Generally
The merger of companies in accordance with the Turkish Commercial Code No. 6102 (TCC) means that the assets of the companies become a whole, resulting in the termination of at least one company.
Articles 134 to 194 are applied to mergers, spin-offs and conversions of companies.
Companies can be merged in two ways:
a) Acquisition of a company by another company, technically called “merger by acquisition,” or
b) Union of two companies under a new company, technically called “merger by formation of a new company”.(Article 136/1)
The practical benefit of the merger is shown as the fact that companies lose their legal personality without any liquidation process and can merge under a new legal entity or an existing legal entity.
Merger occurs when the shares of the transferee are acquired by the shareholders of assignee on the basis of an exchange ratio in return for the wealth of assignee. (Article 136/3)
The transferee takes over the wealth of assignee as a whole via merger. The company merged by acquisition collapses and is deregistered from Trade Registry. (Article 136/4)
This article provides information on the types of mergers, merger agreement, partnership shares and justify, capital increase in acquisition process, merger decision, and facilitated merger method within the framework of TCC provisions. For more detailed information you can review the provisions of the TCC, you can contact us for professional support.
According to the provisions of the TCC, mergers are subject to limitations in terms of species. This means that the types of companies that can be merged are specified in the provisions of the TCC.
Accordingly, valid mergers can take place as follows:
Joint stock companies can be merged with:
a) joint stock companies
b) cooperatives
c) unlimited liability companies and commandite companies, provided that they will be the transferee.
Personal companies can be merged with:
a) personal companies
b) stock companies (provided they will be the assignee)
c) cooperatives (provided they will be the assignee)
Provided that they will be the transferee, cooperatives can be merged with:
a) cooperatives,
b) stock companies
c) personal companies (Article 137)
In order to be able to mention the existence of a valid merger, the merger agreement must be made in writing form.
The merger contract must be in written form, signed by the management of companies participating in the merger, and approved by their general assemblies.
According to the provisions of the TCC, there are some elements that the merger agreement should include. These elements are as follows:
The merger contract must contain:
a) Trade names, legal status, headquarters of companies participating in the merger; in the case of a merger by formation of a new company, type, trade name and headquarters of the new company
b) Transfer rates of company shares, and, if provided for, equalisation amount; explanations regarding shares and rights of shareholders of the assignee in the transferee
c) Rights granted to the holders of privileged shares, non-voting shares and profit-sharing certificates by the transferee
d) Method for transfer of shares
e) Date on which the shares acquired through the merger gained the right to the profits, which is shown on the balance sheet of the transferee or newly established company, and all aspects related to such entitlement
f) Cash payment for withdrawals in accordance with Article 141, if necessary
g) Date on which the transactions and activities of the assignee is considered as performed on the account of the transferee
h) Special benefits granted to managing bodies and managing partners
i) Names of the shareholders with unlimited liability, if necessary. (Article 137)
In the event of a merger, the issue of partnership shares and rights often leads to uncertainty.
According to the relevant provisions of the TCC, it should be noted that the shareholders of the assignee have the right to make a claim on the shares and rights in the transferee at a value that matches their existing partnership shares of the voting rights and other significant matters are taken into account while assessing the said right to make a claim. (Article 140)
An equalisation benefit can be provided while determining the change in partnership shares, providing that the partnership shares assigned to the shareholders of the transferee do not exceed one-tenth of their actual value.
Shareholders with non-voting shares in the assignee are granted non-voting shares or shares with voting rights of the same value. Equal rights at the assignee or a reasonable consideration is given in exchange for preferential rights in the existing shares of the transferee.
The transferee must grant equal rights to holders of the dividend shares in the assignee or to purchase such dividend shares at their value on the date the merger agreement is signed.
In the merger by acquisition, the acquiring company must increase its capital to the level necessary to protect the rights of the shareholders of the transferred company.
This capital increase serves to protect the rights of the creditors and the continuation of the partnership.
In order for companies to take a merger decision, a merger in accordance with various provisions of the TCC should be in question. (Art. 151 of the TCC)
It should be noted that there are general provisions for all types of companies as well as specific provisions for some types of companies.
In order for a merger decision to be taken, the managing body must submit the merger agreement to the general assembly.
The merger agreement must be approved by voting at the general assembly.
The TCC foresees different acceptance rates according to company types. (TCC Art. 151/1) Accordingly;
joint stock companies and companies limited by shares require approval by threequarters of the votes present at the GA, provided that those votes represent the majority of the basic or issued capital, without prejudice to sub-clause (b) of paragraph 5 of Article 421 of this code
capital stock companies to be acquired by a cooperative require approval by threequarters of the votes present at the GA, provided they represents the majority of the capital.
imited liability companies require approval by three-quarters of the votes of all shareholders, provided that they hold at least three-quarters of the shares representing the capital.
cooperatives require approval by a two-thirds majority of the votes cast; if additional payment and other performance liabilities or unlimited liability have been accepted in the articles of association, or if these exist and have been extended, approval requires threequarters of all shareholders registered in the cooperative
In general companies and limited companies, the merger contract needs to be approved unanimously, unless the articles of association set forth that the merger contract requires approval by only three-quarters of all shareholders.
In the event a company limited by shares acquires another company, in addition to the quorum in sub-clause (a) of paragraph 1, all unlimited shareholders must approve the merger in writing.
If additional liability and personal performance liabilities are also provided for through the acquisition, or if these exist and are being extended in a joint stock company and a company limited by shares acquired by a company with limited liability, unanimous approval of all shareholders is required.
If the merger contract sets forth a cash payment for withdrawals, approval by 90 percent of shareholders with voting right is required if the assignee is a personal company, or of all voting rights in the company if it is a capital stock company.
If a change regarding the scope of activity of the assignee has been provided for in the merger contract, the merger contract must also be approved with the quorum required to amend the articles of association. (Article 151/6)
Provisions concerning the finalization of the merger decision
As soon as the merger decision is taken by the companies participating in the merger, the managing bodies apply to the trade registry for registration of the merger.
If the transferee has increased its capital as a requirement of the merger, the amendments to the articles of association are submitted to the Trade Registry.
The assignee is dissolved upon the registration of the merger at the Trade Registry. (Article 152)
The merger takes effect upon the registration of the merger at the Trade Registry. At the instance of registration, all assets and liabilities of the assignee are automatically transferred to the transferee.
The shareholders of the acquiree company become the shareholders of the acquirer company. However, the personal responsibilities of the shareholders’ of the acquired company are not transferred to the acquiring company. (Article 153)
The merger resolution is announced in Turkish Trade Registry Gazette. (Article 154)
Generally
Considering the documents and processes to be prepared in the merger provisions of the Turkish Commercial Code, it can be said that the merger process is a long and tedious process. The purpose here is to prevent the loss of rights of the shareholders of the transferred company, especially the creditors.
In order to protect the rights of creditors, the legislator regulates the matters to be taken into consideration in this process and the documents that must be prepared in absolute terms, and brought convenience for the acquiring and transferred company in cases where creditors will not lose their rights.
Articles 155 and 156 of the TCC regulate the scope and facilities provided for the easy merger of capital companies.
The facilitated merger is an institution recognized by the TCC for mergers of capital companies only. In this context, the TCC stipulates a merger method in which the mergers are subject to less procedural transactions if the relevant conditions are met.
Provisions of the TCC on the Simplified Merger Method
The facilitated merger method is possible in two cases. These are cases in which the acquiring capital company owns all shares or at least ninety percent of the transferred capital company.
Accordingly, in the first case;
If the transferee capital stock company holds all shares with voting right of the assignee capital stock company,
or
If a company or a real person or groups of persons connected due to law or contract hold all shares with voting right in capital stock companies participating in the merger, capital stock companies can merge in accordance with the simplified conditions.(Article 155/1)
In the second case, if the transferee capital stock company holds at least 90 percent of, but not all, shares with voting rights, the merger can take place under simplified terms provided that the minority shareholders are offered:
An option equal to the actual value of company shares in the transferee in accordance with Article 141 in addition to the company shares,
and
No additional payment, personal performance liability or personal responsibility arises due to merger.
