Financial Assistance Prohibition Under The Turkish Commercial Code

Financial Assistance Prohibition

"Financial assistance" refers to the assistance given by a company to a third party for the purchase of its own shares or the shares of its holding companies. In Turkish Commercial Code numbered 6102 ("TCC"), such assistance is prohibited in many jurisdictions. In Turkish law, prohibition of financial assistance has been introduced by under Article 380. This article has been titled as "Evasion of Law" because Article 380 has been instated to prevent bypassing the limitations in relation to buyback own shares of a company stipulated in Article 379 of the TCC. For clarity, Article 379 stipulates that a company cannot acquire and accept as pledge its own shares in return for consideration at an amount of which exceeds or will exceed as a result of a transaction, one-tenth of its principal or issued capital. In order to prevent the circumvention of the prohibition for the companies to acquire their own shares, Article 380 of the TCC