Joint-stock companies, under the Turkish Commercial Code (TCC), may either merge and operate as a new joint-stock company or may acquire one or more other joint-stock companies and merge all such acquired companies under a single existing joint-stock company. In addition to the TCC, provisions of communiqués issued and effectuated by the Capital Markets Board (CMB) provide further criteria for mergers and acquisitions of public joint-stock companies.

Turkish Commercial Code

Provisions in the TCC indicate that joint-stock companies may be dissolved in various ways, including through an acquisition of one company by another or through the merger of more than one company under a newly incorporated company. According to Ünal Tekinalp in The Law Regarding Partnerships and Cooperatives: "Mergers of assets sometimes result in the dissolution of all merging commercial partnerships and sometimes only the company or companies merging into an existing other company dissolve, leaving in existence only the company into which the others merged. These differing outcomes are the consequences of two different types of mergers. The commercial partnership into which the other company or companies merge is called the acquiring company and the partnership which dissolves as a result of the merger is called the acquired company."

The TTC lists the relevant transactions in two ways:

1) In mergers by way of acquisition the following must be transacted in order:

• a favourable result of the negotiations between the partnerships to be merged;
• approval of the accounts and evaluation upon a court investigation;
• execution of the merger agreement;
• capital increase in the acquiring company and determination of the shares of the shareholders of the merging company;
• approval of the merger agreements by general assemblies of the parties;
• registration and announcement of the merger decision; and
• registration and announcement of the dissolution of the acquired company

2) In mergers by incorporating a new company the following is required, in schematics:

• reaching an agreement after negotiations regarding the merger;
• court evaluation of the assets of the merging companies - who are merging for capital in kind;
• preparation of the articles of association of the new company, and obtaining permission for "companies whose incorporation and amendments of the articles of association are subject to permission of the Ministry" (as per the provisions of the circular order sent to the Trade Registry offices after June 17 2003 by the Ministry of Industry and Commerce upon the amendment of Article 273 of the TCC);
• preparation of the merger agreement;
• approval of the merger agreement;
• incorporation of the new company; and
• registration and announcement of the decision regarding the dissolution of the merging companies.

Merger by way of acquisition

Pursuant to Article 451 of the TCC, a joint-stock company may acquire another joint-stock company together with all of its assets and liabilities. The following requirements must be met for such merger transaction to be valid:

Call to creditors

The board of directors of the acquiring company is required to call the creditors of the acquired company, in other words the dissolved company, to identify themselves as a creditor.

Separate management of assets

Until the debts of the acquired company are secured or paid off, the acquiring company is required to manage the assets of the acquiring company and the acquired company separately.

Joint and several liabilities

The members of the board of directors of the acquiring company become jointly and severally liable against creditors for the management of the assets of the dissolved company.

Court with jurisdiction remains unchanged

To facilitate the needs of creditors, one of the provisions of the TCC establishes that, during the period in which the assets of the acquired and acquiring companies are separately managed, the court with personal jurisdiction over the acquired company before its dissolution (that is, the place where any necessary court procedures take place) remains the court with jurisdiction over the separately managed assets of the acquired company.

Priority of creditors of dissolved companies

Assets of the acquired company are considered to belong to the acquired company for the purpose of the relationship between the acquired company's creditors and the acquiring company's creditors. If the acquiring company becomes bankrupt, the assets of the acquired company will be deemed a separate estate in bankruptcy from the acquiring company's assets and bankruptcy estate.

Validity of merger of assets

The assets of the acquired company and the acquiring company may only merge, and the merger of the acquired company into the acquiring company will only be deemed complete, after all creditors of the acquired company are identified and the remaining balance of the net assets are ready for distribution to the shareholders of the acquired company.

Registration of dissolution

The dissolution of the acquired company must be registered with the relevant trade registry.

Delivery of shares

Upon registering the dissolution of the acquired company with the relevant trade registry, the acquiring company must deliver shares to the shareholders of the dissolved company in accordance with the terms and conditions of the merger agreement.

Incorporation of a new company

The incorporation of a new company in which two or more companies merge is called a combination. According to Article 452 of the TCC: "assets of more than one joint-stock company may be transferred to a newly incorporated joint-stock company." The transfer of assets of the merging companies into a newly incorporated company may occur without the dissolution of the merging companies. The following procedures are required for the incorporation of the new company into which other companies are to be combined, and such requirements are in addition to the requirements for incorporation of a new company under the TCC.

Issues to be determined in merger agreement

Companies who are parties to a merger agreement, and whose signatures are properly notarized, should indicate in a merger agreement that the companies have:

• merged;
• prepared articles of association for the newly incorporated company;
• undertaken to subscribe all of the shares of the newly incorporated company;
• transferred the assets of the existing companies as capital into the newly incorporated company; and
• determined the legally required corporate governance bodies of the newly incorporated company.

Consent of general assembly

The general assemblies of each of the merging companies must approve the merger agreement.

Registration of new company

The articles of association of the new company incorporated upon the consensus of the general assemblies of the merging companies must be registered with, and announced through, the relevant trade registry, in accordance with the procedures for incorporation of all companies.

Delivery of new shares:

After the registration and announcement of the articles of association of the new company, the shares of the new company must be delivered to the shareholders in place of the shares of the dissolved company, in accordance with the merger agreement.