COVID-19 Measures: Restriction on dividend distributions in Turkish private companies and exceptions

28 May 2020 | country turkey newsletters


The measures to combat COVID-19 include restrictions on dividend distribution for Turkish private companies introduced through the insertion of Provisional Article 13 into the Turkish Commercial Code (the "Provisional Article") pursuant to the Law on Mitigation of the Effects of COVID-19 No. 7244 dated 16 April 2020 ("Law 7244").

Pursuant to the Provisional Article, joint stock companies and limited liability companies can only distribute or resolve on the distribution of up to 25 % of the profit for the financial year 2019 until 30 September 2020 (the "Deadline"). In addition, no dividend distribution can be made from the previous financial years' profits (prior to 2019) and no resolution can be adopted for payment of advance on future dividends.

If, prior to the enactment of the Provisional Article (i.e. 17 April 2020), the Company has already resolved to distribute (i) dividends from the profit for the financial year 2019 exceeding 25 %, or (ii) previous years' profits, or (iii) advance dividends, then such distributions in breach of the Provisional Article will be postponed until the Deadline.

Trade Registries have been instructed not to register any resolution on dividend distribution which is not in compliance with the Provisional Article.

The Trade Ministry has announced the implementation procedures and certain exceptions to the dividend distribution restrictions via the Communiqué on the Procedures and Principles Regarding Implementation of Provisional Article 13 of the Turkish Commercial Code No. 6102 (the "Communiqué"), which was published in Official Gazette No. 31130 and dated 17 May 2020.

Scope of restrictions pursuant to the Communiqué

According to the Communiqué, the following principles regarding dividend and dividend advances will apply:

  • Capital companies cannot distribute dividends exceeding 25 % of the net distributable profit for the 2019 financial year and the previous year's profit and free reserve funds cannot be subject to distribution. Such a restriction is not applied to the capital increases to be made from internal resources
  • The general meetings of these companies cannot authorise the management body to distribute dividend advances until the Deadline.
  • If, prior to the enforcement date of the Provisional Article, the general meeting has decided to distribute dividends out of the profits for 2019, but the payment to the shareholders has not occurred yet or only partial payment was rendered, such portions of payments exceeding 25 % of the net profit for 2019 will be postponed until the Deadline. No interest can accrue on the postponed payments.
  • If the management body has already been authorised by the general meeting, prior to the enforcement date, to distribute dividend advances, such advance payments will be postponed until the Deadline.

Such provisions shall not apply to companies in which the state, special provincial administration, municipality, village or other public legal entity holds more than a 50 % share or companies in which a 50 % state-owned public fund owns 50 % of the shares.

The following financial statements will be taken into consideration when calculating the dividend:

  • Financial statements prepared in accordance with Turkish Accounting Standards determined by the Public Oversight Accounting and Auditing Standards Authority (only for companies subject to the corresponding standards)
  • Financial statements prepared in accordance with the Tax Procedure Law No. 213

The dividend to be distributed cannot exceed the total amount of the funds subject to profit distribution under the records kept in accordance with the Tax Procedure Law No. 213.

Exceptions to the restriction pursuant to the Communiqué

The following companies will be exempted from the restrictions under Law 7244 and the Communiqué:

  • Companies whose dividend distributions do not exceed TRY 120,000.
    However, those who benefit from short-term working allowance and/or took unpaid leave under Law No. 4447 due to force majeure caused by COVID-19 and those who benefitted from the credit guarantees supported by the Treasury and have unpaid debt balance are excluded.
  • Companies that perform their capital subscription undertakings (in cash) in another capital company provided this capital commitment represents more than 50 % of the dividend to be distributed.
  • Companies whose shareholders use the dividend to repay loans and/or project finance agreements (which will become due by the Deadline) under the loan agreements and project financing facility agreements.
    • The payment of dividends under this paragraph that exceed the shareholders' payment obligations are postponed until the Deadline.

Companies that fall under these exceptions and that desire to benefit from them are required to submit documents proving the above circumstances to the provincial directorates of the Ministry of Trade and to obtain the approval of the Ministry prior to the general meetings to be held.


In the aftermath of the enactment of the dividend restriction, several questions arose, especially in respect to project finance structures where the dividend payments secure debt repayments. The Communiqué issued by the Ministry of Trade provides important responses to the implementation rules of such restrictions.

Sinem Mencük


T: +90 212 230 17 00

Murat Kutluğ

Attorney at Law

T: +90 212 230 17 00

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