrative fines and the invalidity of the transaction.
Capital Markets Law Requirements
For publicly held companies:
- Disclosure obligations: Material events must be announced via the Public Disclosure Platform (KAP).
- Valuation reports: Independent expert reports determine share exchange ratios.
- Minority rights: Shareholders may exercise exit rights if they oppose the merger.
Tax and Financial Aspects
- Mergers may benefit from tax neutrality if carried out under the provisions of the Corporate Tax Law.
- Loss carry-forwards: The surviving company may benefit from the losses of the merged company under certain conditions.
- Stamp duty and other fiscal costs may arise depending on documentation.
Real Life Applications of Mergers in Turkey
- Banking Sector Consolidations
- During financial crises, mergers have been encouraged to stabilize the sector.
- Example: Banks merged under BRSA supervision.
- Family-Owned Company Restructuring
- Many Turkish conglomerates restructure through mergers to simplify group structures.
- Foreign Direct Investment
- International investors often merge local subsidiaries with Turkish companies to optimize operations.
- Public Company Mergers
- Observed in sectors like energy, construction, and telecommunications.
Challenges in Practice
- Valuation disputes between shareholders.
- Delays in obtaining regulatory approvals.
- Employee resistance in cultural integrations.
- Complexities in cross-border recognition.
Conclusion
The legal framework of mergers in Turkish law is a well-established system balancing corporate flexibility with stakeholder protection. The TTK provides a clear roadmap, while the Competition Law and Capital Markets Law ensure transparency and market fairness. For investors, both domestic and international, understanding these provisions is essential to navigate merger transactions efficiently. In practice, successful mergers in Turkey require not only legal compliance but also strategic planning, financial foresight, and effective stakeholder management.
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