Ordinary merger transactions in Turkey require various steps to be completed in terms of legal procedures. A simplified merger could be defined as a shortcut for completing merger transactions in an easier and shorter way without long procedures of the merger transaction.
Who Benefits from Simplified Merger?
Turkish Commercial Code numbered 6102 (“TCC”) limits the type of companies that could be subject to Simplified Mergers. Accordingly, only capital stock companies (i.e. limited liability companies and joint stock companies) could benefit from the regulations of Simplified Mergers. In addition to this limitation, TCC states that only capital companies with a certain shareholder structure could benefit from these regulations.
According to Article 155 of TCC, only two shareholding structures could benefit from simplified merger transactions as indicated below:
(I) The transferee capital stock company holds all shares with voting right of the assignee capital stock company, or a company or a real person or groups of persons connected due to law or contract hold all shares with voting right in capital stock companies participating in the merger. (“Group I Companies”)
(II) The transferee capital stock company holds at least 90 percent of, but not all, shares with voting rights, the merger can take place under simplified terms provided that the minority shareholders are offered:
a) an option equal to the actual value of company shares in the transferee in accordance with Article 141 in addition to the company shares, and
b) No additional payment, personal performance liability or personal responsibility arises due to merger. (“Group II Companies”)
What are the Facilitations of Simplified Merger?
Facilitations for the simplified merger of Group I Companies are listed below:
Merger Agreement: According to Article 146 of the TCC, an ordinary merger agreement must contain:
a) Trade names, legal status, and the headquarters of the merging companies; in the case of merger through by establishment of a new company, trade name, legal type, and headquarter of the new company;
b) Transfer rates of company shares, and, if provided for, equalization amount; explanations regarding shares and rights of shareholders of the assignee in the transferee;
c) Rights granted to the holders of privileged shares, non-voting shares and profit-sharing certificates by the transferee;
d) Way of share transfer;
e) Date on which the shares acquired through the merger gained the right to the profits, which is shown on the balance sheet of the transferee or newly established company, and all aspects related to such entitlement;
f) Cash payment for withdrawals in accordance with Article 141, if necessary;
g) Date on which the transactions and activities of the assignee is considered as performed on the account of the transferee;
h) Special benefits granted to management boards and managing partners;
i) Names of the shareholders with unlimited liability, if necessary.
Accordingly, there are quite a few issues that should be included in merger agreements. However, many of the issues mentioned above are unnecessary in scenarios where the parent company merges with the subsidiary. By taking this into consideration, TCC limits the content of the merger agreement with the sub-clauses (a) and (f) to (i) above for the simplified mergers participated by the Group I Companies.
Consequently, a merger agreement of a Group I Companies must only contain:
a) Trade names, legal status, and the headquarters of the merging companies; in the case of merger through by establishment of a new company, trade name, legal type, and headquarter of the new company;
b) Cash payment for withdrawals in accordance with Article 141, if necessary;
c) Names of the shareholders with unlimited liability, if necessary.
Exemptions: In addition to the facilitation above, TCC exempts Group I Companies from preparing merger report, providing right of shareholders to inspect and approval of the merger agreement by General Assembly of the Company.
Facilitations of Group II Simplified Merger listed below:
Merger Agreement: As in the Group I Companies, a facilitation regarding the merger agreement is regulated for the Group II Companies in the TCC. Accordingly, a merger agreement of Group II Companies must contain the sub-clauses (a), (b) and (f) to (i) above. Eventually, in addition to the provisions in Group I, Group II merger agreement must also contain the transfer rates of company shares, and, if provided for, equalization amount; explanations regarding shares and rights of shareholders of the assignee in the transferee.
Exemptions: Except for the exemption regarding providing shareholders to inspect the merger agreement, all exemptions specified for Group I Companies are also granted for Group II Companies.
To sum up, a simplified merger is much easier and quicker than an ordinary merger transaction. Therefore, companies, which are already affiliated to each other, may change their shareholding structure accordingly with the Group I or Group II to benefit from the Simplified Merger’s facilitations.