Omnibus Law: Limitations On Dividend Distribution

Law No. 7244 on Reducing the Effects of the Novel Coronavirus (COVID-19) Pandemic on Economic and Social Life and the Amendment of Certain Laws (the "Omnibus Law") was published in the Official Gazette last Friday, 17 April 2020. The Omnibus Law, through amendments to the Turkish Commercial Code, introduces certain limitations on capital companies' dividend distributions. These limitations are aimed at preventing capital companies from reducing their resources by the distribution of cash dividends and ensuring that they maintain their equities. Under the Omnibus Law, until 30 September 2020 capital companies cannot (i) resolve to distribute more than 25% of 2019's net profit as dividends; (ii) resolve to distribute the previous years' profits and retained earnings as dividends; and (iii) authorize their board of directors to distribute advance dividends. As per the same provision, the President can extend or shorten the limitation period by three months. If companies