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A. INTRODUCTION
This memorandum (the “Memorandum”) has been prepared to give an overview of the steps and characteristics of a merger and squeeze-out rights of a company under the Turkish Commercial Code numbered 6102 (the“TCC”). Please note that the explanations in this Memorandum are intended to cover exclusively joint stock companies and do not touch any other company types and entities.
B. MERGER
1.Principle
The merger of companies is regulated under the TCC. There are two methods of merger: companies may merge
(i) through an acquisition of one company by another one (merger by acquisition), or
(ii) by formation of a new company. The acquiring company is referred to as the “Transferee Company” and the acquired company is referred to as the “Transferred Company”.
In a merger, the Transferee Company takes over the assets of the Transferred Company as a whole and as a result of the merger, the Transferred Company is dissolved and removed from the Trade Registry. The shareholders of the Transferred Company acquire shares in the Transferee Company in exchange of the Transferred Company’s assets according to aconversion ratio. In this regard, the shareholders must be given shares in the Transferee Company proportional to their previous shareholding.
2. Simplified Merger
The TCC allows companies to apply a simplified merger procedure whereby many protective provisions regarding the merger procedures will not be enforced as opposed to a merger under the full procedure.
Companies may merge through a simplified merger process,if:
(i) the Transferee Company possesses all shares of the TransferredCompany having voting rights; or
(ii) a single company or a single real person or a single group of persons bound by law or an agreement possesses all shares of the companies participating in the mergerhaving voting rights; or
(iii) the Transferee Company owns at least 90 percent of shares of the Transferred Company having voting rights provided that (a) an option equal to the actual value of the Transferee Company shares, in addition to the company shares are offered to the minority shareholders, and (b) minority shareholders are not faced with any additional payments, personal performance liabilities or personal responsibilities due to merger.
In case of a simplified merger, the companies participating in the merger are not obliged to prepare the merger report, provide inspection rights and submit the merger agreement to the approval of the general assembly.
C. SQUEEZE-OUT RIGHT OF THE COMPANY
The squeeze-out of shareholders from joint stock companies is granted under the following circumstances:
1. Squeeze-Out Merger
In a merger, companies participating in the merger may grant the shareholders of the Transferred Company in the merger agreement
The right to acquire shares in the Transferee Company, or
To just receive a consideration that corresponds to the actual value of the Transferee Company’s shares, without obtaining any shares. If the shareholders hold preferred shares in the Transferred Company, then the actual value should be calculated by considering the type of the share (either common or preferred) as well and be specified in the merger agreement.
This being said, the TCC also allows that the merger agreement grants only a consideration to the shareholders of the Transferred Company. In that case, the shareholders may not acquire any shares in the Transferee Company. If the merger agreement stipulates compensation to the shareholders of the Transferred Company, then this must be approved by the affirmative votes of the 90 percent of the existing voting rights at the general assembly of companies participating in the merger.
The shareholders of the Transferred Company subject to the squeeze-out merger may challenge the amount of compensation and bring a claim in Turkish courts within 2 months as from the announcement of the merger at the Turkish Trade Registry Gazette (“TTRG”) arguing that the compensation does not correspond to the actual value of the Transferee Company’s shares. As a result, the court may rule additional compensationto be paid to the previous shareholders of the Transferred Company and however this court ruling does affect the validity of the completed merger.
2. Squeeze-Out Specific to Group Companies
The second circumstance whereby squeeze-out is allowed is specific to the group companies. The parent company in a group, which holds directly or indirectly at least 90 percent of the sister company’s shares or voting rights, may squeeze-out the remaining minority by purchasing the minority shares at a value decided by the court, if such minority violates the good faith principle orcauses distress to the company.
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