On 25 February 2020, significant amendments were made in Capital Markets Law of Turkey No. 6362 (the “CML”) through “Law No. 7222 amending the Banking Law and Other Codes”, published in the Official Gazette dated 25 February 2020 and numbered 31050. One of these amendments is in relation to the squeeze-out right of the controlling shareholder(s) who own(s) shares exceeding a certain threshold and sell-out right of the minority shareholder(s) to such controlling shareholder(s), in publicly offered companies or companies deemed to be public, pertaining to Article 27 of the CML. Following this, on 28 October 2020, Capital Markets Board of Turkey (the “CMB”) has announced the draft Communiqué on Squeeze-Out and Sell-Out Rights numbered II-27.3 (the “Draft Communiqué”) and presented the Draft Communiqué to public consultation. It should be noted that once the Draft Communiqué enters into force, the Communiqué on Squeeze-Out and Sell-Out Rights numbered II-27.2, which is currently in force, will be abolished.
What will change with the Draft Communiqué?
For the squeeze-out right of the controlling shareholder(s) and sell-out right of minority shareholder(s) to be born, CMB requires the shareholder or shareholders acting in concert or as a result of mandatory tender offer, to hold 95% of the voting rights in a public company (Draft Communiqué, Article 4). This ratio is 98% in the existing Communiqué, which is decreased to 95% with the Draft Communiqué.
The procedure with respect to the exercise of squeeze-out and sell-out rights in public companies has been structured in a more detailed manner (Draft Communiqué, Article 5).
In the Draft Communiqué, unlike the existing Communiqué, the exercise price of the squeeze-out and sell-out rights is calculated based on the same formula (Draft Communiqué, Article 6).
With the Draft Communiqué, the share price formula for shareholders to exercise squeeze-out and sell-out rights for the public companies listed on Borsa Istanbul (Istanbul Stock Exchange) (the “BIST”) will change based on whether the shares are listed in the BIST Star Market or any market other than BIST Star Market. Therefore, if the public company is being traded in BIST, the share price for the exercise of squeeze-out and sell-out rights, will be determined based on the highest of the following.
If the public company is listed on the BIST Star Market, the average of the daily corrected average price for the last month before the date of public disclosure of the birth of squeeze-out and sell-out rights, and the value determined in the valuation report for each class of shares,
If the public company is listed in a BIST market other than BIST Star Market, the average of the daily corrected average price for the last 6 months before the date of public disclosure of the birth of squeeze-out and sell-out rights, and the value determined in the valuation report for each class of shares,
If the management control of the public company changes simultaneously with the acquisition of the controlling shareholder status of the public company, the mandatory tender offer price.
If the public company is not listed on the BIST, the share price will be determined based on the valuation report for each class of shares.
Draft Communiqué also includes certain provisions for the transition period after the Draft Communiqué enters into force. Given this;
As of the date the Draft Communiqué enters into force, the controlling shareholders will not be automatically be entitled to squeeze out the minority shareholder or may not exercise the sell-out rights. Only if the controlling shareholder purchases new shares, then such rights will become applicable.
Prior to the date the Draft Communiqué enters into force, if the controlling shareholder status and the purchase of new shares is disclosed to public, then, the price of squeeze out and sell out right under the existing Communiqué will be enforceable.
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