Turkish Commercial Code allows two ways for merger of the commercial companies: “Merger by acquisition” and “Merger by establishing a new company”

MERGER BY ACQUISITION

If merger will be done by acquisition of a company by another company, this is called as “Merger by Acquisition”. The company that accepts the merger is called as “transferee” and the company that joins to the transferee company is called as “assignee”.

MERGER BY ESTABLISHING A NEW COMPANY

If merger will be done under new-established company, this is called as “Merger by Establishing a New Company”. In this way, merger and the new company is registered at the same time and merged companies will merge under this new company.

VALID MERGERS ACCORDING TO THE TURKISH COMMERCIAL CODE

According to Turkish Commercial Code, the capital companies can be merged with;

Sole proprietorships can be merged with;

The cooperatives can be merged with;

To consider the regulation with regards to the joint stock companies (A.Ş.) limited liability companies (Ltd. Şti.) cooperatives and sole proprietorships which are the most preferred company types in Turkey; joint stock companies and limited liability companies and cooperatives can be merged each other by the ways: “Merger by Acquisitions” and “Merger by Establishing a New Company”. But the joint stock companies or limited liability companies or cooperatives can be merged with sole proprietorships only by “Merger by Acquisition” and sole proprietorship should be assignee.

JOIN TO MERGER OF THE COMPANY IN LIQUIDATION

Companies in liquidation can join to merger only for that;

The documents proved that the assets have not been distributed, should be presented to the trade registry offices where the transferee company is located.

JOIN TO MERGER IN CASE CAPITAL LOSE OR BEING IN DEFAULT

The company which has lost the half of the total of capital and legal reserves, or which is in default, can be merged with a company, provided that has the equity to cover the capital and in necessary, to release from default. The documents proved that it has the equity to cover the capital and release from default should be presented to the trade registry offices where the transferee is located.

THE SHARES AND THE RIGHTS OF THE SHAREHOLDERS IN CASE MERGER

CAPITAL INCREASE, THE PROTECTION OF THE SHAREHOLDERS’ SHARES AND RIGHTS

In Merger by Acquisition, the transferee should increase the capital to the required level to protect the rights of the shareholders of the assignee company. In practice, if the assignee is not in capital loss, the capital of transferee increases by the capital of the assignee. To prove assignee is not in capital loss, certified public accountant report and the accountant’s authority letter should be presented to the trade registry office.

Shareholders of the assignee have rights to demand share and right from the transferee in the level that protect the value of their share and rights. These rights are calculated with the value of the company assets, the share distribution, and other important matters.

Share rates can be changed with the merger and due to the change, the equalisation fee can be paid to the shareholders. But the equalisation fee cannot be over 10% of the company shares.

Non-voter shareholders of the assignee have right to demand the shares, whether they have right to vote or not, at the same value.

If any privileged share is issued in the assignee, the equivalent right in the transferee or an appropriate compensation is paid.

Like the situations for the privileged share, dividend share holders have rights to have the equivalent right or transferee should purchase the dividend share for the real value on merger agreement date.

The rates of change if it is set forth, and the equalisation fee if it is set forth, whether the shares that is given to the non-voter shareholders, has right to vote or not, should be regulated in merger agreement. Otherwise, trade registry offices will not accept the demand of registry of merger, even if general assemblies of the companies accept the merger.

If the rates of change, or the equalisation fee in merger agreement, cause the loss or decrease of rights, or if the equivalent rights or appropriate compensation for the privileged or dividend share holders in merger agreement are under real value; the shareholders have right to file a suitcase in Commercial Court to cancel the merger resolution or to fix the real value and collect it, providing putting dissenting option to the general assembly meeting minutes.

CASH PAYMENT FOR WITHDRAWAL

The merged companies may regulate in the merger agreement

Whether cash payment for withdrawal is set forth or not, whether a right of choice or sole choice, and the value of cash payment for withdrawal should be regulated in merger agreement. Otherwise, trade registry offices will not accept the demand of registry of merger, even if general assemblies of the companies accept the merger.

If the cash payment for withdrawal is regulated in merger agreement but the determined amount is under the real value, the shareholders have right to file a suitcase in Commercial Court to cancel the merger resolution or to fix the real value and collect it, providing putting dissenting option to the general assembly meeting minutes.

MERGER AGREEMENT AND MERGER REPORT

MERGER AGREEMENT

According to Turkish Commercial Code, for merger of companies, merger agreement that merged companies are the parties of it, should be signed by the managing bodies of the companies. After signing, merger agreement should be approved by the general assemblies of the companies.

Merger Agreement should include the following regulations:

To register the merger, merger agreement is one of the required documents should be presented to the trade registry office and if one of the above-mentioned subjects is not regulated in merger agreement, trade registry office will not accept the registry demand.

MERGER REPORT

The managing bodies of the merged companies, jointly or severally, prepare a report related to merger, in addition with merger agreement. The report should include the following regulation, should be explained with legal and economic sides, and states the reasons:

Merger report is also one of the required documents should be presented to the trade registry office like merger agreement and to register the merger, and if one of the above-mentioned subjects is not regulated in merger report, trade registry office will not accept the registry demand.

But if the merged companies are small and medium sized enterprises and if all the shareholders of them approve, they can waive regulating merger report.

RIGHT TO INSPECT THE MERGER AGREEMENT, MERGER REPORT AND THE RELEVANT DOCUMENTS

Each of the merged company should submit the following documents to an examination for the shareholders, dividend shareholders, holder of security issued by a company, stakeholders and other relevant persons in their main offices and the branches, and the places determined by Capital Markets Board if there is any publicly traded company among the merged companies, before at least 30 days from the general assembly resolution:

The merged companies should announce where these documents will be made available for examining at least three working days in Turkish Trade Registry Gazette, and the gazettes stated in the articles of associations, and websites of the companies. In the announcements, the right to examine should be stated.

According to the regulations stated above, after signing the merger agreement, preparing the merger report and all other relevant documents, the general assembly meeting which the merger is in the agenda, should be awaited at least 3 working days + 30 days from the announcements.

Holders of right to examine, has also right to demand the hard copies of the above-stated documents submitted for the examination. No fee and expense can be demanded for the copies from them. 

If the merged companies are small and medium-sized enterprises and if all the shareholders approve, the right to examine can be waived.

CHANGES IN THE ASSETS

If any noticeable changes in the active or passive assets of the one of the merged companies between signing the merger agreement and submitting for approval to the general assembly, the managing body should proclaim it to the general assembly and the managing bodies of other merged companies. In this circumstance, the managing bodies examine and determine if any change in merger agreement or if they will sign the merger agreement or not. 

THE GENERAL ASSEMBLIES THAT MERGER IS DISCUSSED AND THE REQUIRED QUORUMS FOR THE RESOLUTION

If one of the merged companies is a joint stock company, a ministry representative should be in the general assembly meeting that merger is in the agenda. To assign the ministry representative, the company should apply to the provincial directorate of commerce where the general assembly will be hold, before the general assembly date. 

QUORUMS

Provided the capital represents the majority, the following types of companies can approve merger agreement with at least ¾ of the attendants in the general assembly:

The following types of companies can approve merger agreement with at least ¾ of all shareholders: 

If a joint stock company is acquired by a limited liability company and if this acquisition imposes additional obligation or personal obligation or increases the current obligation, the merger agreement should be approved unanimously.

If the merger agreement regulates the cash payment for withdrawal, this should be approved with 90% of the voting shareholders.

If the change in the field of operation of the merged companies is set forth in merger agreement, the quorums for changing the field of operation will be considered.

REGISTRATION AND ANNOUNCEMENT OF MERGER

If the general assemblies of the merged companies approve merger agreement with the quorums stated above, the managing bodies should first make a merger application via http://mersis.gtb.gov.tr and take an application number and then apply to the trade registry office with the following documents: 

Merger will be valid in law by registration. With registration, all actives and passives of the company automatically transfer to the transferee. Without exceptions, shareholders of the assignee company become the shareholders of transferee company.

After the registration, merger will be announced in Turkish Trade Registry Gazette.

THE FACILITATED MERGER OF CAPITAL CORPORATIONS

Turkish Commercial Code enable the capital companies that has the similarity on their shareholding structure and accept the merger by acquisition to merge without doing some of the above-stated procedural and legal actions. You may find our detailed article from here.

GUARANTEE OF RECEIVABLES

If the payees of the merged companies request in 3 months from the validity of merger, the transferee company should guarantee their requested receivable. Merged companies proclaim to the payees that they have such right with three times announcement every seven days in gazette and in their website.

If it is considered the other payees are not incurred loses, transferee company may directly pay for the receivable instead of guarantee.

THE LIABILITIES OF SHAREHOLDERS

If the shareholders are liable for the debts of merged companies, this liability carries over after merger. But for this liability, the event that cause to arise the debt should happen before announcement of merger.

The limitation period for request related to the personal obligation of shareholders is 3 years from the date of announcement. But if the receivable becomes mature after the date of announcement, the limitation period starts with date of maturity.