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GOVERNMENT PUBLISHES EXCEPTIONS TO RESTRICTIONS ON DISTRIBUTION OF PROFITS

GOVERNMENT PUBLISHES EXCEPTIONS TO RESTRICTIONS ON DISTRIBUTION OF PROFITS

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Law no. 7244 has very recently introduced a temporary article into the Turkish Commercial Code no. 6102 (“TCC”), setting out restrictions on companies’ distribution of their net profits in 2019. You can find our article discussing these restrictions here. Exceptions to these restrictions have now been published in the Official Gazette on 17 May 2020 through the Communiqué on the Principles and Procedures of Implementation of the Temporary Article 13 of the Turkish Commercial Code (“Communiqué”) and entered into force the same day .

Exceptions Allowing Profit Distribution

Companies that meet any of the following conditions are held exempt from the restrictions on profit distribution stipulated under the temporary article 13, provided that they file an application with the Ministry of Commerce, submit the documents listed as required under the Communiqué, and obtain clearance from the Ministry before they resolve to distribute any profits.

a. Companies that do not (i) employ any employees who benefit from short-term working subsidy [1] or cash support due to unpaid leave [2] and (ii) utilize any credit guarantee supports provided by the Treasury or have any due credits in this respect [3] can distribute profits up to TRY 120,000,

b. Companies that distribute profits on condition that more than half of such profits are used by shareholders for payment of their capital commitments in other companies under the TCC,

c. Companies that distribute profits on condition that such profits are used for payment in cash of shareholders’ debts which are due until 30 September 2020 under credit agreements or project finance agreements, provided that the distributed amount does not exceed such debts.

Should you have any queries or require clarification, please do get into contact with us. We would be pleased to answer your queries.

[1] Reference is made to temporary article 23 of the Unemployment Insurance Law no. 4447.

[2] Reference is made to the temporary article 24 of the Unemployment Insurance Law.

[3] Reference is made to article 20 of the Law on the Regulation of Public Financing and Debt Management no. 4749.

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