Legal Newsletter 2/2018

Read below the latest legal developments in Turkey. This latest roundup provides insight on the latest amended and repealed laws and regulations affecting different sectors.

To discuss how these developments affect your business interests please contact Fethi Pekin, Managing Partner. Email: fpekin@pekin-pekin.com

 

BANKING & FINANCE

Q2/2018 Financial Lease, Factoring and Financing Companies to comply with the TFRS 9

  • In order for financial lease, factoring and financing companies to (i) implement “Turkey Financial Reporting Standard 9 – Financial Instruments” and (ii) set aside provisions for “expected credit loss”, the Banking Regulation and Supervision Agency (the “BRSA”) has enacted a regulation and a communiqué, amending respectively the Regulation on the Accounting Practices and Financial Statements of Financial Lease, Factoring and Financing Companies (published in the Official Gazette dated December 24, 2013 and numbered 28861) and the Communiqué on Uniform Accounting Plan and Prospectus to be Implemented by Financial Lease, Factoring and Financing Companies (published in the Repetitive Official Gazette dated December 24, 2013 and numbered 28861), both published in the Official Gazette dated May 2, 2018 and numbered 30409 with immediate effect.

Q2/2018 Crucial Amendments to the Secondary Legislation of the Pledge Law

  • Since practice of the Law on Pledge over Moveable Assets in Commercial Transactions (Law No. 6750) (published in the Official Gazette dated October 28, 2016 and numbered 29871) (the “Pledge Law”) has yet to be established, the relevant ministry has introduced certain amendments to the secondary legislation of the Pledge Law, as published in the Official Gazette dated May 22, 2018 and numbered 30428 with immediate effect, in particular to the Regulation on Registry of Pledged Moveable Assets (published in the Official Gazette dated December 31, 2016 and numbered 29935 (bis 3)) (the “Registry Regulation”), the Regulation on Establishment of Pledge Interest and Exercise of Rights upon an Event of Default in Commercial Transactions (published in the Official Gazette dated December 31, 2016 and numbered 29935 (bis 3)) and the Regulation on Valuation of Moveable Assets in Commercial Transactions (published in the Official Gazette dated December 31, 2016 and numbered 29935 (bis 3)).It should be further noted that amendments to the secondary legislation of the Pledge Law have been made to be in conformity with the Pledge Law, as recently amended. As such, the amendments to the secondary legislation of the Pledge Law pertains to the types of movables eligible to be pledged, the scope of pledged perfected as per the Pledge Law and de-registration and foreclosure proceedings. Therefore, list of movables eligible to be pledged under the Pledge Law does not bear an exhaustive nature; provisions related to merger and amalgamation of pledged assets have been abolished; scope of the pledge shall extend to future legal proceeds and substitute goods of the relevant pledged assets; upon the occurrence of an event of default, pledgees will be able to apply, alternatively, to the general enforcement proceedings or special enforcement proceedings under the Pledge Law; and the period for application of de-registration has been extended.Lastly, according to the significant amendment made to Article 17 of the Registry Regulation, good faith of any third persons (i) who are not required to review the Registry of Pledged Movables under the Pledge Law or (ii) who cannot be party to a movable pledge agreement as per Article 3 of the Pledge Law shall be preserved. Since the Pledge Law and the secondary legislation thereof have been several times amended after entering into force, we will be keeping any potential amendments under our review.

Q2/2018 Slight Amendments to the Law No. 1567

  • The Law regarding the Protection of the Value of Turkish Currency (Law No. 1567) (published in the Official Gazette dated February 25, 1930 and numbered 1433) (the “Law No. 1567”) has been amended by way of an omnibus law, namely the Law on Amendments to the Certain Laws (Law No. 7144) (published in the Official Gazette dated May 25, 2018 and numbered 30431), with immediate effect.Accordingly, a new paragraph has been added to Article 3 of the Law No. 1567 which sets out sanctions to be imposed on those who are engaged in commercial activities triggering operation permit (faaliyet belgesi) or authorization certificate (yetki belgesi) as per any decree, regulation, communiqué and other general and regulatory acts introduced based on the Law No. 1567. Furthermore, repealed Article 5 of the Law No. 1567 has been restated; consequently, joint stock companies who are granted operation permits and/or authorization certificates in accordance with the provisions of the Law No. 1567 and any piece of legislation enacted based on the Law No. 1567 shall be considered as joint stock companies subject to special laws under Article 330 of the Turkish Commercial Code (Law No. 6102) (published in the Official Gazette dated February 14, 2011 and numbered 27846) (the “Turkish Commercial Code”). It should be further noted that provisions of the Turkish Commercial Code in relation to joint stock companies shall be applicable to the joint stock companies subject to special laws, with the exception of the provisions of any special laws. On a side note, joint stock companies subject to special laws are only able to be incorporated and operate for the economic aims and issues foreseen under the Law No. 1567 and secondary legislation thereof.

Q2/2018 Expected Amendment on the Articles of Association of the Central Bank

  • As a continuation of crucial amendments made to Turkish foreign exchange legislation, the Articles of Association of the Central Bank of the Republic of Turkey (the “Central Bank”) has been slightly amended. As such, the Decree of the Council of Ministers (Decree No. 2018/11894) restating Article 44 of the Articles of Association of the Central Bank has been published in the Official Gazette dated June 23, 2018 and numbered 30457 with immediate effect. Consequently, the Central Bank has duly become authorized to request from Turkish residents information and document in order to monitor their respective FX positions.The following link which will direct you to our Legal Alert may be referred to, for further elaboration on the respective amendment: http://www.pekin-pekin.com/newsletter/Legal-Alert-Amendment-to-AOA-of-the%20Central-Bank.pdf

Q2/2018 Amendments on the Capital Movements Circular shortly afterwards its Entry into Force

  • The Capital Movements Circular issued by the Central Bank of the Republic of Turkey on May 2, 2018 (the “Capital Movements Circular”) has been amended via three letters issued by the Turkish Treasury, respectively on May 16, 2018, May 31, 2018 and June 29, 2018.Initially, amendments made to the Capital Movements Circular on May 16, 2018 concern Turkish companies benefitting from renewable energy sources support mechanism (Yek Destekleme Mekanizması). In this regard, Turkish residents who have been granted state guarantee of electricity purchase will be able to obtain foreign currency loans up to 80% of the price subject to the respective state guarantee of purchase and annual maximum amount of electricity production related to the respective power plant, calculated based on the remaining period of such guarantee.In the second place, with efforts to clarify principles regarding the utilization of foreign currency loans by ordinary partnerships (adi ortaklık), the Capital Movements Circular has been amended on May 31, 2018. According to the relevant amendments, any loans utilized by an ordinary partnership shall be deemed as extended to its respective partners, pro rata their shares in such partnership. In the event that ordinary partnerships intend to obtain foreign currency loans based on their foreign currency incomes, then the aggregate amount of foreign currency incomes shall be calculated in accordance with the partners’ shares in the relevant partnerships. Similarly, with respect to the calculation of credit balance of ordinary partnerships, the aggregate amount of credit balance related to an ordinary partnership shall be calculated in view of credit balances of their partners pro rata their shares in the relevant partnership. In conclusion, ability of ordinary partnerships to obtain foreign currency loans shall be determined in accordance with the principles set out under the Capital Movements Circular.Finally, for further elaboration on the amendments made on June 29, 2018, please see our Legal Alert prepared by our Firm at following link: http://www.pekin-pekin.com/newsletter/Legal-Alert-Recent-Amendments-to-the-Capital-Movements-Circular.pdf

Q2/2018 Increase of the Discounted Interest Rate for Rediscounting Transactions by Central Bank

  • The Central Bank of the Republic of Turkey has enacted a communiqué published in the Official Gazette dated June 29, 2018 and numbered 30463 with immediate effect, so as to determine discounted interest rate to be applied to rediscounting transactions and advance transactions. Therefore, annual discounted interest rate to be applied to rediscounting transactions conducted in return for cheques, term of which are at the furthest within 3 months, has been increased from 8.75% to 18.50%, and annual interest rate to be applied to advance transactions has been increased from 9.75% to 19.50%.

Q2/2018 Increase of the Maximum Interest Rates to be applied to Credit Card Transactions

  • The Central Bank of the Republic of Turkey has introduced a communiqué amending the Communiqué on Maximum Interest Rates to be applied to Credit Card Transactions (Communiqué No. 2016/8) (published in the Official Gazette dated November 12, 2016 and numbered 29886) which has been published in the Official Gazette dated June 30, 2018 and numbered 30464.Pursuant to the abovementioned amendments, monthly maximum rate of contractual interests to apply to Turkish Lira transactions has been increased from 1.84% to 2.02%, whereas monthly maximum rate of default interests to apply to Turkish Lira transactions has been increased from 2.34% to 2.52%. When it comes to foreign exchange transactions, it should be noted that monthly maximum rate of contractual interests has been increased from 1.47% to 1.62, and monthly maximum rate of default interests has been increased from 1.97% to 2.12%. Also note that the maximum rates listed above shall take effect as of July 1, 2018.

 

CORPORATE / M&A

Q2/2018 Real Estate & Construction

  • A new omnibus law including provisions relating to real properties in breach of Zoning Law widely referred to as “zoning peace” law in public has been enacted upon its publication in the Official Gazette dated May 18, 2018 and numbered 30425. The owners of buildings in breach of law will have the opportunity to obtain a “Building Registration Certificate” which will allow temporary instalment of utilities (electricity, water and gas) to the building and cancel decisions for demolishment of the building as well as administrative penalties. On the other hand, this new certificate is different than the building permit or building utilization permit which was provided under the Zoning Law prior to the enactment of this zoning peace law. Principles and procedures of granting of Building Registration Certificate is regulated under the secondary legislation issued after the law and published in the Official Gazette dated June 6, 2018 and numbered 30443.

Q2/2018 Energy & Natural Resources

  • An extension to the period for the implementation of liquefied petroleum gas (“LGP”) tube tracking systems has been provided to the LPG distributors by virtue of the Communiqué Regarding Amendments to the Communiqué on Tracking of Liquefied Petroleum Gas Tubes in the Market (published in the Official Gazette dated April 12, 2018 and numbered 30389). Pursuant to the Communiqué on Tracking of Liquefied Petroleum Gas Tubes, the LPG tube distributors were restricted to hold, fill in and sale the LPG tubes which are not identified or bear a barcode as of April 15, 2019. Pursuant to the amendment, this restriction shall commence on December 31, 2019.

Q2/2018 Transportation, Logistics & Defense

  • A new Regulation on Air Transportation of Dangerous Goods concerning (i) activities of air transportation of dangerous goods by Turkish aircrafts and foreign aircrafts using the Turkish airfield and airports and (ii) those who engage in activities pertaining to shipping, loading, unloading, separation, classification, labelling and marking, packaging, temporary storage, transportation, reporting and notification and auditing and training matters relating to such activities for the purposes of providing such air transportation of dangerous goods economically, safely, promptly, of good quality and without harming the environment has been published in the Official Gazette dated April 13, 2018 and numbered 30390. Pursuant to the regulation local operators who are to engage in air transportation of dangerous goods shall obtain a certificate of authority for dangerous goods transportation from the Directorate General for Dangerous Goods and Combined Transport. Foreign (the “Directorate General for Dangerous Goods”) operators who are using Turkish airfield for transportation of dangerous goods shall submit the certificate of authority issued by their local administration to the Directorate General for Dangerous Goods. Pursuant to the regulation certain matters such as exceptions, special permits of obtaining a certificate of authority for air transportation of dangerous goods and additional requirements for carriage have been left to the further regulations to be issued by the Ministry of Transport and Infrastructure and the Directorate General for Dangerous Goods. The regulation also set out certain responsibilities and liabilities to be imposed on the dispatchers, operators, ground handling companies and airway carriage agents, transportation works organization facilities, temporary storage and warehouse services operators. Furthermore, those who fail to comply with the principles and procedures set forth under the regulation shall be subject to an administrative fine ranging between TL 2,000 to TL 100,000. Also licenses of those who do not remedy the incompliance as directed by the Directorate General for Dangerous Goods shall be suspended or cancelled.

Q2/2018 Personal Data Protection

  • The Personal Data Protection Board issued the list on Data Controllers’ who are exempt from to registration to the Data Controllers’ Registry under the decision published in the Official Gazette dated May 15, 2018 and numbered 30422. According to the decision following data controllers are exempt from such obligation (i) data processors, who are processing personal only through non-automatic means provided that such data that is a part of data recording system, (ii) notaries which are subject to the Notary Act, (iii) associations and foundations which are established in accordance with the Associations Act and Foundations Act, (iv) trade unions which process personal data -bounded by fields of activity- only to their own employees, members, donators, in accordance with Law on Trade Unions and Collective Bargaining Agreements, (v) political parties which are established in accordance with the Law on Political Parties, (v) attorneys who operate in accordance with Attorneys’ Act (vi) independent accountants and financial advisors who operate in accordance with Certified Public Accountants and Sworn-in Accountants Act.

Q2/2018 Infrastructure

  • A new exemption has been brought to zoning plan changes and approval procedures in the organized industrial zones for service and support areas by virtue of a new article implemented in the Regulation on Implementation on Organized Industrial Zones (published in the Official Gazette dated June 23, 2018 and numbered 30457), according to which the industrial site building cooperatives’ land requests for provision of service and support of small manufacturing and repair are now not required to be allocated from the lands which are owned and under the disposal of organized industrial zone.

Q2/2018 Employment

  • The occupational health and safety services to be performed by the employers and employers’ representatives are now concern the workplaces with at least fifty workers based on the recent amendment to the Regulation on Occupational Health and Safety Services Conducted by Employers or Employer Representatives in Work Places (published in the Official Gazette dated May 21, 2018 and numbered 30427). Pursuant to the amendment it is now possible to have remote training for occupational health and safety services from the authorized bodies.

Q2/2018 General Corporate

  • Rules on certification of the commercial books of the joint stock companies, limited companies and cooperatives has been determined by the Communique Regarding Amendments to the Communique on Commercial Books (published in the Official Gazette dated March 22, 2018 and numbered 30368). At the time of establishment of joint stock companies, limited companies and cooperatives, certification of commercial books shall be approved by the Trade Registry Office where the company headquarters is located whereas before the amendment it was possible to certify the commercial books of the said types of companies from a Notary Public.
  • The procedures to be followed for the annual notifications, notifications relating to the share capital and share transfers to be made by the foreign investors have been amended by the Regulation for Implementation of Direct Foreign Investment Law by Regulation Regarding Amendments (published in the Official Gazette on June 1, 2018, and numbered 30438), according to which said notifications shall be made through an online medium operated by the Directorate of Incentive Implementation and Foreign Investment by using a secure electronic signature.

CAPITAL MARKETS

Q2/2018 Amendment on the Communiqué on Takeover Bids

  • The Capital Markets Board (the “CMB”) has amended certain provisions of the Communiqué on Takeover Bids (published in the Official Gazette dated January 23, 2014 and numbered 28891) on June 5, 2018 with immediate effect. Under the amended Article 18, CMB may provide exemptions to the obligation of making a takeover bid upon application in the following two cases:- in case of non-repayment of the bank loans, if the ownership of the shares, which were given as guarantee, are transferred to the bank and those shares are transferred to the special purpose entity in which the bank is the founder and then a third party is purchased those shares after the ownership of the shares were transferred to the bank or the special purpose entity.- if shares are transferred in order to fulfill a provision of the law which stipulates the nature of the shareholder. The CMB has also determined a period of application for the above-mentioned exemptions.

Q2/2018 Amendment on the Communiqué on Real Estate Investment Funds

  • The CMB has amended certain provisions of the Communiqué on Real Estate Investment Funds (published in the Official Gazette dated January 3, 2014 and numbered 28871) on June 30, 2018 with immediate effect.As per the amendment, a real estate investment fund may now be established by real estate and venture capital portfolio management companies, along with the portfolio management companies, and real estate portfolio management companies. In addition, the activities that can be conducted by the real estate investment funds have been amended.In addition, as per Article 13, following the approval of the issuance document by the CMB, funds units are offered to investors through distribution channels declared in the issuance document as of the starting date of the sales which is stated in the issuance document. Pursuant to the amendment, the date of the sales to be determined cannot exceed 3 months following the date of the receipt of the approved issuance document by the founder. In the event that the fund units are not offered for sale in such time, it is mandatory to apply to CMB with the liquidation request within 6 business days.
 

DISPUTE RESOLUTION

Q2/2018 Introduction of Mandatory Mediation by Regulation on the Law on Mediation in Civil Disputes

  • Mediation has been introduced as an alternative dispute resolution method with the Law on Mediation in Civil Disputes (Law No. 3625) numbered 6325 (published in the Official Gazette dated June 22, 2012 and numbered 28331) (the “Law”).Secondary legislation of the Law, Regulation on the Law on Mediation in Civil Disputes (the “Regulation”) is published in the Official Gazette dated June 2, 2018 and numbered 30439. Both the Law and the Regulation stipulate principles of the mediation as voluntariness, equality of parties and confidentiality.In addition, the Law on Labour Courts (Law No. 7036) (published in the Official Gazette dated October 25, 2017 and numbered 30221) entered into force and its provisions related to the mandatory application to the mediation as a precondition of filing lawsuit (Articles 3, 11 and 12) have become effective as from January 1, 2018. In this regard, applying to mediation has become a mandatory condition for disputes relating to collection of a receivable arising from labour law and/or employment contracts and concerning re-employment lawsuits. Accordingly, if the employee does not apply for mediation and directly files a lawsuit before Labour Courts, the lawsuit shall be rejected on procedural grounds. Mandatory Mediation aims to shorten the judicial proceedings and to ease the workload of the Courts.The mandatory mediation as a precondition for filing a lawsuit is regulated under Articles 23-25 of the Regulation. As per Article 23, in cases where the mediation is regulated by the laws as a precondition for filing a lawsuit, the plaintiff shall apply to the competent mediation authority for mediation located where the counterparty’s domicile or workplace is located. In the mandatory process if parties mutually agree on one of the registered mediators, the agreed mediator is appointed. Otherwise, the mediation authority shall appoint a mediator ex-officio. The appointed mediator shall inform the parties and convene a meeting. As per Article 25(5) of the Regulation, the negotiation process shall be concluded in three weeks starting from the date of appointment. If it is necessary the timeframe can be extended by one week.As per Article 26, if the mediation is concluded with an agreement of parties, mediation cost will be covered equally by the parties unless otherwise agreed upon. Otherwise, first two hours of mediation cost will be covered by the Ministry of Justice (exceeding hours will be covered equally by the parties unless otherwise agreed upon.). As per Article 27, the period from the initiation until the termination of mediation shall not be taken into consideration while calculating the lapse of time.
This legal newsletter has been prepared for informational purposes only; it has not been prepared for advertising purposes or with the intention of creating an attorney-client relationship. It does not seek to provide information on all legal developments in Turkey with the quarter specified. None of the information contained in this legal newsletter shall constitute legal advice or anything akin thereto. To unsubscribe email the Editor: newsletter@pekin-pekin.com
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