INTRODUCTION
Under Turkish law, although companies are generally prohibited from acquiring their own shares, joint-stock companies may hold their own shares only in accordance with the conditions, procedures, and limitations prescribed by law. When a joint-stock company acquires its own shares, such shares do not cease to exist but remain within the company’s assets. The legislator has not granted joint-stock companies unrestricted freedom to acquire their own shares but has instead imposed certain limitations under the Turkish Commercial Code No. 6102 (“TCC”), which remains in force as of 07.02.2025. Since the acquisition of its own shares results in a reduction of the company’s assets, the primary objective of the restrictions set forth under Articles 379 et seq. of TCC is to protect the creditors and maintain the company’s capital.
A. LIMITATIONS ON THE ACQUISITION OF ITS OWN SHARES BY JOINT-STOCK COMPANIES
One of the most significant limitations on the acquisition of its own shares by a company is set forth under Article 379/1 of TCC. Pursuant to this provision, a joint-stock company may not acquire or accept as pledge its own shares for consideration in an amount exceeding one-tenth of its principal or issued capital, nor may it do so if such an acquisition would cause this threshold to be exceeded. As can be seen, the legislator does not impose an absolute prohibition on the acquisition of own shares but rather introduces a quantitative limitation. A joint-stock company may acquire its own shares up to one-tenth of its capital for consideration and is not obligated to dispose of such shares. Another crucial point to note is that the one-tenth threshold is determined based on the nominal value of the shares rather than their stock exchange or market value. Furthermore, this limitation also applies in cases where third parties act in their own name but on behalf of the company through indirect representation.
Pursuant to Article 379/2 of TCC, the board of directors is the corporate body authorized to acquire the company’s own shares; however, such acquisition is subject to prior authorization by the general assembly, provided that the statutory limits are observed. As can be seen, the legislator has vested the general assembly with control over the acquisition of own shares. An examination of the article’s rationale reveals that the general assembly cannot delegate this authority to any other corporate body. The authorization may be granted for a maximum period of five years. The board of directors is not required to justify its request for authorization by demonstrating a specific and imminent risk or loss. The authorization may be sought without providing any reason, solely for potential future use. However, the general assembly may impose specific purposes or conditions on the exercise of this authority. The reason for exercising the authority, as determined by the general assembly, must not be contrary to the law, morality, or public order, nor may it be aimed at facilitating stock market trading. Another important point to consider is that the authorization must specify the number of shares to be acquired or accepted as a pledge based on their nominal value. Furthermore, it must set both the lower and upper limits of the price to be paid for the shares in question.
However, as an exception, a joint-stock company may acquire its own shares through the board of directors even in the absence of prior authorization from the general assembly. This exception is regulated under Article 381 of TCC, which permits such acquisition “when necessary to avoid an imminent and serious loss”. Examples of imminent and serious threats include cases where the company would otherwise be unable to collect a receivable from an insolvent debtor, a sudden or potential sharp decline in the value of its shares on the stock exchange, or the risk of control over the company shifting to another group. In the event of such an acquisition, the board of directors is required to provide written information at the next general assembly meeting regarding the reason and purpose of the acquisition, the number and total nominal value of the acquired shares, the proportion they represent in the company’s capital, as well as the price paid and payment terms. It is important to note that this exception only removes the requirement for general assembly authorization; all other statutory conditions for the acquisition of own shares must still be fulfilled.
The consideration for the shares to be acquired by the company may be paid from the net assets, which can be defined as the portion of the company’s assets exceeding its capital. However, the legislator has introduced a statutory limitation under Article 379/3 of TCC, stipulating that after deducting the consideration paid for the acquired shares, the company must still possess net assets. Furthermore, the amount of net assets must be at least equal to the sum of the company’s principal or issued capital and the legal and statutory reserves that are not distributable pursuant to the law or the company’s articles of association. Additionally, pursuant to Article 379/4 of TCC, a joint-stock company may only acquire shares that have been fully paid up.
Furthermore, under Article 380 of TCC, the legislator has explicitly provided that any legal transactions entered into by a company with a third party, the subject of which is the granting of an advance, loan, or security for the purpose of acquiring the company’s own shares, shall be null and void. This provision aims to prevent circumvention of Article 379 of TCC by prohibiting the company from financing, supporting, or assisting a third party—whether through loans, security, or other means—for the acquisition of its own shares.
Additionally, pursuant to Article 389 of TCC, a joint-stock company may not exercise the rights associated with the shares it has acquired. The shareholder rights related to those shares will be suspended for the duration that the shares remain within the company’s ownership.
TCC also provides certain exceptions that allow a company to acquire its own shares without being subject to the conditions outlined above. According to Article 382 of TCC, the company may acquire its own shares without the need to comply with the conditions set forth in Article 379 under the following circumstances:
- If there is a reduction in the company’s share capital,
- If it is required by the rule of universal succession,
- If it arises from a statutory obligation to purchase,
- If all consideration for the shares has been fully paid and the acquisition is aimed at collecting a company debt through forced execution,
- If the company is a securities company.
Similarly, Article 383 of TCC stipulates that when a company acquires its own shares through donation or a will, i.e., without consideration, it will not be subject to the conditions outlined in the previous provisions. However, in these exceptional cases regulated under Articles 382 and 383, the company is required to dispose of its own shares. According to Article 384 of TCC, for shares exceeding one-tenth of the company’s capital, the acquired shares must be transferred as soon as possible without causing any loss to the company, and in any case, they must be disposed of within three years from the date of acquisition.
B. CONCLUSION
In line with the legislation in force as of February 7, 2025, the legislator has imposed certain restrictions on a joint-stock company’s acquisition of its own shares. In order for the company to acquire its own shares for consideration, it must obtain authorization from the general assembly, and the value of the shares to be acquired must not exceed one-tenth of the company’s capital. However, the board of directors may acquire shares without prior authorization from the general assembly if it is deemed necessary to avoid an imminent and serious loss. Moreover, the shareholder rights associated with the shares acquired by the company cannot be exercised while the shares remain in the company’s possession. The legislator has also provided exceptions to these restrictions in cases where the company is compelled to acquire its own shares due to specific obligations, but in these cases, the shares must be disposed of as soon as possible and, in any event, within three years of acquisition.
