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Our Information Note on the implementation of and exceptions to the dividend distribution restrictions which had previously been introduced as part of the Government’s COVID-19 measures has been published.

Information Note:

The Effects of the COVID-19 Pandemic on Dividend Distributions of Corporations






In its letter dated 1 April 2020 and previously submitted to all chambers and commodity exchanges, the Turkish Union of Chambers and Commodity Exchanges (“TOBB”) had referred to the letter of the Ministry of Trade (the “Ministry”) submitted to it on 31 March 2020 and announced that the Ministry highlighted the importance for corporations to preserve their equity capital during the COVID-19 pandemic and requested that dividend distributions should be restricted.  

The Ministry’s advisory restriction had then been legalised with the entry into force of 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[1] (the “Law”).[2]

The Ministry has now published the Communiqué on the Principles and Procedures regarding the Application of Provisional Article 13 of the Turkish Commercial Code numbered 6102[3] (the “Communiqué”) setting out such principles and procedures in relation to the implementation of the relevant measures with exceptions. The aim behind the introduction of the Communiqué is to clarify certain questions that arise in practice.  


Pursuant to article 13(5) of the Regulation on the Principles and Procedures of General Assemblies of Joint Stock Companies and the Representative of the Ministry of Trade to be Present at such General Assemblies (the “Regulation”), the Ministry is authorised to add items to the agenda discussed during general assemblies of corporations. As such, in its abovementioned letter, the Ministry requested that the following items should be included in the list of issues to be discussed with respect to dividend distributions during general assemblies to be convened for the 2019 financial year:

  • the suspension of dividend distributions in relation to the profit of past years[4];

  • the distribution amount not to exceed 25% of the net profit of 2019; and

  • not to authorise the board of directors to distribute advance dividends.

On the basis of the Ministry’s authority derived from article 13(5) of the Regulation, corporations were required to include such items on dividend distributions in the agenda of their general assemblies with respect to the 2019 financial year.

Questions as to whether such measures were advisory or mandatory in nature, i.e. whether such measures should merely be discussed during general assemblies or directly adopted as a resolution, had therefore been clarified with the introduction of the Law.


Pursuant to article 11 of the Law, provisional article 13 setting out restrictions on dividend distribution had been included in the Turkish Commercial Code No. 6102[5] (the “TCC”).

According to such provisional article 13, until 30 September 2020, corporations:

  • will only be allowed to distribute up to 25% of their net profit of the 2019 financial year;

  • will not be allowed to distribute profits and reserve funds of previous years; and

  • will not be allowed to authorise their board of directors to distribute advance dividends in their general assemblies.

The new measures are applicable to companies whose majority shareholding is directly or indirectly held by the State, other public entities or funds which are State-owned or controlled.

The President has the authority to extend or shorten the duration of these measures scheduled to stay in force until 30 September 2020 for 3 months.

The second paragraph of provisional article 13 contained provisions for companies that had already adopted general assembly resolutions for dividend distribution prior to the entry into force of the Law but had not yet carried out such distributions. Such companies were obliged to defer the payment of dividends exceeding 25% of their net profits of the 2019 financial year until the end of the 2020 financial year.


The Communiqué introduces certain exceptions to the previously adopted dividend distribution restrictions.

Pursuant to the Communiqué, share capital increases conducted with the use of internal resources pursuant to article 462 of the TCC will not be subject to such restrictions. As the primary intention of the Law is to ensure the preservation of equity capital, allowing the use of profits for share capital increases without subjecting those to these newly introduced restrictions appears plausible.

The Communiqué further provides that dividend distributions conforming to any of the below criteria will be exempt from the restrictions set out in the Law:

  1. if the dividend distribution is equal to or less than TL 120,000 (corporations which employ individuals on the basis of the short-term work allowance and/or pecuniary wage support due to COVID-19 and corporations which profit from credit guarantees supported by the Treasury pursuant to provisional article 20 of the Law on the Regulation of Public Financing and Debt Management[6] and accompanying regulations and currently having an outstanding credit debt balance will not be able to benefit from this exception);

  2. if the shareholders decide that more than half of the dividends to be distributed will be used for the discharge of share capital commitments vis-à-vis another company in cash and in full; or

  3. if the shareholders decide that the dividends to be distributed will be used for the discharge of debt service obligations due and payable by 30 September 2020 under a loan facility or project finance agreement (if the amount of the dividends to be distributed is higher than the amount of such debt service obligations, the distribution of the dividend portion exceeding such obligations will not be distributed to the shareholders and be accordingly deferred until 30 September 2020).

The above will require the pre-approval of the Ministry. An application for pre-approval should be submitted to the Ministry’s General Directorate of Domestic Trade with a notarised copy of the board resolution in respect of the relevant general assembly, the financial statements for the relevant fiscal year including the profit and loss statement, along with the following documents:

  • if the application relates to the exception in item (a) above, a document obtained from the relevant authority certifying that the corporation is not benefitting from any support stated in such item;

  • if the application relates to the exception in item (b) above, a document certifying that the persons entitled to receive more than half of the dividends to be distributed have share capital commitments vis-à-vis another company; and

  • if the application relates to the exception in item (c) above, a document certifying the existence of debt service obligations under a loan facility or a project finance agreement.


The intention behind these measures is to limit dividend distributions in order to preserve equity and prevent any possible financial duress or bankruptcy scenarios that may distort the economic balance during the COVID-19 pandemic.

As such, dividend distributions in violation of the Law will be deemed invalid and their registration with the respective trade registry will not be allowed.

The Ministry now intends to provide a reasonable degree of flexibility to corporations by introducing certain exceptions to previously introduced dividend distribution restrictions so that corporations will be in a position to fulfil their existing obligations.


For more information please contact Bezen & Partners:

Yeşim Bezen (Telephone + 90 212 366 6804, E-mail [email protected])

Serdar Bezen (Telephone +90 212 366 6803, E-mail [email protected])




[1] Published in the Official Gazette dated 17 April 2020 and numbered 31102.

[3] Published in the Official Gazette dated 7 May 2020 and numbered 31130.

[4] We understand this to refer to the years prior to 2019.

[5] Published in the Official Gazetted dated 14 February 2011 and numbered 27846.

[6] Published in the Official Gazetted dated 9 April 2002 and numbered 24721.