Procedures and Principles of Dividend Distribution Limitation are Determined

Within the scope of Provisional 13th Article of Turkish Commercial Code numbered as 6102, added with 17/04/2020 dated and 7244 numbered Law; it has been decided that "until 30/09/2020, capital companies can only decide to distribute 25% of 2019 period net profit, previous years'profits and free capital reserves cannot be included within the decision, and company board cannot receive authorization of advance dividend payment from general assembly".

The communiqué published in the 31130 numbered Official Gazette on 17.5.2020, provides explanations regarding the procedures and principles of executing the provisional 13th article of the Turkish Commercial Code.

Within the scope of the communiqué, certain decisions are as below;

• Capital companies can only decide to distribute 25% of 2019 period net profit, until 30/09/2020.
• Previous years'profits and free capital reserves cannot be a subject of distribution.
• Company board cannot receive authorization of advance dividend payment from general assembly.
• Related article will not be applicable for legal entities owned by government, special provincial administration, municipality, village or other legal public entities, and funds of which 50% is owned by public, and companies of those 50% of their capital is owned by public directly or indirectly.

In case of general assembly granted advance dividend payment authority to corporate management, advance payments are to be postponed until 30/09/2020.

Ministry of Trade is authorized to determine exceptions of dividend distribution limitations on capital companies, procedures and principles of its execution by consulting to the Ministry of Treasury and Finance.

Exceptions Regarding Dividend Distribution

• Companies, which have decided to distribute dividend that is lower than 120 thousand lira, will be exempted; excluding the companies which are benefitting from short employment allowance, cash wage support for those on unpaid leave due to Covid-19 pandemic, and benefitting from Treasury supported loans, or have unpaid loan balances.
• Companies that have decided to distribute dividends will be exempted, provided that more than half of the dividend decided to be distributed by the shareholders is used in full cash payment of the capital commitment debt to another capital company within the framework of the provisions of the law.
• Dividend distribution decisions will be exempted, with the precondition of being used in cash payment of liabilities which are due until 30/09/2020, in accordance with the signed loan and financing agreements.

You can access related circular in Turkish from here.

For further details, please contact your customer representative.