Recent Development
Several chambers of commerce throughout Turkey published a uniform announcement regarding dividend distributions on their websites, based on Union of Chambers and Commodity Exchanges of Turkey’s information note referring to the letter of the Ministry of Trade dated 31.03.2020 (“Announcement“). The Announcement referred that the Ministry of Trade informs companies to preserve their equities during the COVID-19 pandemic.
What Does the Announcement Say?
The Announcement calls all companies, except state-owned enterprises, to preserve their equities and in this regard, take the below principles into consideration for a cash dividend distribution resolution as an agenda item of general assembly meeting for the 2019 financial year that will be held this year:
- Not to utilize profits from their previous financial years for dividend distributions;
- Not to distribute any profit that is more than 25% of their net profit for the 2019 financial year; and
- Not to grant their boards of directors the authority to distribute advance dividends.
The Ministry of Trade bases its letter on Article 13/5 of the “Regulation on Procedures and Principles of the Joint Stock Companies’ General Assembly Meetings and Participating Ministry of Trade Representatives”.
Conclusion
We advise all companies except state-owned enterprises that are planning on holding their general assembly meetings for the 2019 financial year to consider the Announcement’s statement regarding their resolutions for cash dividend distributions.
Please refer to https://www.esin.av.tr/coronavirus-desk/ for our client alerts regarding the legal consequences of COVID-19 on other areas.
