The Law on Reducing the Effects of the COVID-19 Pandemic on Economic and Social Life and the Law on the Amendments of Certain Laws No. 7244 (“Law“) published in the Official Gazette, numbered 31102, and dated April 17, 2020.
On March 31, 2020, the Ministry of Trade announced that companies, except for state-owned companies, must preserve their equities and cannot distribute any dividend that is more than 25% of their net profit of the 2019 financial year and any profits of the previous years. As per the Article 12 of the Law, the Ministry of Trade’s announcement was regulated as a provisional in the Turkish Commercial Code.
As per the Article 12 of the Law, companies, (i) shall postpone and not make cash dividend distributions exceeding 25% of the net profit pertaining to 2019 fiscal year, (ii) cannot distribute retained profits and free reserve funds, and (iii) cannot authorize their boards of directors to distribute advance dividends. In the event that the general assembly adopted a dividend distribution resolution for the 2019 financial year, but the payment was not yet made or only partially made before the effective date of the Law, companies shall postpone such dividend payments.
Companies whose majority capital is directly or indirectly held by the state, governorship, municipalities, villages, governmental entities or by the funds whose majority capital is owned by the government are exempt from the restrictions explained above.
These restrictions will be valid until 30 September 2020. The President is authorized to shorten or extend this period by three months.
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Yılmaz Göksu Serdaroğlu