Recent Development
The amendment introduced to the Capital Movements Circular on December 21, 2020 (“Amendment”) extends the scope of PPP exception that applies to the FX loan ban.
What Does the Amendment Say?
With the amendment made to the Capital Movements Circular on December 8, 2020, Turkish resident legal person shareholders of Turkish residents who conduct projects under the public-private partnership (“PPP”) model (“Shareholder(s)”) were allowed to utilize FX loans, even if they do not have FX income. In order to benefit from this exception, the Shareholders were required to inject the FX loans to be utilized to the share capital of the company that conducts projects under the PPP model (the “Project Company”), and to submit the original copy of the PPP agreement to the lender or intermediating bank. Please find our Legal Alert dated December 14, 2020 on this amendment here.
The Amendment allows the submission of a notarized copy of the PPP agreement, instead of the original copy, to banks. The Amendment abolishes the requirement to inject the loan proceeds to the share capital of the Project Company and it is now sufficient that the Shareholder utilizes the proceeds to finance the PPP project in order to benefit from the exception.
The following documents will need to be presented to the lender or intermediary bank for Shareholder to utilize this FX loan:
- A copy of the Trade Registry Gazette evidencing the establishment of the Project Company.
- The original or notarized copy of the PPP agreement evidencing the parties, subject, consideration and date of the PPP agreement, bearing the parties’ signatures, and a letter of confirmation from the relevant public institution evidencing the agreement consideration.
- A statement of the Shareholder that the entire loan amount is used, will be used, is transferred or will be transferred to the Project Company to finance the PPP project.
Moreover,
- If the loan amount will be used, or transferred to the Project Company to be used, for financing the PPP project after utilization, documents evidencing this (e.g. bank receipts, correspondence with the Project Company) must be submitted to the bank.
- If the loan proceeds will be netted with the amounts already used, or transferred to the Project Company to be used to finance the PPP project, documents evidencing this (e.g. bank receipts, correspondence with the Project Company) must be submitted to the bank. These documents can only be utilized as evidence for disbursements and transfers made at most a year ago.
If these documents are not submitted until the end of the construction period stated in the PPP agreement, the bank will notify the Ministry of Treasury and Finance.
Conclusion
The amendment eases accessing FX loans for the development of PPP projects.
