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Legal Updates in Turkish Capital Markets Sector Q1/2012

April 2012 - Finance. Legal Developments by Pekin & Pekin.

More articles by this firm.

Focus items for this edition are: Amendment to Corporate Governance Principles, Amendment to Real Estate Investment Companies Communiqué, the Registered Capital System Threshold Decrease and the ISE Authority to Prevent Manipulation.

Amendment to Corporate Governance Principles

The Communiqué Serial: IV, No: 56 on corporate governance principles which applies to companies listed on the Istanbul Stock Exchange (“ISE”), has been revised by the Capital Markets Board (“CMB”) via an amendment published in the Official Gazette dated February 11, 2012 and numbered 28201. The important amendments are as follows:

• At least half of independent directors shall either be domiciled in Turkey or shall stay in Turkey for more than six months in a calendar year. Prior to the amendment, this condition was required for all independent directors.

• Important amendments have been introduced for significant transactions (e.g. transferring or renting out all or a significant portion of company assets, establishing rights in rem on all or a significant amount of company assets, and granting privileges to third parties or changing the scope and subject of already provided privileges), which can be directly executed if the majority of independent directors provide their consent. General assembly approval is required if the majority of independent directors do not approve such transactions and the BoD insists. The CMB has also brought in certain disclosure requirements for these procedures.

• The requirement on the number of independent directors representing the free float rate of the company has been abolished. The amendment requires that independent directors shall comprise one-third of the BoD.

• Further to the amendment, independent directors may be appointed for a term of up to three years, instead of a period of three years.

• The amendments also include the requirement to appoint a woman to the BoD of a listed company.

Amendment to Real Estate Investment Companies Communiqué

The Communiqué on Principles regarding Real Estate Investment Companies (“REICs”) was amended by the CMB on January 31, 2012. Further to the explanation by the CMB, the amendment seeks to adapt REICs with the evolving needs of the market and corporate governance requirements. The amendment enables REICs (i) to use advisory services provided by related parties within the fee cap determined by the CMB, (ii) to open participation accounts at participation banks, and (iii) to issue lease asset-backed securities. Furthermore, the rules on the independent directors of real estate investment trusts have been harmonised with the corporate governance principles for listed companies.

Registered Capital System Threshold Decrease

As per the amendment published in the Official Gazette dated February 29, 2012 and numbered 28219, the threshold to enter into the registered capital system has been decreased from TL3,500,000 to TL100,000.

ISE Authority to Prevent Manipulation

As per a new article added to the ISE Regulation following its publication in the Official Gazette dated February 28, 2012 and numbered 28218, the ISE Board has been authorised to take preventive measures, as necessary, regarding real and legal persons trading on the ISE if their actions would be deemed dangerous and preventing open, organised and honest trading on the ISE. If these actions reoccur, the ISE can make a decision to boycott these persons for a period of up to 180 days. Names and titles of persons subject to said measures shall be published in the Public Disclosure Platform.

About Pekin & Pekin

Pekin & Pekin is a full-service Turkish law firm based in Istanbul. The Firm advises on cross-border transactions in Turkey and the region, and over the 40 years since establishment has gained broad experience in both international and Turkish law. A member of Lex Mundi, TerraLex and SEE Legal, and advisor to ISDA and ICMA, the Firm is committed to excellence and has a culture of participation and success, driving all to exceed client objectives.

For more information contact:

Charlotte McCrudden

Business Development

T: +90 212 313 3503