Introduction
Squeeze-out and sell-out rights in Turkish capital markets are special legal mechanisms designed to regulate the relationship between a dominant shareholder and minority shareholders in publicly held corporations. In Turkish practice, the squeeze-out right is generally called “ortaklıktan çıkarma hakkı”, while the sell-out right is known as “satma hakkı”. These rights become relevant when a shareholder reaches a very high level of voting control in a public company.
The main legal basis is Article 27 of Capital Markets Law No. 6362 and the Communiqué on Squeeze-Out and Sell-Out Rights II-27.3, published in the Official Gazette dated 31 December 2020 and numbered 31351. Communiqué II-27.3 expressly states that its purpose is to regulate the procedures and principles for the dominant shareholder’s right to squeeze out other shareholders and the other shareholders’ right to sell their shares to the dominant shareholder. It is based on Article 27 of Capital Markets Law No. 6362.
These rights are important because they balance two competing interests. On one hand, when a shareholder owns almost all voting rights of a public company, maintaining a tiny minority shareholder base may create administrative, listing and governance costs. On the other hand, minority shareholders should not be forced out without a legally regulated price and procedure. Turkish capital market law therefore gives the dominant shareholder a squeeze-out right, while also giving minority shareholders a corresponding sell-out right.
Legal Framework
The key regulation is Communiqué II-27.3 on Squeeze-Out and Sell-Out Rights. The CMB announced that this communiqué entered into force after amendments introduced by Law No. 7222 and that the dominant shareholder threshold for triggering squeeze-out and sell-out rights was preserved at 98%. The same CMB announcement also explained that the communiqué revised rules on persons acting together, valuation, sell-out timing, squeeze-out timing and pricing.
The communiqué applies to publicly offered or deemed-public joint-stock companies. It defines a “dominant shareholder” as a natural or legal person who, alone or together with persons acting in concert, owns at least 98% of the voting rights of the company. It also defines “persons acting in concert” as natural or legal persons who carry out share acquisitions causing the birth of squeeze-out and sell-out rights under an explicit or implicit, oral or written agreement.
The legal framework is therefore not limited to the nominal number of shares. What matters is voting control. Direct and indirect holdings must be considered, and persons acting together may be aggregated. This prevents dominant shareholders from avoiding the rules by spreading shares among affiliates, controlled companies or coordinated persons.
What Is the Squeeze-Out Right?
The squeeze-out right allows the dominant shareholder to remove all remaining minority shareholders from the company by purchasing their shares at the legally determined price. Under Communiqué II-27.3, when the voting rights attached to shares owned through a takeover bid or by any other means, including acting in concert, reach 98% of the company’s total voting rights, or when additional shares are acquired while already in that position, the dominant shareholder obtains the right to squeeze out all other shareholders, regardless of whether those remaining shares are privileged or non-privileged.
This right is especially relevant where the dominant shareholder intends to simplify the shareholder structure, delist the company, reduce public company compliance costs or complete a full acquisition. In a company where only a very small percentage of shares remains in the hands of minority investors, the existence of a public float may no longer serve the usual functions of a listed market.
However, the squeeze-out right cannot be exercised arbitrarily. It is subject to valuation, disclosure, CMB approval, payment, MKK procedures and, for listed companies, delisting processes. The dominant shareholder must pay the legally calculated price in cash and in Turkish lira.
What Is the Sell-Out Right?
The sell-out right is the minority shareholder’s corresponding protection. When a shareholder becomes a dominant shareholder by reaching the 98% voting rights threshold, the remaining shareholders gain the right to sell their shares to the dominant shareholder at the price determined under Communiqué II-27.3. This right protects minority shareholders from being trapped in a company effectively controlled by one shareholder.
The sell-out right is important because after the 98% threshold is crossed, liquidity may decrease, public trading may become less meaningful, and minority shareholders may have limited influence over company decisions. The law therefore allows them to exit at a regulated price.
Communiqué II-27.3 provides that after the valuation report summary is publicly disclosed, minority shareholders who wish to use the sell-out right must submit their written requests to the company within a two-month preclusive period. For purposes of the communiqué, one month is calculated as thirty days.
The 98% Voting Rights Threshold
The most important trigger is the 98% voting rights threshold. The CMB’s 2020 announcement expressly states that the threshold for the dominant shareholder position, which triggers squeeze-out and sell-out rights, was preserved at 98%.
Under Communiqué II-27.3, the threshold may be reached through a takeover bid, market purchases, block purchase, indirect acquisition, acting in concert or any other acquisition method. The communiqué states that direct and indirect shares owned by the dominant shareholder are taken into account when calculating the voting rights ratio. However, voting privileges are not considered in the calculation.
This distinction matters. A shareholder may have privileged voting shares in a company, but the 98% calculation is not made by giving additional weight to voting privileges. The regulation focuses on the voting rights ratio in the manner specified by the communiqué. In addition, squeeze-out cannot be exercised on the basis of shares held through usufruct or purchase rights.
Persons Acting in Concert
The concept of persons acting in concert is essential. A shareholder cannot avoid the 98% threshold by dividing acquisitions among several related entities. Communiqué II-27.3 provides that certain persons are deemed to act together when determining acquisitions that trigger squeeze-out and sell-out rights. These include companies controlled by natural or legal person shareholders and persons controlling legal person shareholders together with companies controlled by them.
For example, if a parent company, its subsidiary and another controlled affiliate acquire shares in the same publicly held corporation under a coordinated structure, their voting rights may be assessed together. Similarly, if natural persons and companies act under an explicit or implicit arrangement to acquire shares causing the 98% threshold to be reached, the CMB may examine the economic reality rather than only the formal ownership record.
This rule is particularly important in group companies, family-controlled structures, private equity acquisitions and complex M&A transactions.
Cases Where the Rights Do Not Arise
Communiqué II-27.3 also identifies situations where squeeze-out and sell-out rights do not arise. The communiqué provides that these rights do not arise because of shares acquired by existing shareholders in bonus capital increases or in paid capital increases where pre-emption rights are not restricted. They also do not arise because of inheritance, repurchased shares or freezing of voting rights.
The CMB’s 2020 announcement similarly states that bonus capital increases, paid capital increases without restriction of pre-emption rights, inheritance, repurchased shares and freezing of voting rights do not trigger squeeze-out and sell-out rights.
This is logical. The purpose of the regulation is to address situations where a dominant shareholder obtains overwhelming control through acquisition or similar conduct. If the 98% level is reached merely because of mechanical or legal events such as inheritance, treasury shares or capital increase participation by existing shareholders without restriction of rights, the same policy justification may not exist.
First Disclosure After Becoming Dominant Shareholder
When a shareholder becomes a dominant shareholder or acquires additional shares while already in that position, a public disclosure must be made under the CMB’s material event disclosure rules. Communiqué II-27.3 expressly requires the dominant shareholder to make public disclosure when the dominant shareholder position is acquired or when additional shares are acquired while in that position.
This disclosure is important because it starts the process. Investors must be informed that the squeeze-out and sell-out rights have arisen. Market participants must also be able to evaluate whether the company may be delisted or whether minority shareholders may exercise the sell-out right.
In listed companies, these disclosures are made through KAP, the Public Disclosure Platform. KAP is the central electronic disclosure system for capital market and Borsa İstanbul notifications, designed to provide correct, timely, fair and complete information to all investors simultaneously.
Valuation Report
After the dominant shareholder disclosure, the company must procure a valuation report for the purpose of determining share values. Communiqué II-27.3 provides that within one month following the public disclosure by the dominant shareholder, the company must have a valuation report prepared under the relevant CMB regulations, and the summary of that report must be publicly disclosed.
The valuation report is critical because it helps determine the price at which minority shareholders may sell their shares or be squeezed out. A defective valuation may lead to investor objections, CMB review, litigation risk and reputational problems.
The report should be prepared carefully, with appropriate valuation methodologies, transparent assumptions and separate analysis for different share groups where necessary. If there are privileged and non-privileged shares, the value of each group must be considered properly.
Sell-Out Procedure
After the valuation report summary is publicly disclosed, minority shareholders who want to use the sell-out right must submit written applications to the company within the two-month preclusive period. The company must examine whether the applicants are shareholders and must notify the dominant shareholder of requests within two business days by registered letter with return receipt or through a notary. For dematerialized shares, shareholder information must be confirmed through MKK.
The dominant shareholder must deposit the share price into the company account within two business days after receiving the sell-out request. The company then pays the shareholder on the business day following the deposit, and the share transfer is completed together with the payment. The communiqué also allows the sell-out right to be exercised through an investment institution.
A minority shareholder who wants to use the sell-out right must use it for all privileged and non-privileged shares owned. The right cannot be used selectively for only part of the shareholder’s holdings.
Squeeze-Out Procedure
The squeeze-out right is exercised after the sell-out period ends. If the dominant shareholder wants to use the squeeze-out right, it must apply to the company within three business days after the end of the two-month sell-out period. The application must cover all privileged and non-privileged shares of other shareholders and must be made at the price determined under Article 6 of the communiqué.
The dominant shareholder must also submit evidence that the total amount required for exercising the squeeze-out right is covered by a bank guarantee letter or blocked cash in a special bank account. After the dominant shareholder applies, the board of directors of the company must adopt a decision within five business days to cancel the shares of the other shareholders and issue new shares to be delivered to the dominant shareholder. The company must then apply to the CMB within ten business days for approval of the issue document.
For companies whose shares are traded on the exchange, the company must simultaneously apply to the exchange for delisting. After the CMB approves the issue document, the dominant shareholder must deposit the total squeeze-out price into the company’s bank account within three business days. The company must then apply to the trade registry within three business days after the payment for registration and announcement in the Turkish Trade Registry Gazette. The shares subject to squeeze-out are deemed cancelled as of the registration date.
MKK and Takasbank Process
For listed companies and companies whose shares are dematerialized, the MKK process is central. Communiqué II-27.3 provides that companies must apply to MKK on the business day following the deposit of the squeeze-out price into the company account, requesting transfer of the price to the accounts of shareholders other than the dominant shareholder, cancellation of their shares and transfer of the newly issued shares to the dominant shareholder’s account.
For shares followed in the MKK system, the relevant amounts are transferred by MKK to investment institution accounts for the benefit of rights holders, and the shares are cancelled. For shares followed at the company level in the MKK system or shares not yet dematerialized, the remaining amount must be kept for three years in a special blocked account opened through an investment institution at Takasbank and must be interest-bearing.
After three years, the block may be lifted upon application by the relevant investment institution to Takasbank, and the remaining balance and accrued return may be returned to the company upon request. If a person later proves shareholder status after this period, the company must pay the corresponding share price.
Delisting Consequences
For listed companies, squeeze-out usually leads to delisting. Communiqué II-27.3 provides that after completion of the MKK process, the exchange evaluates the application and decides to remove the company’s shares from exchange listing and permanently prohibit them from trading. That decision becomes effective on the first business day following its announcement by the exchange on KAP.
The communiqué also provides that companies delisted after the dominant shareholder exercises the squeeze-out right are deemed to have exited the scope of Capital Markets Law No. 6362.
This is a major legal consequence. A company that leaves the capital market framework may no longer be subject to the same public company disclosure and governance obligations. For the dominant shareholder, this may be one of the commercial reasons for using the squeeze-out right. For minority shareholders, it is one of the reasons why the sell-out right and fair payment process are crucial.
Price Calculation for Listed Companies
The squeeze-out and sell-out price must be paid in Turkish lira, fully and in cash. Communiqué II-27.3 sets out separate price calculation rules for listed and unlisted companies.
For listed companies, the price is based on the average of two elements: the arithmetic average of daily adjusted weighted average prices formed on the exchange during the relevant period, and the value determined in the valuation report for each share group. For companies traded on the Yıldız Pazar, the relevant exchange period is the last one month before the public disclosure of the birth of the rights. For companies traded outside Yıldız Pazar, the relevant period is the last six months.
If the acquisition of dominant shareholder status simultaneously causes a change in management control, the price must also be compared with the mandatory tender offer price calculated under takeover bid rules, and the higher price is taken into account. The CMB’s 2020 announcement confirms this mechanism and explains that the mandatory tender offer price was included among the criteria to prevent shareholder rights loss where dominant shareholder status and control change arise simultaneously.
Price Calculation for Unlisted Public Companies
For public companies whose shares are not traded on the exchange, the price is primarily determined by the valuation report prepared for each share group. If the dominant shareholder status is acquired simultaneously with a change in management control, the price is compared with the mandatory tender offer price calculated under takeover bid regulations, and the higher amount is used.
This rule is important because unlisted public companies do not have a daily exchange price. The valuation report therefore becomes even more central. It must reflect the company’s assets, liabilities, profitability, cash flows, market comparables and relevant circumstances.
Minority shareholders in unlisted companies should pay particular attention to the valuation report summary. If the valuation appears to ignore material assets, hidden reserves, group transactions, related-party claims or future cash flow, legal review may be necessary.
Market Manipulation and Extraordinary Conditions
Communiqué II-27.3 includes a special rule for calculating exchange price periods where the CMB has taken decisions relating to market manipulation under Article 107 of Capital Markets Law No. 6362 or where extraordinary developments affecting the economy or the sector exist. In such cases, the relevant periods that formed the basis of the CMB’s decision are not taken into account, and equivalent periods are added to complete the calculation period.
This rule protects the fairness of the price calculation. If market prices during the relevant period were distorted by manipulation or extraordinary conditions, using those prices directly could harm either minority shareholders or the dominant shareholder.
In practice, price disputes may arise where the market price was affected by unusual volatility, public announcements, liquidity problems, manipulation investigations or extraordinary economic events. The valuation and pricing process must therefore be reviewed carefully.
Public Disclosure Obligations
Communiqué II-27.3 contains detailed public disclosure obligations. The dominant shareholder must disclose acquisition of dominant shareholder status, additional share acquisitions while in that position, loss of dominant shareholder status, and the decision to exercise the squeeze-out right together with the price and application to the company.
The company must disclose the application made for exercise of the squeeze-out right, information about the process and its results, the fact that the sell-out right has arisen, daily information during the sell-out period about the number of shareholders applying, their shareholding ratios and the total sell-out price, the final squeeze-out and sell-out price including the valuation report summary, and the results of the sell-out period.
These disclosures are essential for investor protection. Minority shareholders must know when the rights arise, how much they will be paid, how to apply, how many shareholders have applied, and whether the squeeze-out process will continue.
Two-Year Limitation After Initial Trading
Communiqué II-27.3 provides an important limitation: squeeze-out and sell-out rights cannot be used for two years from the date the company’s shares first begin trading on the exchange.
This rule protects the integrity of public offerings and initial listing. Without such a limitation, a company could go public and then rapidly eliminate minority shareholders through squeeze-out, undermining investor expectations and market confidence.
For IPO investors, this rule provides a minimum stability period. For controlling shareholders and sponsors, it means that squeeze-out planning must consider the two-year restriction after initial trading.
Public Institutions and Investment Companies
The communiqué includes specific exceptions. Unless public institutions or organizations request otherwise, the communiqué does not apply to shares owned by public institutions or organizations. It also states that provisions relating to investment companies are reserved.
These exceptions reflect the fact that public ownership and investment company structures may be subject to special legal regimes or policy considerations. Therefore, squeeze-out and sell-out analysis should always consider whether the shareholder or company is subject to another special legal framework.
Relationship With Mandatory Tender Offers
Squeeze-out and sell-out rights may arise at the same time as acquisition of management control. Communiqué II-27.3 provides that where the birth of squeeze-out and sell-out rights occurs simultaneously with acquisition of management control, the mandatory tender offer obligation is deemed not to arise.
This is an important rule. If a shareholder acquires such a high level of voting rights that the squeeze-out and sell-out regime is triggered, the law avoids duplicating processes through both mandatory tender offer and squeeze-out/sell-out mechanisms. However, the price calculation protects minority shareholders by comparing the squeeze-out/sell-out price with the mandatory tender offer price where control change occurs simultaneously.
In M&A transactions, this interaction must be analyzed before closing. A buyer acquiring a very large controlling stake in a public company must understand whether takeover bid rules, squeeze-out rules or both pricing mechanisms are relevant.
Legal Liability Risks
Squeeze-out and sell-out procedures create significant liability risks. The dominant shareholder may face liability if it fails to make required disclosures, delays payment, miscalculates the price, acts through concert parties without proper disclosure or tries to avoid the process through indirect structures.
The company may face liability if it fails to procure the valuation report within the required period, fails to disclose the report summary, mishandles minority shareholder applications, fails to verify shareholders through MKK, delays board decisions, fails to apply to the CMB in time or makes incomplete KAP disclosures.
Valuation firms may also face liability if their valuation report is materially flawed, misleading or inconsistent with CMB standards. Because price is central to minority shareholder protection, valuation quality is often the most contested part of the process.
Minority Shareholder Remedies
Minority shareholders should carefully monitor KAP disclosures after a shareholder reaches or approaches the 98% threshold. They should review the valuation report summary, the announced price, the application deadline, payment procedure and whether they must submit written requests to the company.
If a minority shareholder believes that the price is unlawful, the valuation is defective, the disclosure is misleading or the process violates CMB rules, legal advice should be obtained quickly. The two-month sell-out period is a preclusive period, meaning delay may cause loss of the right to use the sell-out mechanism.
Evidence is important. Shareholders should preserve brokerage statements, MKK records, KAP disclosures, valuation summaries, written applications, payment records and correspondence with the company or investment institution.
Practical Checklist for Dominant Shareholders
A dominant shareholder planning to use squeeze-out rights should follow a strict compliance checklist.
First, calculate voting rights carefully, including direct and indirect holdings and persons acting in concert. Second, verify whether any exceptions apply, such as capital increase participation, inheritance, repurchased shares or voting right freezing. Third, make the required public disclosure when the 98% threshold is reached or when additional shares are acquired while already in dominant position. Fourth, coordinate with the company for preparation of the valuation report within one month. Fifth, ensure that the sell-out process is properly administered. Sixth, wait until the two-month sell-out period expires. Seventh, apply to the company within three business days if the squeeze-out right will be used. Eighth, provide blocked cash or a bank guarantee covering the total amount. Ninth, ensure board, CMB, MKK, registry and delisting processes are completed on time. Tenth, preserve all records.
This process should be planned before acquiring the final shares that cross the 98% threshold. Waiting until after the threshold is crossed may create avoidable regulatory and timing risks.
Practical Checklist for Companies
A public company facing a squeeze-out and sell-out process should immediately organize internal responsibilities. The investor relations, legal, finance and board secretariat teams should coordinate the process.
The company must procure a valuation report within the required period, disclose the summary, receive sell-out applications, verify shareholder status, notify the dominant shareholder, handle payments, prepare board decisions, apply to the CMB for issue document approval, coordinate with MKK and Takasbank, and apply for delisting if shares are traded on the exchange.
The company should also ensure that KAP disclosures are accurate, complete and timely. Because the process directly affects shareholder rights, vague or incomplete disclosures may create investor claims and CMB scrutiny.
Practical Checklist for Minority Shareholders
Minority shareholders should act promptly. They should check whether the dominant shareholder disclosure has been made, review the valuation summary, note the two-month sell-out deadline, submit a written application if they wish to sell, and confirm that payment is made according to the communiqué.
If the shareholder holds shares through an investment institution, account and MKK records should be checked. If the shareholder holds physical or non-dematerialized shares in a non-exchange company, the special procedure for delivery, cancellation and payment must be followed.
A shareholder who remains passive may still be squeezed out if the dominant shareholder exercises the squeeze-out right after the sell-out period. Therefore, minority investors should not ignore KAP announcements.
Common Legal Mistakes
Common mistakes include miscalculating the 98% threshold, ignoring indirect holdings, failing to identify persons acting in concert, assuming privileged voting rights are counted in the threshold, failing to disclose additional purchases while already dominant, missing the one-month valuation report deadline, missing the two-month sell-out period, using incomplete valuation assumptions, failing to compare the price with mandatory tender offer price where control changes simultaneously, and delaying MKK or CMB procedures.
Another common mistake is treating squeeze-out as an ordinary private share transfer. It is not. It is a regulated capital market process involving public disclosure, valuation, minority rights, CMB approval, MKK transactions and delisting consequences.
Conclusion
Squeeze-out and sell-out rights in Turkish capital markets are regulated mechanisms designed to balance the interests of dominant shareholders and minority shareholders in publicly held corporations. The legal framework is based on Article 27 of Capital Markets Law No. 6362 and Communiqué II-27.3, which entered into force after publication in the Official Gazette on 31 December 2020.
The key threshold is 98% of voting rights, held alone or together with persons acting in concert. When this threshold is reached, the dominant shareholder obtains the right to squeeze out other shareholders, and minority shareholders obtain the right to sell their shares to the dominant shareholder. The process requires public disclosure, valuation, sell-out applications, payment, CMB approval, MKK processing and, for listed companies, delisting.
The price must be paid fully and in cash in Turkish lira. For listed companies, pricing combines market average data and valuation report results, while also considering the mandatory tender offer price if control change occurs simultaneously. For unlisted public companies, the valuation report is central, again subject to comparison with mandatory tender offer pricing where applicable.
For dominant shareholders, this process is a powerful tool to complete ownership and simplify corporate structure. For minority shareholders, it is a statutory exit protection. For companies, it is a high-liability compliance process. Any dominant shareholder, listed company, minority investor, valuation firm or intermediary involved in Turkish squeeze-out and sell-out rights should obtain professional legal advice before taking action, because deadlines, valuation rules and disclosure obligations are technical and strictly regulated.
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