Our Information Note on the exemptions granted to the Turkey Wealth Fund in connection with the Government’s COVID-19 measures has been published.

1. INTRODUCTION

Law No. 7244 on the Amendment of the Law on the Mitigation of the Effects of the Novel Coronavirus (COVID-19) Pandemic on Economic and Social Life and Certain Laws (the “Omnibus Law”) has entered into force following its publication in the Official Gazette dated 17 April 2020 and numbered 31102. The amendments of the Omnibus Law include the granting of certain privileges and immunities to the Turkey Wealth Fund (“TWF”), Türkiye Varlık Fonu Yönetimi Anonim Şirketi – Turkey Wealth Fund Management Company (the “Company”) and TWF’s sub-funds and companies established by the Company (together the “TWF Funds and Companies”). These privileges and immunities relate to certain share purchase transactions of the TWF Funds and Companies which entail a change of control in companies hit by the COVID-19 pandemic.

2. NEW REGULATIONS CONCERNING TWF

The Omnibus Law introduces certain exemptions for share purchase transactions of the TWF Funds and Companies which lead to the TWF Funds and Companies acquiring/assuming sole control or joint control (with third parties) in respect of such companies. Accordingly, such transactions which will render the TWF Funds and Companies controlling entities will no longer be subject to the provisions of articles 23 – 27 of the Capital Markets Law[1] (the “CML”) dealing with significant transactions, exit rights, mandatory offers and squeeze out, including the secondary legislation relating to such issues. The idea behind such exemption which relieves these transactions from the approval of the Capital Markets Board and from certain procedural steps is that companies adversely affected by the COVID-19 pandemic should be provided with rapid support through the quick and efficient implementation of such transactions. 

The relevant amendment further provides that such companies over which the TWF Funds and Companies assume control will not be subject to article 202 of the Turkish Commercial Code[2] (the “TCC”) on abuse of control. The objective of article 202 of the TCC is to prevent controlling companies from harming their affiliates by regulating that the controlling company as well as the board members of such controlling company will become liable for any losses sustained by controlled affiliates (which are not compensated). The exemption introduced by the amendment therefore relieves the TWF Funds and Companies and their board members from the restrictions and offsetting obligations stipulated in article 202 of the Turkish Commercial Code.

3. CONCLUSION

By providing for the possibility of the TWF Funds and Companies to purchase shares in companies hit by COVID-19 in a more rapid and efficient manner, the amendment paved the way for such adversely affected companies to obtain support other than through external financing.