Restrictions regarding the Distribution of Dividends in Capital Companies Have Been Extended in Turkey

    

The validity period of Temporary Article 13 of the Turkish Commercial Code (“TCC”), which sets forth some restrictions regarding the distribution of dividends in capital companies, has been extended for three months to be valid from 1 October 2020 by Presidential Decree numbered 2948 published on 18 September 2020. You can reach the decree via here (Available in Turkish only).

As a result of the extension, in accordance with Temporary Article 13 of the TCC, until 1 January 2021, capital companies, which consist of joint stock companies, limited liability companies and limited partnerships in which capital is divided into shares - including public companies:

  • Can only distribute up to twenty-five percent of the net profit for the financial year, 2019
  • Cannot distribute previous year profits and free reserves
  • Cannot be authorized to distribute advances on dividends by a general assembly of shareholders

If a general assembly of shareholders has already decided to distribute dividends for the financial year of 2019, but the shareholders have not yet been paid or only partial payments have been made, payments for any part exceeding twenty-five percent of the net profit for the financial year of 2019 will be postponed until 1 January 2021.

Considering the economic impact of the Covid-19 epidemic, these restrictions are intended to stop companies reducing their resources by distributing dividends and to prevent additional financing needs.