The Acquisition and Leveraged Finance Review: Turkey


In 2019, Turkish M&A activity saw a sharp fall in line with the global slowdown of economic activity as a result of macroeconomic uncertainties, trade tensions, geopolitical challenges and slower growth expectations. According to market data,2 around 233 mergers and acquisitions were carried out in 2019 in Turkey, with the aggregate transaction value reaching approximately US$5.3 billion, representing the lowest annual deal volume in the last decade, and a decrease of 56 per cent compared to 2018.

There were around 70 notable transactions involving foreign investors, making a solid contribution to the annual deal volume with an investment volume of more than US$3 billion, while Turkish investors represented an annual deal volume of around US$2 billion. European investors once again led the market in terms of deal numbers with 43 deals, while investors from the Asia Pacific and Gulf regions were also involved in a number of landmark deals.

In 2019, internet and mobile services and technology remained at the top of the list of sectors in relation to deal number. Energy, manufacturing, e-commerce, food and beverages sectors were among the most active sectors. Infrastructure was the biggest contributor to overall annual deal volume, followed by financial services, energy and retail, which significantly provided a major contribution to the total M&A deal volume.

The customary way of financing acquisitions in the Turkish M&A market is through conventional loans from onshore and offshore financial institutions, often in the form of senior secured debt. However, there has been an observable drop in cross-border acquisition financing deals following the entry into force of foreign currency lending restrictions progressively introduced from late 2018, which led to a rise in equity-funded deals.

Regulatory and tax matters

i Regulatory matters

Lending is a regulated activity in Turkey that generally requires the lender to hold a licence (for example, a banking licence), and unlicensed lending for profit constitutes a criminal activity pursuant to the Turkish Criminal Code (the Law No. 5237) (Criminal Code). However, there may be limited instances where intragroup lending may be permitted as well.

Bank loans

Turkish lira loans

Pursuant to the Decree No. 32 Regarding the Protection of the Value of Turkish Currency (published in the Official Gazette dated 11 August 1989 and numbered 20249, the Decree No. 32) and the Capital Movements Circular issued by the Central Bank of the Republic of Turkey (the Central Bank) on 2 May 2018 (the Capital Movements Circular), Turkish lira denominated cross-border loans borrowed by Turkish entities are required to be utilised through local intermediary banks. Similarly, repayment and payment of interest in respect of Turkish lira denominated cross-border loans borrowed by Turkish entities are to be made through local intermediary banks, in Turkish lira. In addition, Turkish entities are not allowed to obtain cross-border revolving or overdraft facilities.

FX loans

Pursuant to the Decree No. 32 and the Capital Movements Circular, generally, Turkish companies that had foreign exchange (FX) revenues in the last three years may obtain loans denominated in foreign currency (FX loans) based on the amount of their documented FX revenues for such period. Turkish corporates that do not generate FX revenues cannot utilise FX loans unless such Turkish residents benefit from the exemptions listed exhaustively under Decree No. 32 and the Capital Movements Circular.

The general exemption is for Turkish corporates who have an aggregate outstanding FX-denominated credit balance of at least US$15 million (or equivalent in any other currency). Other exemptions are also available for Turkish borrowers that are operating in certain sectors, such as the defence industry or in public–private partnership (PPP) or energy projects. Further, Turkish residents are prohibited from utilising FX-indexed loans. Another notable exception to this rule is when the borrower is a Turkish special purpose vehicle (SPV) that is established for the sole purpose of purchasing the shares of a company, in which case the relevant SPV may be eligible to utilise a cross-border FX loan up to the purchase price stated in the share purchase agreement.

Decree No. 32 requires cross-border loans borrowed by Turkish entities to be utilised through local intermediary banks.

Intragroup lending

In addition, intragroup loans that are subject to various rules and regulations in the Turkish market (as explained below) are frequently used for corporate financing purposes.

The Turkish Commercial Code (Law No. 6102) (the TCC) does not allow shareholders to be indebted to their subsidiaries unless they have paid all amounts due under their equity undertakings and the profit of the relevant subsidiary for the relevant year (together with available reserves) is sufficient to meet the previous year's losses. If these parameters are not met, upstream loans cannot be granted by Turkish entities to their shareholders.

In addition, under the TCC, a parent company cannot use its dominant position to force its subsidiary to enter into transactions that may result in losses to the subsidiary. These include acts such as requiring the controlled company to provide security, or to incur indebtedness. Failing to comply with this could result in the controlling company being responsible against such company, its shareholders or creditors for the losses incurred (which loss would need to be equalised until the end of the same calendar year or the right to demand compensation should be given by the parent to the controlled company) unless the controlling company can prove that a similar action would be to the corporate benefit of the controlled company and could have been taken by a prudent director in good faith of an independent company under the same circumstances.

Furthermore, among other tax considerations, pursuant to Corporate Tax Law (Law No. 5520) (published in the Official Gazette dated 21 June 2006 and numbered 26205) (the Corporate Tax Law), which includes rules and restrictions regarding related party transactions entered into by and between Turkish corporations, transactions between a Turkish company and its related parties must be conducted in accordance with the 'arm's-length transfer pricing' principles under the Corporate Tax Law.

Intragroup cross-border lending

Turkish lira loans

Subject to the provisions of the TCC, Turkish companies may make available Turkish lira denominated loans to their subsidiaries, parent companies or affiliates incorporated in or outside Turkey.

Pursuant to the Decree No. 32 and the Capital Movements Circular, cross-border loans from Turkish resident lenders to their offshore subsidiaries, parent companies or affiliates are subject to fulfilment of ancillary requirements, including but not limited to (1) using a local intermediary bank to transfer the loan proceeds and (2) providing a copy of the written loan agreement (including a repayment plan) and documents evidencing the shareholding structure of the borrower to the local intermediary bank. The loan agreements to be signed in this respect must include an express maturity date and may not include structures such as overdraft or revolving credit facilities.

FX loans

Decree No. 32 and the Capital Movements Circular provide that Turkish companies cannot obtain intercompany loans denominated in foreign currency (FX loans) from other Turkish entities.

However, funds in foreign currency may be transferred to the onshore accounts of Turkish companies (subject to satisfaction of other criteria set out under the Capital Movements Circular) provided that:

  1. the transfer is in connection with a lending transaction carried out within the same holding or group;
  2. the intercompany debt is incurred and repaid in Turkish lira (TRY); and
  3. the Turkish borrower provides a written statement indicating that the funds in foreign currency to be transferred to its onshore accounts are a conversion of the loan proceeds originally denominated in TRY.

Further, the Decree No. 32 and the Capital Movements Circular allow foreign currency denominated intercompany loans to be granted to Turkish borrowers from abroad if (1) the Turkish borrower is directly and wholly owned by the offshore holding entity acting as the lender or (2) both the Turkish borrower and the offshore lender are (whether directly or indirectly) wholly owned affiliates of the same offshore holding entity, subject to fulfilment of ancillary requirements, including but not limited to (1) using a local intermediary bank to transfer the loan proceeds and (2) providing a copy of the written loan agreement (including a repayment plan) and documents evidencing the shareholding structure of the borrower to the intermediary bank.

Filing and reporting obligations

Generally, Turkish intermediary banks through which the proceeds of the loans flow are responsible for monitoring compliance with the restrictions under the Decree No. 32 and the Capital Movements Circular, including on the credit balance and the amount of the FX loans. Accordingly, the Turkish intermediary banks have increased responsibilities in monitoring the use of onshore and offshore FX loans and have certain reporting obligations to the Central Bank in this respect.

Furthermore, the Decree No. 32 provides that Turkish residents (other than banks and financial institutions) are obliged to notify any guarantee provided in favour of offshore beneficiaries to the Ministry of Treasury and Finance within 30 days of the signing date for information purposes.

ii Tax matters

Withholding tax

According to Article 30 of the Corporate Tax Law (Law No. 5520) published in the Official Gazette dated 21 June 2006 and numbered 26205 (the Corporate Tax Law), below-listed earnings and revenues other than commercial, agricultural, and other earnings and revenues of non-resident corporations that have limited tax liability are subject to a 15 per cent withholding tax:

  1. contract progress income for construction and improvement;
  2. independent professional service income;
  3. gains derived from securities other than dividends, gains derived from participation shares, dividends paid to board of directors and the profits repatriated by the limited liable entities; and
  4. payments received in return for the sale, assignment, or transfer of copyrights, patents, enterprise and commercial titles, trademarks, and similar non-material rights regardless of whether they are a part of commercial or agricultural income.

Within the framework of the said article of the Corporate Tax Law, interest income obtained by non-resident corporations is also subject to withholding tax in Turkey.

The President is authorised by the Corporate Tax Law to determine the rate of withholding tax that can apply to each separate item of the profits and incomes of non-resident corporations by their fields of operations, and to reduce it to zero or to increase the rate to 30 per cent. Per such authority, the withholding tax rate has been determined as 10 per cent in general for the interest payments paid by Turkish resident borrowers under a loan obtained from abroad and, as an exception, 0 per cent for the interest payments paid to one of the following lending entities: (1) foreign countries; (2) international institutions; or (3) foreign banks or entities that are authorised in their country of residence to customarily grant loans not only to entities they are affiliated with but to all real and legal people (qualified financial institutions).

In summary, for the borrowings from abroad, provided that the lender is a qualified financial institution, regardless of its jurisdiction, interest payments made to said institution in return of borrowing by a Turkish resident borrower will be subject to a withholding tax at the rate of 0 per cent.

On the other hand, interest payments to be paid on loans obtained from foreign parties that do not qualify as a qualified financial institution will be subject to a withholding tax at the rate of 10 per cent.

Value added tax (VAT)

In general, the payments made abroad are subject to 18 per cent reverse charge VAT, according to Article 9 of the Law on Value Added Tax (Law No. 3065) published in the Official Gazette dated 2 November 1984 and numbered 18563 (the VAT Law). As those payments are deemed as done against services, VAT liability occurs. The VAT amount that will be paid regarding those payments to abroad shall be declared via a No. 2 VAT return and deducted from the calculated VAT of the payer (the borrower) in the same month within the framework of the reverse charge mechanism.

In summary, to the extent the loans are granted by a financial institution, the interest payments made will not be subject to VAT. However, if the loans are extended by an institution other than a financial institution, the VAT in the ratio of 18 per cent over the interest payments will be triggered.

Stamp tax

Stamp tax applies to a wide range of documents, including but not limited to agreements, financial statements and payrolls. Stamp tax is levied at a rate of 0.948 per cent of the aggregate monetary amount stated on the agreements. Stamp tax is payable by the parties who sign a document. The signatories of a taxable document are jointly responsible for the payment of stamp tax. Only one signed copy of the agreement is subject to stamp tax. The stamp tax per document is subject to a cap of 3,239,556.40 Turkish lira for the year 2020.

According to the stamp duty regulations, the taxable event for the agreements signed in Turkey occurs when the documents are signed. In case the agreements are signed abroad, it may be claimed that no stamp tax arises until the agreement is brought into Turkey to be submitted to the official departments, or until the terms of the document are benefited from in Turkey.

It is necessary to understand the term 'benefiting from the terms of the agreement' as specified in the law in the broadest sense. In essence, 'benefiting from the terms of the agreement' in any way aims to impose no restriction. 'Benefiting from the terms of the agreement' means relying upon that document's legal power. It is not compulsory to achieve a monetary benefit to consider that a document is relied upon or benefitted.

Pursuant to the Article 23 of Part IV of Table 2 attached to the Stamp Tax Law (Law No. 488) published in the Official Gazette dated 11 July 1964 and numbered 11751 (the Stamp Tax Law), if the loans are extended by banks, foreign credit institutions or international finance institutions, the instruments that would be issued for obtaining and back payment of the loan as well as annotations attached to these instruments shall be exempted from stamp duty. If the loan is obtained from institutions, other than the aforementioned, then a stamp duty of 0.948 per cent should be calculated over the amounts referred to in the instruments and annotations.

In summary, save for all other events that trigger stamp tax, under the applicable legislation, documents and annotations thereto to be issued in relation to the extension and repayment of loans to be granted by banks, foreign financial institutions and international institutions are free of stamp tax. However, if a loan is obtained from institutions other than a bank, foreign financial institution or an international institution, then a stamp duty in the ratio of 0.948 per cent over the aggregate monetary amounts referred to in the documents and annotations will be triggered.

Resource utilisation support fund (RUSF)

Pursuant to the Communiqué No. 6 Concerning the Resource Utilisation Support Fund on the Decree No. 88/12944 dated 12 May 1998, foreign currency borrowings from abroad with an average maturity of less than three years are subject to RUSF as follows:

MaturityRUSF rate
Average maturity up to 1 year3%
Average maturity between 1 year (including 1 year) to 2 years1%
Average maturity between 2 years (including 2 years) to 3 years0.5%
Average maturity of 3 years (including 3 years) and aboveExempt

The RUSF amount is calculated over the principal amount for the foreign exchange loans. Turkish lira-denominated loans from abroad are subject to 1 per cent RUSF if the loan falls short of 1 year. The RUSF amount is calculated over the interest amount for the Turkish lira loans.

Security and guarantees

As a general principle that applies to all forms of security, any provision entitling the security holder to become the owner of the secured asset upon the occurrence of an event of default is null and void under Turkish law (the lex commissaria prohibition). This means that the security holder cannot automatically become the owner of the secured assets upon the occurrence of an event of default but it can sell (depending on whether private sale is permitted for that particular form of security) or have them sold to receive sale proceeds for the satisfaction of its receivables or it may join such sale and bid against its claims (i.e., the security holder does not have to make an actual payment for the amount of its claims).

As an exception to this rule, for the collateral arrangements where the subject matter of the form of security is dematerialised capital market instruments registered in the electronic records of the Turkish Central Registry Agency (the CRA), Article 47 of the Capital Market Law (Law No 6362) (the CML) allows the pledgee to automatically acquire the ownership of such listed shares on an enforcement event.

i Pledge over share

Without prejudice to any further requirements in the articles of association of the relevant company, a pledge over the shares of a Turkish joint stock company can be established by:

  1. entering into a written pledge agreement;
  2. delivering the share certificates (in printed or temporary form) representing the pledged shares to the pledgee (bearing pledge or blank endorsements if they are registered shares); and
  3. registering the pledge on the share ledger of the company upon the resolution of the board of directors of such company to that effect (so that no one can claim good faith while conducting any transactions regarding the pledged shares).

Perfection of a pledge over the shares of a Turkish limited company requires a written pledge agreement to be executed before a notary public and registration of the pledge with the share ledger of the company upon a resolution of the general assembly of such company to that effect.

The shares of publicly traded companies are in dematerialised form and are recorded with the CRA. Accordingly, the shares of these companies that are subjected to a pledge should be transferred to the sub-account of the pledgee held with the CRA with a record of the pledge.

In the absence of any agreement to the contrary, the voting rights of the pledged shares will be exercised and the dividends will be received by the pledgor or pledgors.

ii Mortgage

A mortgage constitutes an encumbrance over the immovable property subject to such mortgage and all buildings thereon including the integral and accessory parts. A mortgage over immovable property may secure:

  1. the principal amount of the debt;
  2. delay interest and enforcement costs;
  3. the contractual interest; and
  4. the expenses, including but not limited to the insurance premium payments, made or incurred by the mortgagee for the protection of the mortgaged immovable property.

Pursuant to the Turkish Civil Code (Law No. 4721), a mortgage can be created as security over immovable property for any kind of debt: present, future or contingent. The perfection of a mortgage requires a mortgage agreement to be entered into by and between the mortgagor and the mortgagee at the relevant Title Deed Registry in ex officio form and thereafter registration of the mortgage with the same.

In principle, the amount of the mortgage is required to be registered in TRY. However, according to Article 851/II of the Civil Code, a FX mortgage can be created if it secures an FX loan to be obtained from a credit institution.

Mortgages are registered in first and continuing degrees and rankings. The degree of the mortgage holds particular importance in an enforcement scenario. Initially, the first-degree mortgagee receives its receivables (up to the mortgage amount) from the proceeds of the sale of the mortgaged property. If there remain any proceeds, the second-degree mortgagee receives its receivables and the process continues in such a manner.

It is possible to create a joint mortgage on a certain degree (i.e., a mortgage in favour of more than one mortgagee) and unless a different arrangement is included in the mortgage agreement, the rights of each mortgagee under the joint mortgage shall rank pari passu with the rights of the other joint mortgagees.

Mortgages can move up to a higher degree upon their becoming available if the relevant mortgage agreement includes an express provision to this effect.

iii Pledge over movables

Under Turkish law, perfection of a pledge over movable property requires a written pledge agreement to be entered into by and between the pledgor and the pledgee and transfer of the physical possession of such movable property to the pledgee.

In respect of a pledge over movable property that is legally required to be registered with a special registry (such as vehicles), the pledge may be granted through a registration at the relevant special registry as a perfection condition and, in such a case, physical possession of such movable property is not required to be transferred to the pledgee.

iv Movables pledge in commercial transactions

The Movable Pledge Law in Commercial Transactions (Law No. 6750) provides for the establishment of pledge over movables without any requirement to transfer the physical possession of the pledged asset to the pledgee. These sorts of pledges must be based on a pledge agreement signed before a notary public in Turkey and registered with the pledged movables registry.

v Assignment (transfer) or pledge of receivables

An assignment (transfer) of receivables or pledge over receivables is perfected by entering into a written assignment or pledge agreement. Present or future receivables (including insurance proceeds) can be assigned or pledged but they should be ascertainable.

vi Bank account pledge

The perfection of a bank account pledge (which is a type of receivables pledge over the receivables of the deposit holder with regard to the account bank) requires execution of a written pledge agreement between the pledgor and the pledgee and a notification to the account bank (unless the pledgee is also the account bank). It is also advisable to obtain an acknowledgement from the account bank to ensure that the pledge is duly registered with its records, it waives any set-off rights it may have in respect of the pledged accounts and it does not have any counterclaims as at the date of the acknowledgement.

vii Other forms of security

In addition to the above-mentioned forms of security that are most commonly used in the Turkish market, there are also more specific forms of security available such as aircraft or vessel mortgages or pledges over mines, etc.

viii Restrictions on upstream guarantees and security

Pursuant to Article 202 of the TCC, a parent company cannot use its dominant position to force its subsidiary to enter into transactions that may result in losses to the subsidiary. These include giving sureties or guarantees, making payments or decreasing its assets for the debt of the parent company.

Under Article 203 of the TCC, the board of directors of the parent company may give instructions to its wholly owned subsidiary regarding its management, provided that: (1) the provision of these instructions shall be required by the determined and factual policies of the parent company; and (2) these instructions shall not be clearly exceeding the subsidiary's solvency, jeopardising its existence or causing the loss of its material assets. Even if these instructions might result in losses for the subsidiary, the bodies of the wholly owned subsidiary must comply with the instructions. However, in this case, the parent company would still be required to compensate these losses, as explained below and the creditors of the wholly owned subsidiary, who have incurred losses, would have the right to claim compensation against the parent and its board of directors (if the losses are not compensated by the parent) subject to certain conditions.

As per Article 202 of the TCC, upstream guarantees or security can be provided if any such transaction is made for a consideration. For the purposes of this consideration, Article 202 allows the parent company to compensate any loss suffered by the subsidiary within the same financial year that the loss is suffered in, or to grant an express right to the subsidiary against the parent (or a counter-guarantee) to claim any losses it may suffer as a result of providing such guarantee or security.

Failure to provide the consideration explained above allows the shareholders of the subsidiary to claim compensation against the parent and its board of directors. Any creditor of the subsidiary may also request payment to the subsidiary of any losses so suffered. However, if the transaction could have been made or could have been prevented from being made by the board of directors of an independent company acting for corporate benefit in accordance with the principle of good faith and with the care of a prudent director under the same or similar conditions, then this compensation would not be applicable.

Under certain circumstances, the subsidiary's dissenting shareholders to certain transactions (such as to merger or demerger) are also entitled to request from the court the purchase of their shares by the parent company.

ix Restrictions on acquisition finance

According to Article 380 of the TCC, a company (whether privately or publicly held) cannot advance funds, provide loans or security for acquisition of its own shares by a third party. This restriction stems from the prohibition envisaged in Article 379 regarding acquisition of a company of its own shares. Providing financing or security for acquisition of its own shares is considered as a way to circumvent the referred prohibition and this restriction is introduced mainly to avoid such circumvention.

It is sufficient that the intention of the restricted transactions is to acquire the shares and no written agreements are necessary for this restriction to apply. The timing of the acquisition (whether completed before or after such restricted transactions) is also irrelevant as long as the intention of transactions is to acquire the shares.

Pursuant to Article 380 of the TCC, there are only two exceptions to this restriction. Accordingly, transactions (1) carried out by credit and financial institutions in their ordinary course of business, and (2) with regard to granting advance funds, loan or security to the employees of the company or employees of its subsidiaries for the purpose of acquiring the company's shares are exempt from the financial assistance restriction, unless these transactions reduce the legal reserves of the relevant company below certain limits. All transactions that fall within the scope of Article 380 will be automatically null and void.

x Clawback provisions and voidable transactions

Transactions carried out by the bankrupt debtor prior to bankruptcy can be subject to an annulment action subject to the applicable hardening periods under the Turkish Enforcement and Bankruptcy Law No. 2004 dated 9 June 1932 (the EBL).

Accordingly, the assets of the debtor that have been transferred to a third party prior to the declaration of bankruptcy may be included in the bankruptcy estate and liquidated for the satisfaction of its creditors if the relevant transactions are successfully challenged by the bankruptcy estate or creditor and found fraudulent.

Priority of claims

i Subordination

As the concept of subordination of debts is not recognised under Turkish Law, in cases where a Turkish company goes bankrupt or insolvent, even if they are subordinated, the claims of the creditors will rank side by side with the claims of all unsecured creditors. To circumvent this, in practice, the subordinated creditors are requested by lenders to assign or transfer all their subordinated loans to them via an assignment or transfer of future receivables. It should be noted that, while not recognised by Turkish Bankruptcy Law, subordination can result in contractual claims because it is not an invalid as a contractual undertaking.

ii Ranking system in EBL

Upon the liquidation of the bankruptcy estate, payments to eligible creditors shall be made in the following order.

  1. Secured debts will be paid first following deduction of any relevant taxes and expenses relating to the sale of pledged assets.
  2. Unsecured debts and secured debts that have not been satisfied by the foreclosure of pledged assets:
    • first category – (1) the employees' receivables, including notice and severance pays accrued in the year prior to the bankruptcy or because of the termination of the employment following the bankruptcy of the company; (2) debts of the employer to the national insurance and social funds for employees; and (3) any and all alimony claims arising from family law accrued within a year prior to the bankruptcy (if applicable);
    • second category – receivables of persons whose assets have been left to the administration of the bankrupt as a guardian or an administrator;
    • third category – receivables that are given priority pursuant to the provisions of special laws (e.g., statutory legal fees payable to lawyers);
    • fourth category – all other receivables that do not otherwise have any priority.

Claims of each creditor within a particular category rank pari passu with claims of other creditors in the same category (save for secured debts, which shall be paid in accordance with their respective rankings and degrees). Creditors of any category are not entitled to any payment until and unless all creditors of the superior category are satisfied in full.


Pursuant to Article 24 of the Private International Law, the law governing contractual rights and obligations may be freely chosen by its parties, provided that there is a foreign element to the subject transactions and relationships and such choice of law is valid under such foreign law; unless to recognise and give effect to such law would be clearly against the public policy rules of Turkey. However, according to Article 21 of Private International Law, in rem rights (such as ownership or security interests created under a pledge) on assets are subject to the laws where such assets are located (lex loci situs).

A Turkish court would not uphold the choice of law provision if to recognise and give effect to such law would be clearly against the public policy rules of Turkey. In addition, a Turkish court may stay proceedings if concurrent proceedings are being brought in other jurisdictions.

Further, despite the relevant provisions of an agreement that states that the choice of a certain court is made only for the benefit of a single party, a Turkish court may decide that other parties to the relevant agreement may also benefit from such provisions. Accordingly, it would generally be advisable to avoid using one-sided jurisdiction clauses, mainly for enforcement purposes.

Under Turkish law, a company would not enjoy any immunity from any suits or attachment in Turkey provided that its assets that are (1) allocated to public services or (2) granted with a statutory prohibition from attachment under or in accordance with the relevant laws would be immune from attachment in Turkey. Accordingly, a customary waiver of immunity clause in the facility agreement could be effective and enforceable under Turkish law subject to the any public immunities or statutory limitations mentioned above.

Under Private International Law, Turkish courts will only enforce a judgment of a foreign court if:

  1. the judgment is not clearly against any public policy rules of Turkey;
  2. the person against whom enforcement is sought does not raise objections before Turkish courts to the effect that he or she was not duly summoned to or represented at the foreign court or that the judgment was rendered in his or her absence in violation of the laws of the foreign country;
  3. the judgment does not fall within the exclusive jurisdiction of the Turkish courts or (provided that the defendant objects) the judgment is not issued by a self-authorised court without any relation to the subject matter or the parties of such dispute; and
  4. the judgment is final and non-appealable.

Although a Turkish court would only examine an application of enforcement of a foreign judgment with a view to determining whether these enforcement conditions are met and should not necessarily re-examine the merits of the case, such court may still re-examine the merits to ascertain if there is any public policy violation.

Acquisitions of public companies

Turkish publicly held companies are incorporated in the form of joint stock companies established under the TCC, which also regulates mergers and acquisitions for all companies, whether public or private.

Similar to other jurisdictions, publicly held companies in Turkey are regulated entities and operate under the supervision and oversight of the Capital Markets Board of Turkey (the CMB). Accordingly, publicly held companies are obliged to comply with the applicable rules and requirements of the CML and the ancillary regulations thereof issued and published by the CMB, and Borsa Istanbul, along with the provisions of the TCC.

i Disclosures

Under the Turkish capital markets laws and regulations, public companies must disclose certain material information to the public (e.g., changes in the shareholding structure exceeding certain thresholds or management of the company). Accordingly, acquisitions of Turkish public companies are required to be disclosed to the public by the buyer.

The new Communiqué on Material Transactions and Exit Rights No. II–23.3 was published in the Official Gazette and entered into force on 27 June 2020 (the Material Transactions Communiqué). Unlike the former communiqué, the Material Transactions Communiqué limits shareholders who are entitled to exit rights. Only the shareholders holding shares as of the date of public disclosure of the material transaction are entitled to exercise exit right. Thus, the Material Transaction Communiqué takes a snapshot of the shareholding status as of the date of the public disclosure.

ii Mandatory tender offers

Pursuant to the Communiqué on Tender Offers (II-26.1) (the MTO Communiqué), if a person or persons acting in concert obtain the 'management control' (i.e., by (1) holding directly or indirectly more than 50 per cent of the voting rights of a company, or (2) holding privileged shares giving the right to elect more than half of the total number of board of directors members) of a publicly held company, a mandatory tender offer (an MTO) would be required. Even if the shareholding structure of the company does not change, obtaining management control through written agreements would still trigger the MTO requirement.

If the MTO requirement is not fulfilled within the period granted by the CMB, the voting rights of the relevant shareholder would automatically freeze. Accordingly, such shares would not be taken into account with respect to the applicable quorum at the general assembly.

However, the CMB may, upon application by the purchaser, grant an exemption to the MTO requirement under certain circumstances listed under the MTO Communiqué.

iii Squeeze-out

The TCC grants the majority shareholder holding at least 90 per cent (directly or indirectly) of the shares of a company a right to squeeze out the minority shareholders in the event that those shareholders obstruct the company's operations, act in bad faith, create apparent distress on the company's operations, or act recklessly.

Actions of minority shareholders that could lead to the aforementioned conditions are not specifically listed under the TCC. Therefore, the courts will determine whether or not such conditions have occurred, according to the circumstances of each case. In addition, the TCC elaborates on the details of the consideration to be paid to these minority shareholders in the event of a squeeze-out.

The TCC also allows the squeeze-out of the minority shareholder in a merger of two or more companies. Accordingly, the merger agreement to be signed between the merging companies can provide an option for the minority shareholders to exit the company with cash consideration instead of holding shares in the surviving entity. Such a merger agreement must be approved by the shareholders holding at least 90 per cent (directly or indirectly) of the share capital of the company that will cease to exist.

In respect of public companies, a squeeze-out mechanism is regulated under the Squeeze-Out and Put Option Rights Communiqué (II-27.2) (the Squeeze-Out Communiqué). Accordingly, if a purchaser or persons acting in concert with the purchaser obtain 98 per cent or more of the voting rights of a listed company, directly or indirectly, or acquire additional shares after reaching a 98 per cent shareholding level, the minority shareholders of the listed target company will be entitled to sell-out rights against the controlling shareholder, and that controlling shareholder will be entitled to squeeze-out rights against the minority shareholders.

The minimum squeeze-out and sell-out price will be calculated in accordance with the principles set forth under the relevant CMB communiqués.

The year in review

Domestic political conditions and macroeconomic factors, including the current account deficit, high levels of unemployment, high levels of inflation and interest rate and currency volatility continue to be areas of concern for foreign investors, particularly in light of the depreciation of the Turkish lira in recent periods. The ongoing covid-19 pandemic has additionally caused significant disruption in the global and Turkish economy and financial markets. Within Turkey and many of its important trading partners, the spread of covid-19 has caused illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, labour shortages, supply chain interruptions and overall economic and financial market instability.

However, Turkey saw a rise in the technology M&A deals this year, which is expected to become a growing trend in parallel with the growing market shares of tech companies because of, among other factors, lockdown conditions. Another notable area was the increased appetite of foreign investors on Turkish SPVs awarded with landmark concession projects carried out under PPP models, often offering a strong or guaranteed cashflow to the stakeholders of the company.


Looking ahead in 2020, investors are expected to increase their focus on the Turkish market and pursue more strategic M&A and leveraged finance opportunities across various sectors. Although the volatility of the local currency and restrictions on foreign currency transactions may seem like a hurdle, the Turkish market continues to offer advantageous deals and attract investors across the globe.



1 Sait Eryılmaz is the head of the finance practice and Ali Can Altıparmak is an associate at CIFTCI Law Firm.

2 Market data extracted from Deloitte, Annual Turkish M&A Review 2019 p. 4; January 2020, available at

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