Amendments brought with the communiqué complement the amendments made to the Turkish Capital Markets Law (“CML”) in February 2020. You may find below a summary of the amendments concerning squeeze-out and sell-out rights.

You can also find more information on the previous amendments made to the CML in our detailed client note here.

Squeeze-Out/Sell-Out threshold kept as 98%

Communique kept the definition of controlling shareholder as natural or legal persons controlling at least 98% of the voting rights together as a group or by themselves (“Controlling Shareholder”).

Consequently, Controlling Shareholders may squeeze out minority shareholders and minority shareholders may sell-out if:

• voting rights of the controlling shareholder reaches 98%,
• Controlling Shareholder acquires additional shares when it already possesses at least 98% of the voting rights.

However, additional shares acquired by existing shareholders during unpaid capital increases and/or paid capital increases where the pre-emption right is not limited or due to inheritance, reacquired shares, suspension of voting rights will not trigger squeeze-out/sell-out rights. This amendment is also in line with a recent principle decision of the CMB dated 23 July 2020. Under the principle decision, CMB declared that the following cases do not trigger squeeze-out and sell-out rights:

1. when the controlling shareholder acquires new shares by exercising its pre-emption rights upon a capital increases where the pre-emption right is not restricted, and 
2. where internal resources or dividends are used for the capital increase, and the controlling shareholder acquires new shares.

Following persons will be deemed as parties acting together in determining share acquisitions triggering the squeeze out and sell out rights:

       (a) Companies whose management control is owned by the natural and/or legal person shareholders,

       (b) Natural and/or legal persons having management control over the legal person shareholders and companies owned by such natural and/or legal persons. 

New rules on calculating Squeeze-Out/Sell-Out Price

Communique also amends the rules for calculating the squeeze-out/sell-out price. 

For listed companies:

• If listed on BIST Star, squeeze-out/sell-out price will be the average of: 
  (1) arithmetic mean of last month’s  daily weighted average stock price preceding the public disclosure announcing that squeeze-out/sell-out  rights have been triggered and (2) price determined in the valuation report for each share group
• If listed elsewhere, squeeze-out/sell-out price will be the average of:
  (1) last six-months’2 daily corrected weighted average stock prices preceding the public disclosure announcing that squeeze-out/sell-out  rights have been triggered and (2) price determined in the valuation report for each share group.

For non-listed public companies:

• Squeeze-out/sell-out price will be the price determined in the valuation report. 

However, if the management control also changes hands with the acquisition of Controlling Shareholder status, a mandatory tender offer price (“MTO Price”) will also be calculated for both listed companies and non-listed public companies. If the MTO Price is higher than the calculated price above, squeeze-out/sell-out price will be the MTO Price. 

Procedural amendments in exercising Squeeze-Out/Sell-Out Rights

Communique makes amendments in the procedure to be followed for exercising squeeze-out/sell-out rights as well.

Under the amended rules:

• The company is required to prepare a valuation report and publicly disclose a summary of such report within one month following the public announcement stating that requirements for squeeze-out/sell-out rights have been triggered. 
• Shareholders intending to exercise their sell-out right will apply to the company in writing within two months following the public disclosure of the valuation report’s summary. 
• Company will review sell-out requests and notify the Controlling Shareholder within two business days at the latest. 
• Controlling Shareholder intending to squeeze-out will apply to the company within three business days at the latest after the sell-out period lapses. 
• Upon the squeeze-out application, company’s board of directors, will resolve on cancelling minority shareholder’s shares and issuing replacement shares within five business days at the latest. The board of directors must also apply to the CMB for the approval of issuance certificate for new shares within one business days following the squeeze-out application at the latest. If the company is listed, the board of directors must also apply to Borsa İstanbul for delisting. 
• Some other time frames such as when the squeeze-out payment will be due were also amended to make the procedure easier. 

Transitionary Provision: Squeeze-Out/Sell-Out right will not automatically trigger 

The Communiqué also includes transitionary provisions regulating the status for existing shareholders:

• If a shareholder has announced  the acquisition of a Controlling Shareholder status or purchased additional shares as an existing controlling shareholder before the Communiqué came into force, the previous regulations on squeeze-out/sell-out right applies for calculating the squeeze-out/sell-out price.