The letter that was sent to all chambers of commerce by the Turkish Union of Chambers and Commodity Exchanges (TOBB) on 1 April 2020, numbered 34221550-045.02-3392 referring to the letter of the Ministry of Trade (Ministry) dated 31 March 2020 (the Announcement) advises companies to preserve their equities during the COVID-19 pandemic. TOBB also made an advisory announcement regarding the need to limit the distribution of profits in order to prevent companies from falling into a state of capital loss and debt because of the outbreak. The Announcement recommends all companies, except state-owned enterprises, preserve their equities and in this regard, take the below principles into consideration for General Assembly meetings for the 2019 financial year that will be held this year.
How the Ministry recommends decisions to be taken on General Assembly meetings with regard to profit distribution?
The followings are requested by the Ministry to be included in the General Assembly decisions of the 2019 financial year period:
• Not to distribute profits from the previous financial years;
• Not to distribute any profit that is more than 25% of the net profit of the 2019 financial year;
• Not to grant their Board of Directors the authority to distribute advance dividends.
Is it obligatory to make a decision in the General Assembly in line with The Ministry’s Announcement ?
First of all, the advisory announcement excludes state-owned enterprises. Other companies are obliged to put this issue on the agenda for the 2019 financial year. The Ministry of Trade bases its letter on Article 13/5 of the Regulation on Procedures and Principles of the Joint Stock Companies’ General Assembly Meetings and Participating Ministry of Trade Representatives dated 28 November 2012 and numbered 28481 on the Official Gazette. The said article is as follows:
“It is obligatory to put the issues on the agenda of general assemblies which are requested by the Ministry as a result of an audit or for any other reason deemed appropriate by the Ministry ”
As can be understood from the above-mentioned article of the Regulation, although it is obligatory to put the said issues on the agenda, in accordance with the legislation and considering the advisory content of the Announcement, the companies do not have to put restrictions on their dividend distribution in line with the Announcement. In other words, it is not obligatory to comply with recommendation of the Ministry. It is possible to make a contrary decision in the light of the existing regulations, until a contrary regulation is made by the law-makers.
MORAL & PARTNERS
Karaca Kacar, Senior Associate karacakacar@moral.av.tr
Aslı Kınsız, Associate aslikinsiz@moral.av.tr
Dilara Kaymaz, Associate dilarakaymaz@moral.av.tr
