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"Right of Expulsion” and “Right to Sell Shares”

Capital Markets Law: Turkey

Article 27 of the Code of Capital Markets Numbered 6362 (the Code) regulates “right to expulsion” and “right to sell share”. This Article of the Code is introduced pursuant to European Union legislation and especially aims to protect small investors. The “right to expulsion” provides an opportunity to change the structure of the company. A shareholder, who reaches the required percentage of shares is able to terminate the publicly traded status, whereas “the right to sell share” provides an opportunity to shareholders in reviewing their shareholder status when reaching a minority status after a takeover bid. However, these rights shall not be exercised within one year after the company in question has entered a publicly-trade status.

The principles and procedures relating to the implementation of Article 27 of the Code were determined by Communiqué Relating to Right to Expulsion and Right to Sell Share (the Communiqué).

In the matter of the right of expulsion and right to sell shares, the Communiqué determined the required amount of controlling shares to be at 95%. Accordingly, the controlling shareholder with 95% of the shares shall be able to exclude other shareholders. During the expulsion, it shall not be of any importance whether other shareholders are privileged or not. Privileges on the right to vote shall be considered, while determining the rate of right to vote. As well as the status of direct and indirect shares of shareholders and legal entities that cooperate in order to control the administration of the partnership.

The holders of privileged shares shall be competent to participate in all resolutions of the Shareholders Assembly.

Right of Expulsion

A shareholder who wants to use his/her right of expulsion shall apply his/her right within a period of 3 months starting from the day the amount of shares rates at 95%. The board of directors of the company shall provide the Capital Markets Board (Board) the required documents requesting a formal application.

When the Board approves the application, the shareholder who wants to use his/her right of expulsion shall deposit the fee for expulsion to the company bank account. The fee for expulsion shall be determined as well as the procedures regulated by the Communiqué. Pursuant to article 5/A of the Communiqué, other shareholders shall have the right to object the fee amount for expulsion within 30 days from the date the expulsion decision is published.

Right to Sell Shares

Pursuant to Article 6 of the Communiqué, shareholders, other than the controlling shareholder, shall have the right to sell their shares to the controlling shareholder within 3 months from the arising date of the right of expulsion. The right to sell could be used either for privileged or non-privileged shares. The right to sell shall be requested in writing from the company.

The company shall notify the controlling partner about the request and file an evaluation report within a month. In the case of a publicly traded company the evaluation report should be filed within 3 days.

From the date of notification on, the controlling shareholder shall deposit valuables within 6 working days.

The Liability of Public Disclosure

Pursuant to Article 8 of the Communiqué, the controlling shareholder shall publish the controlling situation in the company. The controlling shareholder shall publish;

  • The acquisition of the controlling shareholder,

  • The receival of additional shares of the controlling shareholder,

  • The loss of the controlling shareholder.

  • The notifications shall be executed regarding the public disclosure principles of the Code.

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